Tag Archives: FX Trends

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The thinness of the order-driven capital markets is making price action that seems more inexplicable than usual.  The US dollar is mixed. It has recouped all the ground it lows against the euro yesterday, as the single currency briefly dipped below $1.09 in the North American morning.  It was unable to build on yesterday's gains that had carried it up to almost $1.0950.   Despite some fraying, the $1.08-$1.10 trading range still seems intact.   Sterling which had been sold to eight-month...

1.  China's Central Economic Work Conference is responsible for setting the annual GDP target. Although it was not formally announced, President Xi previously indicated that the goal for the economy to expand by around 6.5% a year through 2020.  More telling than the GDP target is the intentions expressed in the new slogan:  flexible monetary policy, forceful fiscal policy.  For Chinese officials, these are not ends in themselves but means to another end.  In this case, the goal is to...

1.  The election in Spain did not lift the uncertainty but re-redoubled it.  Given the outcome, it is difficult envision a majority government.  Purely looking at the numbers, a coalition between the Popular Party and the Socialists is simplest solution.  It is like Pasok and the New Democracy in Greece and the Christian and Social Democrats in Germany. While such grand coalitions maybe political expedient, it sends a powerful signal that there is not a significant difference between the...

(co-authored with my colleague Sam Waters) Inflation or indeed its opposite has driven monetary policy among the largest high income economies. With nominal rates thought to be bounded by zero, the US, UK, and Japan engaged in operations to increase the size of the central bank’s balance sheets as an unorthodox channel of easing monetary conditions. European central banks demonstrated interest rates can fall below zero.  Countries have adopted different measures of consumer inflation. ...

The broad interpretative framework we developed since late 2014, one that centers the dy-synchronization of the major economies, will retain its usefulness into the New Year and beyond.  The first phase of divergence was characterized by the Federal Reserve standing pat after winding down their open-ended asset purchase operations (QE3+) while many central banks from high income countries, including the eurozone, Japan, China, Canada, Australia, New Zealand, Sweden, and Norway eased...

Speculative position adjustments in the currency futures were minimal in the immediate aftermath of the ECB's December 3 meeting and US employment data the following day. However, activity dramatically increased in the days ahead of the FOMC meeting on December 16.   In most Commitment of Traders reports the gross position adjustment of 10k or more contracts is seen in three or four of the 16 gross currency positions we track.  In the latest report, which covers the five sessions before...

The dollar rose against all the major currencies over the past week.  The divergence meme we have emphasized has continued to unfold.  The ECB eased policy at the start of the month.  Less than 48 hours after the Fed hiked rates, the BOJ tweaked its asset purchase program to sustain it.  Holiday-thin markets make for more treacherous conditions than usual.   The news stream lightens, and participation will fall off until January 4.     The key question for many short-term participants...

1) Argentina eliminated capital controls and allowed the peso to float2) Argentina also eliminated export taxes on agricultural goods that include beef, wheat, and corn3) Fitch joined S&P in cutting Brazil to sub-investment grade BB+ with a negative outlook4) Brazil’s Supreme Court ruled that impeachment proceedings can move forward5) Banco de Mexico hiked rates for the first time since 20086) Under strong pressure from the financial markets, South African President Zuma reinstated...

The Greek crisis that dominated the European discussion in the first half of the year was barely ending when attention turned to the refugee problem.   While it often seemed that all of Europe was united against Greece, the refugee problem is significantly more divisive, though southern Europe, especially Italy and Greece are the front lines.   In the financial crisis, we emphasized the linkage between solvency and sovereignty.  The less solvent a country was, the more sovereignty was...