Tag Archives: 4) FX Trends

Overview: The dollar jumped yesterday making new highs against most of the major currencies, including the euro, sterling, the dollar-bloc and the Scandis. The yen and Swiss franc held in better, but the greenback still closed firmly against the yen despite a six-basis point decline in the 10-year yield. The Swiss franc rose to its highest level against the euro since the lifting of the cap in early 2015. After opening sharply lower, the S&P 500 and NASDAQ...

Overview: The dollar is soaring today, and the euro is trading at new 22-year lows having traded below $1.03. Even a 50 bp hike by the Reserve Bank of Australia has failed to prevent a sharp drop in the Australian dollar. The session seemed to have begun off well enough. Japan, South Korean, Taiwan, Australian, and Indian shares advanced in the Asia Pacific region. Europe’s Stoxx 600 began off firmly, but quickly unwound yesterday’s 0.55% gain. US futures are...

The most important thing to appreciate is that the market has moved to price not one but two cuts next year.  The first is priced into the September Fed funds futures and the second is in the Dec Fed funds futures.  This I in response to weaker than expected data that have elevated recession fears.  The Atlanta Fed GDPNow puts Q2 growth at -2.1%.  Banks have revised down their forecasts, but none of the 59 economists in the Bloomberg survey have forecast a negative...

(Combining the weekend macro commentary and price action review in one note.  Check out the July monthly.) Three economic reports highlight the week ahead:  Japan's labor cash earnings at the start of the week and the US employment report and China's CPI at the end of the week. In addition, the Reserve Bank of Australia meets early on July 5. The Bank of Japan's insistence that inflation, which is running slightly above target is not sustainable is that it is a...

Overview: Central banks are committed to combatting inflation even as the economies weaken. This is taking a toll on investor sentiment and is dragging down equities. Outside of China, where the PMI confirms a recovery, and India, where most large bourses in the region were off 1-2%. Europe’s Stoxx 600 snapped a three-day rally yesterday with a 0.65% decline. Near midday, its loss today is approaching 2%. US futures are 1.5%-2.0% lower. Bond yields are falling. The...

Overview: The sharp sell-off in US equities yesterday, led by tech, is weighing on today’s activity. Most of the large Asia Pacific markets excluding Japan and India lost more than 1% today. The three-day rally in Europe’s Stoxx 600 is being snapped today. US futures are posting small losses. The US 10-year yield is little changed around 3.17%, while European benchmarks are narrowly mixed, with the periphery doing better than the core. The dollar is enjoying a firmer...

The most important development in foreign exchange probably took place in the interest rate market last week. A series of disappointing US economic data and the Fed's "unconditional" commitment to rein in inflation have heightened concerns that economic weakness will limit the Fed's ability to hike rates. Specifically, for the first time, the implied yield of the December 2023 Fed funds futures contract is below the December 2022 yield. In fact, the gap implies a...

The pendulum of market sentiment swings dramatically.  It has swung from nearly everyone and their sister complaining that the Federal Reserve was lagging behind the surge in prices to fear of a recession.  On June 15, at the conclusion of the last FOMC meeting, the swaps market priced in a 4.60% terminal Fed funds rate.  That seemed like a stretch, given the headwinds the economy faces that include fiscal policy and an energy and food price shock on top of monetary...

Overview: Equities are higher and bonds lower as the week's activity winds down. Asia Pacific markets rallied, paced by more than 2% gains in Hong Kong and South Korea. Japan's Nikkei rallied more than 1%, as did China's CSI 300. Most of the large markets but South Korea and Taiwan advanced this week, though only China and Hong Kong are up for the month. Europe's Stoxx 600 is up 1.3% through the European morning, its biggest advance of the week and what looks like...

Overview: Asia Pacific equities were mixed. Gains were recorded in China, Hong Kong, Australia, and India, among the large markets, while Japan was mostly flat and South Korea and Taiwan shares fell. Europe's Stoxx 600 is off about 0.7%, the same as yesterday. US futures are slightly firmer. The rally in bonds continues. After falling nearly a dozen basis points yesterday, the US 10-year yield is off another 5 bp today around 3.10% it is near two-and-a-half week...