Summary: The market got what it expected from the FOMC meeting yesterday, as the Fed is set to taper asset purchases at the expected pace, with some flexibility on a shift in the pace in the likely event that the overheating US economy requires that they second guess the ponderous move toward rate lift-off. The US dollar is back firmer this morning nonetheless as...
Summary: The Reserve Bank of Australia only checked a couple of the boxes in its shift in the direction of tightening overnight, far short of where the market has priced the central bank to head with its policy rate in the coming year, but how much should the market care when it feels as though central bank guidance is loosing its sway? Elsewhere, rapidly...
Summary: The wild ride last week for the Euro in the wake of the ECB meeting and in how the market is pricing future ECB policy relative to its own guidance points to very interesting tests this week for the RBA, which meets tonight, and of course for the dovish Fed, whose guidance looks far behind the curve relative to market pricing. Indeed, it appears that...
Summary: The ECB is the latest central bank to suffer the market second guessing its intentions as rate hike bets for next year rose to cycle highs even as ECB President Lagarde pushed back against the market pricing these rate moves. The Euro rose in response, with EURUSD trading above local resistance, but we have a critical week ahead for the US dollar as next...
Summary: A solid beat in the Australian CPI reading overnight saw a huge adjustment to the forward rate curve in Australia but failed to impress the currency as much as other factors are providing some offsetting pressure. Today we look forward to a Bank of Canada meeting that will have to deliver a guidance shift to meet market expectations for rate moves in the...
Summary: A speech on Friday from Fed Chair Powell jolted the expected time frame for Fed rate lift-off forward, although it did little for the US dollar outside of a bit of stabilization, and the JPY is near the top of the two-week range against the US dollar as long US yields are well behaved. This week, the focus will be on the Bank of Canada and ECB meetings...
Summary: It is easy for commodity currencies to advance strongly when only the inflationary component of stagflation is in play, but what happens across FX if risk sentiment starts to consider the outlook for sharply weaker growth, especially if yields rise further? Key tests lie ahead on that account for the most yield-sensitive currency the Japanese yen, as...
Summary: The contrarian in me is making a bit of a fuss as recent market developments like JPY weakness and commodity currency strength look extremely extended for at least the short term. This week looks short on macro catalysts, but US yields pressing back higher could add some fresh energy and a pushback against the sharp relief rally in risk sentiment last...
Summary: Risk sentiment remains on edge as markets hold their breath on the next moves from China as it returns from holiday at the end of this week, as it waits for the resolution of the US debt ceiling issue, and as it waits for the US jobs report on Friday, with wages an increasing focus on whether a good old-fashioned wage-price spiral threatens.
FX...
Summary: Yesterday saw a big US dollar move higher as key support gave way in EURUSD and other currencies likewise came under pressure against the big US dollar. This time, the move was its own phenomenon, not requiring sympathetic weakness in risk sentiment or higher yields. The timing is worth noting as today is the last day of Q3 and end-of-quarter effects may...
Summary: Market sentiment has finally reached a breaking point on the pressure that had been building for weeks in energy prices and for less than a week in yields, with US Treasury yields taking out key levels all along the curve. In response the US dollar has strengthened more broadly, not just in USDJPY, while risk-sensitive currencies like NZD and SEK have...
Summary: The German election offered no decisive outcome and we are now faced with the prospect of an extensive period of building a ruling coalition and a likely garbled policy mandate. Elsewhere, the issue that will increasingly seize market attention this week is the recent rise in US yields and how close the US Congress is willing to dance at the edge of a...
Summary: The market tried to slip back into full risk-on mode yesterday, but a huge rise in US treasury yields and sympathetic moves elsewhere at the long end of the curve reminds us how quickly the yield question can steal the spotlight when they are on the move. Next week looks very important for follow up moves in the wake of that particularly development and...
Summary: Fed Chair Powell managed to surprise the market somewhat during the press conference with clear guidance on an imminent start to QE tapering, but the market reaction was fairly muted, with the action overnight and in the European session today suggesting the Evergrande story is still the hobby horse of market attention at the moment. Elsewhere, the Bank...
Summary: With expectations virtually nil for strong signals from the Fed at the FOMC meeting tonight, the meeting could well surprise expectations, which have perhaps shifted slightly to the hawkish side on the potential for the Fed to move sooner rather than later on the taper. But the next steps from the Fed are likely far less important than other irons this...
Summary: Yesterday saw the USD moving sharply higher and sustaining an intraday move for the first time in a while. A stronger than expected US Retail Sales report seemed to show how touchy the lowest yielding CHF and JPY are to anything that prompts a sharp move in US treasury yields. Next week is chock full of central bank meetings, highlighted by the FOMC...
Summary: The Swedish krona initially jumped yesterday on a very hot August inflation print from Sweden, but backtracked after the weaker than expected US CPI data. This morning, sterling has entirely ignored the highest UK inflation readings in nine years, a sign that the market is unwilling to react consistently to relative inflation data when risk sentiment...
Summary: EURUSD remains near the top of the range, possibly on the anticipation that the ECB is set to beat the Fed to the announcement of an asset purchase taper. Meanwhile, long US treasury yields are nearing an important trigger level that could trigger more volatility than we have seen in some time in currencies, while the RBA tapered after all, but provided...
