Tag Archives: FX Trends

A few short hours stand in the way of the long holiday weekend for many.  The capital markets are retracing the recent moves.  This means equities and commodities are lower.  It means bonds are firmer and the dollar stronger.  The markets response to the ECB and FOMC recent meetings was to extend trend moves.   However, this entire week has been the counter.   The foreign exchange market illustrates this point.   The euro is recording a lower high for the first consecutive session and a...

The euro's rallied shortly after the ECB announced numerous monetary measures that in their totality were more than expected.  Many saw this as proof that monetary policy had lost its effectiveness, and central banks have lost credibility.    Recall summer of 2012.  The market anticipated another round of asset purchases by the Federal Reserve.  The euro rallied from about $1.2050 in late July to $1.30 on September 13 when Bernanke announced the open-ended QE3.  The euro peaked two days...

The UK referendum is three months away.   Three-month options are a common benchmark for various market segments; from speculators, to fund managers to corporations.  Events over the past week have raised the risks that the UK votes to leave the EU. The market has responded forcefully today, and even if you only follow the spot market, what is happening in the options market is significant.  First, three-month volatility has jumped 2.6 percentage points to 14.5%.  It appears to be the...

An ill-conceived strategy undermined by mismanagement and bad fortune is increasing the risks that the UK votes to leave the EU in June.    Nearly everything that could, has gone wrong for UK Prime Minister Cameron. While many investors have anticipated the UK would remain in the EU, the increased risks will likely weigh on sterling, with potential for sharp losses.  Sterling is already the worst performer among the majors here in Q1.  It is from 3.3% which is more than twice the loss of...

Until last September, the Federal Reserve seems to play down the market-based measures of inflation expectations, preferring the surveys that showed views were anchored.    At the September 2015 FOMC meeting where the Fed had been expected to tighten until the August turmoil, officials cited among other considerations, the decline in market-based measures of inflation expectations.   There are many problems with using the spread between conventional Treasuries and the inflation-linked...

A series of attacks at Brussels airport and metro casts a pall over the market.  The attacks come as Europe prepares what for many will be a long holiday weekend.  Gold, the dollar and yen seem to have been the beneficiaries.   Bonds are generally firmer and equities lower.   However, in late morning activity in London, the markets began stabilizing.  Sterling remains the weakest of the major currencies.  It is nearly as much as it was yesterday (0.7%) against the dollar.  Osborne has...

EM ended the week on a mixed note after posting strong post-FOMC gains. The bounce in risk seems likely to continue this week, with little on the horizon to derail it. Specific country risk remains in play, however, with heightened political concerns in Brazil and South Africa. Taiwan reports February export orders Monday, which are expected at -10% y/y vs. -12.4% in January. It reports February IP Wednesday, which is expected at -5.45% y/y vs. -5.65% in January. The central bank then...

The year started off poorly, to say the least. Equity markets plunged from the get-go.  The Nikkei, DAX and S&P 500 gapped lower on the first trading day of the year.   Emerging markets and commodities were smashed.   Many economists blamed the Federal Reserve for hiking rates in mid-December.   Pundits warned that the seven-year bull market and weak economic recovery in the US was ending.  A recession loomed, and worse because monetary policy had lost its effectiveness and fiscal...

After a relatively quiet period into the run-up to the ECB, speculative activity markedly increased in the CFTC reporting week ending the day prior to the conclusion of the FOMC meeting. Two speculative gross currency position adjustments stand out.  First, speculators appeared to have bought a record amount of sterling contracts.  The gross long position more than doubled; increasing 33.5k contracts to 62.9k.   Despite the continued recovery of sterling in the spot market, the bears...

The US dollar had a difficult week.  The price action after the ECB meeting had undermined the technical tone, and the dollar took another leg down after the FOMC moved closer to the market expectation by reducing the number of rate hikes the median official thinks will be appropriate this year from four to two.  The US Dollar Index fell for the third consecutive week and the fifth week of the past seven.  The minor gains ahead of the weekend failed to improve the technical tone. ...