Tag Archives: macro

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...

The US reports September CPI on October 12 and the first decline in three months in the year-over-year rate is expected. However, the price action itself may overshadow not only the CPI but other high-frequency data in the week ahead. US grew more than twice the number of jobs in September as economists expected. US interest rates and the dollar jumped initially, and stocks were dumped. And then they reversed. Many narratives will be spun to explain the price...

There are four large macro forces shape the investment and business climate here at the start of the last quarter of the year. First, the US economic outperformance has been stark. This has helped underpin US rates and bolsters the dollar. The divergence is likely to narrow in coming months as US growth slows rather than stronger growth prospects in other high-income countries. Second, Beijing has taken numerous measures, which although stopping well shy of the...

The most important outcome of the last week's flurry of central bank meetings was the median forecast of Fed officials for 50 bp less in cuts next year than it had anticipated in June as it revised up its growth forecasts for this year and next. The prospect for higher rates for pushed equities lower. Sterling and the Swiss franc were the weakest currencies in the G10 last week, falling by a little more than 1.1%. Both central banks did not hike rates to the...

The diverging economic performance between the US and Europe, Japan, and China on the other hand is stark. Yet, a greater divergence may be between widespread discussion of de-dollarization and its incredible strength in the foreign exchange market. The eight-week rally in the Dollar Index is the longest in nine years. According to SWIFT, which is not comprehensive but remains by far the largest platform, the dollar's role in international payments (46% in July) is...

There is a sense of new divergence. Most economists, including the staff at the Federal Reserve, no longer think the US is recession-bound. Unprecedented in modern times, inflation has fallen sharply, and unemployment has not risen, and the economy appears to be enjoying its third consecutive quarter, and the fourth in the past five, above what the Federal Reserve regards as the non-inflationary pace (1.8%). At the same time, and despite being among the fastest...