Tag Archives: 4) FX Trends

Overview: Softer-than-expected US CPI, following weaker than expected job growth has sent the greenback tumbling. The dollar is stabilizing against the yen today, but the downside momentum is intact against the other major currencies. The euro approached $1.1175, sterling $1.3080, and the greenback slumped to almost CHF0.8615. The Australian dollar reached $0.6850, and the New Zealand dollar tested $0.6360. The Canadian dollar, often a laggard in a weak US dollar...

Overview: The US dollar's losses have been extended ahead of the June CPI. At the same time, speculation that the Bank of Japan will adjust policy later this month saw the yen extend its gains for the fifth consecutive session. Sterling made new highs since last April, while the Swiss franc has risen to its best levels in about 2 1/2 years. The Dollar Index gapped lower and through the trendline drawn off the April and May lows. The greenback has steadied a little...

Overview: The UK surprised with higher-than-expected consumer inflation and budget deficit, and the odds of a 50 bp hike tomorrow edged higher. Sterling has been sold on the news and is the weakest of the G10 currencies, off about 0.5%. The dollar is mixed with the euro, Swedish krona, Canadian dollar, and Swiss franc posting small gains. Emerging market currencies are lower, including the Chinese yuan, which is at new lows since last November. The Mexican peso,...

Overview: The market continues to resist the Fed's signal that another 50 bp of hikes may be necessary to ensure inflation is headed toward its target. Previously, the market had rate cuts priced in, and it took some time for the Fed's push back to be accepted. The market converged with the Fed, and this helped the dollar recover. We suspect a similar pattern to play out again. The market does not have even one of the two Fed hikes discounted. As it moves in this...

The week ahead is less eventful than the week that just passed, which saw the anticipated hike by the ECB and the small cut by the PBOC. The Fed delivered the widely tipped hawkish hold and the US CPI continued to decelerate. The dollar fell against the G10 currencies last week but the yen.  Sterling, and the Canadian dollar rose to new highs for the year,  Momentum indicators are stretched.  This coupled with risk-reward considerations suggest that the dollar could...

Overview: The market has not yet become convinced that the Fed will in fact deliver the two hikes the median dot anticipates this year, and the dollar was sold off sharply yesterday, the day after the FOMC meeting. In fact, the swaps market is more convinced that the ECB hikes in July than the Fed. Outside of the yen, which was sold after the BOJ stood pat, the G10 currencies are mostly little changed, consolidating the recent moves. Emerging market currencies are...

Overview: The Fed's hawkish hold and signal that it may raise rates two more time this year sent ripples through the capital markets. Risk appetites have been dealt a blow. However, China's rate cut and likely additional supportive measures after disappointing data, helped lift the CSI 300 by 1.6%, the most this year. The Hang Seng rose by nearly 2.2%, the most in three months. Europe's Stoxx 600 is snapping a three-day advance and US index futures are trading...

The euro has traded between roughly $1.0485 and $1.1100 so far this year. The average is about $1.08, where it traded above yesterday for the first time in 2 ½ weeks. Recall that the euro rallied from around $1.05 in mid-March (amid speculation that the banking stress was going to force the Fed to cut) to around $1.1100, where it stalled in late April and early May. We argued that the rate cut expectations had swung too far and that as they converged back with...

Overview: The year-end effective Fed funds rate implied in the futures market is about 5.11%. The rate has been averaging 5.08% since the Fed hiked rates last month The Fed may go to pains to explain that the steady that to be announced later today is just a pause to get a better read on the economy, the market favors this to be the end of the tightening cycle. The dollar is trading softer against nearly all the G10 currencies. Emerging market currencies are more...

Overview: A surprise cut in China's seven-day repo and a stronger than expected UK employment report are session's highlights ahead of the US CPI. The base effect alone suggests a sharp fall in the year-over-year rate, while the median forecast in Bloomberg's survey has been shaved to a 0.1% month-over-month gain. The dollar is under pressure and is weaker against nearly all the G10 currencies. It is mixed against the emerging market currencies. The dollar gapped...