Tag Archives: macro

Given the world's turmoil, including the escalation, and broadening of the conflict in the Middle East and China's continued aerial harassment of Taiwan ahead of the election, the capital and commodity markets have remained firm. February WTI fell about 1.7% last week and March Brent slipped around 0.65%. Shipping costs are rising as the Rea Sea is avoided and supply chain disruptions are threatened. Still the MSCI index of developed equity market rose by nearly...

The terribly mixed US jobs report spurred dramatic intraday swings in exchange and US interest rates. But at the close, the dollar was little changed against most major currencies, and expectations for Fed policy was nearly unchanged. The futures market has about a 70% chance of a cut at the March meeting. The Dollar Index was off by less than 0.1%. Job growth held up better than expected in December, the unemployment rate held steady, and average wages rose...

The only thing that can be said with high confidence about the year ahead is that it will be different from 2023. Three broad forces will shape the business and investment climate in the year ahead.First, the post-Covid tightening cycle in the high-income countries, leaving aside Japan, has ended. The question is when and how fast rate cuts will be delivered. Moderating price pressures and weaker growth impulses have seen the pendulum of market sentiment swing...

As the year winds down, the global economy appears to be entering a new phase. While North American and European central bankers swear that they are prepared to respond to new threats to price stability, the markets demur. Indicative pricing in the derivatives markets reflects the general conclusion that the central banks have most likely completed the post-Covid monetary tightening cycle. Central bankers are pushing against a premature easing of financial...

The dollar fell against all the G10 currencies last week. The dollar-bloc currencies, sterling, and the Scandis  led the move, appreciating by about 0.55%-1.40% against the US dollar.  The dollar bloc and sterling recorded new highs for the month ahead of the weekend. Against the others, the dollar spent most of last week consolidating after its recent losses were extended at the start of the week. Still, our review of the technical condition warns that the US...

Price Action:  Since the North American markets closed Wednesday, the foreign exchange market has been subdued.  Most of the major currencies are +/- 0.2%.  The Antipodeans and sterling have risen a bit more.  The euro is in the middle of this week’s range (~$1.0850-$1.0965).  The dollar is at the upper end of this week's range against the Japanese yen (~JPY147.15-JPY149.75).  Sterling is trading near the high for the week set in...

The recent dollar gyrations seem tightly linked to US rates. The FOMC meeting and October jobs report saw the two-year Treasury yield drop 17 bp and the dollar was taken broadly lower. Indeed, against several currency pairs, it approached three standard deviations below its 20-day moving average. What seemed like a mild adjustment to the over-extended technical development turned into a rout after a weak reception to the US 30-year bond auction to finish the...

An inflection point may have been reached last week. Despite, Chair Powell's insistence that the Fed did not adopt an easing bias and confirmed that there is still no talk of a cut, the market knows better. The implied yield of December 2024 Fed funds futures contract is about 4.45%, which is to say, the market is discounting not only the two cuts in the Fed's September projections, but a third cut, and the risk again (~60%), of a fourth cut. The first cut is now...

November may be an in-between month. It will be a month of limited monetary policy actions and a period of heightened geopolitical tensions. Fiscal policy may be more interesting, with a Japanese supplemental budget, more measures expected from China, and a debate in Europe over the re-implementation of the Stability and Growth Agreement. In the US, the drama that played out in the House of Representatives could still leave the federal government with insufficient...

The markets absorbed two shocks last week. The war in Israel that seems to know of no restraint underpinned oil prices and appeared to help boost gold and the Swiss franc, the only G10 currency to appreciate against the dollar. The other was the continued deluge of US Treasury supply, the coupon auctions that tailed and higher than expected PPI and CPI. Nevertheless, the US 10- and 30-year yields fell nearly 20 bp last week, snapping a six-week uninterrupted...