Tag Archives: macro

The US dollar advanced against all the G10 currencies last week but the Swiss franc but turned in a most mixed performance against emerging market currencies. The US 10-year yield fell for the third consecutive week and near 4.16%, it is around a dozen basis points below where it settled the night before the US election. The two-year yield fell for the second consecutive week and settled near 4.10% is about half a dozen basis points below the pre-election day level....

The trends were already entrenched before the US election and continued through most of last month. The trend toward higher rates and higher equities stalled, while the dollar remained strong. Investors and business continue to wrestle with the implications of the Republican sweep in the US elections.There are two broad issues that are the source of uncertainty. The first is the broad tariff Trump has advocated on the campaign trail: 60% on China and 10-20% on rest...

There are powerful forces in the capital markets, and they do not appear exhausted even if there is some near-term consolidation. The Dollar Index has risen for seven weeks, which is to say that it has not fallen on a weekly basis so far here in Q4. The US two-year yield has risen for the past four weeks and six of the past seven. It has surged from about 3.55% at the end of September to 4.38% last week. The US 10-year yield has fallen in only two weeks since...

Two of the most tumultuous weeks of the year are behind us. The sweeping GOP victory in the US cannot be considered anything but a mandate. The shock experienced in 2016 is not being repeated, but there is limited visibility  Perhaps, the stance articulated at the press conference by Fed Chair Powell that the central bank does not "guess, speculate, or assume" about the policies of the next administration and the impact on efforts to achieve the dual mandate of full...

The US dollar extended its dramatic recovery against the major currencies for the fourth consecutive week. The dollar's rally seems to stand on two-legs. The first shift in the expected trajectory of Fed policy, which has been partly encouraged by relatively firm economic data, both surveys and real sector reports. The derivatives market has from discounting 75 bp of cuts before the end of the year to not be quite sure that 50 bp will be delivered. This leg may be...

The combination of the stronger-than-expected US September jobs report and the slightly firmer inflation readings lifted US interest rates and the dollar. Several Fed officials spoke, and it did not appear that the employment or price reports changed views as much as it had impacted the capital markets. The September Summary of Economic Projections found a median projection (and 10 officials) that 50 bp of cuts in Q4 would be appropriate, but seven thought only one...

There were several developments last week that shape the investment climate. First, the September US employment report was stronger than expected and this reinforces the message from Fed Chair Powell. After initiating the easing cycle with 50 bp cut, the central bank is not in a rush and two quarter-point cuts in Q4 is most likely scenario. Once again, the market has converged to the Fed rather than the other way around. Second, the new Japanese government and the...

With the Federal Reserve's 50 bp rate cut, seven of the G10 central banks have begun an easing cycle that will extend, broaden, and may accelerate going forward. Australia and Norway will likely join the party next year, while some, like Canada and Sweden may increase the pace of its cuts in Q4. Beijing jumped into the mix, with rate cuts, reserve requirement reductions, and a flood of liquidity aimed at supporting the housing and property markets, and industry...

After the US jobs report and Fed speak, the market scaled back the odds of a 50 bp cut at the September 17-18 FOMC meeting. It settled last week slightly below a 30% chance. The odds were shaved for the second consecutive week. Fed officials have indicated that the full employment mandate is now of greater significance given its growing confidence that inflation is heading back toward its 2% target. Next week's August CPI and PPI are likely to be consistent with...

As the summer in the Northern Hemisphere gives way to the fall, monetary policy and politics will shape the investment and business climate. Even if history does not repeat itself, there are still insights to be gleaned. In the last few months of 2023, the market expected aggressive interest rate cuts this year. Although global rates fell, the dollar fell. In Q1 24, the markets moved more into line with the signals from the central banks. Global rates rose and the...