Tag Archives: 4) FX Trends

The market has much to digest. The Bank of England's new purchases of Gilts coincided with a reassessment of the trajectory of Fed policy. After the hawkish FOMC decision and forecasts, the market briefly thought the terminal rate could be 5.25-5.50% in the middle of next year. However, by the end of last week, it had returned to around 4.5% at the end of Q1 23. Italy has a right-wing government, and what it means for the country's debt and relationship with the EU...

Overview: Benchmark 10-year yields are off 6-8 basis points in Europe and the United States. The panic seen at the start of the week in the UK has subsided considerably, as sterling recovered to almost where it was a week ago, while BOE’s hand has help steady the Gilt market. Equities in Asia Pacific suffered after the losses in the US yesterday. Hong Kong and India were notable exceptions. Europe’s Stoxx 600 is recouping around half of yesterday 1.65% fall, while...

(Business travel will prevent me from updating the blog for the next couple of days.  Thank you for your patience.  Good luck.) Overview: After extending last week’s moves yesterday, the capital markets are mostly calmer today. Sterling is firmer, as are UK Gilts. The dollar is mostly consolidating inside yesterday’s range. Equities are stable to higher. Most of the large markets in the Asia Pacific region, but India edged higher, led by a 1.45% gain in China’s CSI...

Comments from the SNB policymaker Declines to comment on further interest rate moves We see a weakening in the Swiss economy but no recession Acting now to make sure inflation doesn’t become entrenched Recent rise in franc helped dampen inflation The SNB is expected to rise 50 or 75 bps at the next meeting.   [embedded content]...

Overview: Sterling’s pounding continued in Asia where it was driven to $1.0350, a new record low before stabilizing. UK rates also continued to rise sharply after the new government promised more tax cuts next year. The right-wing victory in Italy was not surprising but it kept pressure on Italian bonds. China took more action to slow the yuan’s descent The dollar is broadly higher. All the G10 currencies and most emerging market currencies are lower. Risk appetites...

The dollar surged last week. Sure, the push of the Fed was notable, but the larger move from Sweden’s Riksbank failed to impress. In fact, the Swedish krona was the poorest performer among the G10 currencies, tumbling 5% last week. Sterling was pummeled to $1.0860 even as the market moved to discount the likelihood of a 100 bp hike at the next Bank of England meeting on November 3. It cannot be entirely laid at the Fed’s feet. Sterling’s biggest drop (~3.5%) was...

As September winds down, three sets of economic reports will draw the most attention. We will review them and then offer a snapshot of the emerging market central bank meetings. As we have seen in the UK and Norway, several emerging market countries raised rates early (beginning in the middle of last year) but still experienced an acceleration of inflation. It obviously begs the unanswerable question about the impact on US inflation if the Fed had taken its foot off...

Business travel commitments keep me from updating the blog until the weekend, but I wanted to share a few thoughts post-Fed. First, the Fed was more hawkish, and the median dot sees 125 bp increase in the target rate in Q4.  The hawkish thrust was also evident in projecting that the target rate will remain higher for longer.  Even in 2025 sees the target rate above the longer-term (neutral) level.   Second, the market still does not fully accept the Fed's message....

Overview: Between Putin’s mobilization of 300k Russian troops and Fed Chair Powell expected to lead the central bank to its third consecutive 75 bp hike later today, the dollar rides high. It has recorded new two-year highs against the dollar bloc and Chinese yuan, while sterling was sent to new lows since 1985. Asia Pacific bourses were a sea of red for the sixth decline in the regional benchmark in the past seven sessions. Surprisingly, Europe’s Stoxx 600 is...

Overview: Yesterday’s late rally in US shares carried into the Asia Pacific session where all of the large markets advanced. However, the bears are not abdicating and Europe’s Stoxx 600 is off for the sixth consecutive session and US futures are trading lower. The sell-off in the bond market continues. European benchmark yields are mostly 8-10 bp higher and the US 10-year Treasury yield is up nearly five basis points to approach 3.54%. The two-year continues to...