AccuTrade2000

AccuTrade2000

Tariffs on Canada have been delayed for now, and USD/CAD has weakened back to mid-December levels. Our economists suspect these tariffs will be pushed back again before March 4, but see the risk that the President ultimately follows through with these tariffs as higher for Canada than for Mexico. Canada’s parliamentary stand-still, upcoming election, and political...

AccuTrade2000

Crosswinds from a combination of global and domestic factors have muddied the near-term outlook for Sterling, but overall we continue to see net tailwinds for the currency on crosses. A key part of our positive Sterling view for much of last year was predicated on the currency uniquely benefitting from an environment where global equities are rallying and global...

AccuTrade2000

The Yen has been one of the best performing currencies globally since the January BoJ meeting. Most of the move has been driven by the decline in US long-end real yields as well as higher JGB yields on stronger wage data, but there has been growing outperformance over the past few trading days (Exhibit 3). First, anticipation around recent meetings between...

AccuTrade2000

We see three key takeaways from a frenzied week. First, the recent back and forth headlines have not altered our view that tariffs are coming and this will materially impact exchange rates. Second, it is clear that FX is responding strongly to tariff risks in both directions. Third, the solid payrolls report demonstrates that economic performance is still...

AccuTrade2000

A respectable outcome for January job creation with fewer than feared downward revisions to historical data have cemented expectations that the Fed will not be cutting rates imminently. There are still lingering concerns about the quality of jobs being added, but an improving trend in jobs creation since late summer means the Fed will hold rates until 3Q.

AccuTrade2000

The European Central Bank will publish its staff revision on the neutral rate today. President Christine Lagarde said last week that r-star is “a range that does not give a guideline or a destination” and Olli Rehn added yesterday that “we should not constrain our freedom of action because of a theoretical concept”. That said, with the next couple of cuts not...

AccuTrade2000

The dollar’s bearish momentum has eased into today’s US jobs release. Most of the tariff shock from last weekend has been absorbed, and markets are also probably reconsidering the optimism on a US-China deal. Beijing’s retaliatory tariffs are due to come into effect on Monday, and the chances of a de-escalation before then have decreased. Also helping the dollar...

AccuTrade2000

The elephant in the room The focal point of late has undoubtedly been US President Trump’s proposed tariffs on Canadian goods shipped to the US. A 25% universal tariff rate would be troublesome for the Canadian economy—despite the exemption for energy products. But it would also have a notable stagflationary effect on the US—making it an expensive strategy for...

AccuTrade2000

The dollar faces downside risks today as US payrolls should slow and annual benchmark revisions could be significant. That could more than offset some safe-haven flows on the back of souring China sentiment. In the eurozone, we’ll watch the ECB’s new estimate for the neutral rate. Central banks in CEE maintain a hawkish tone but rates diverge.

AccuTrade2000

GBP-USD edged lower ahead of the BoE meeting. The central bank is widely expected to cut rates by 25bp with markets expecting a 100% probability of a rate cut. The BoE members are expected to vote in a 8-1 split with Catherine Mann favoring no change. While the outcome should not have a material impact for GBP, risks remain that the board members vote for...

AccuTrade2000

USD-JPY moved sideways ahead of President Trump and Japan’s Prime Minister Ishiba’s meeting. The JPY has held on to its gains from yesterday, and notably, it has been the best performing currency in the G-10 space this week. The overnight comments by BoJ board member Naoki Tamura also helped, as he flagged the need for more interest rate hikes (Bloomberg). Some...

AccuTrade2000

The Bank Of England's trade-weighted sterling index has rallied 1.7% since the middle of January. The recovery from the gilt-triggered January sell-off has undoubtedly been helped by the rally in US Treasuries. Additionally, the recent focus on tariffs has been a EUR/GBP negative, with the UK less exposed and the UK perhaps even being granted a tariff exemption...

AccuTrade2000

One wild card for EUR/USD this year is what happens in Ukraine. Yesterday the FX market took note of the further rise in Ukraine's hard currency bonds, amid optimism that negotiations could bring a potential peace deal closer. Reports that the US will unveil a peace plan at next week's Munich security conference, in addition to signs that both countries’ leaders...

AccuTrade2000

The BoJ has made it clear that the path of wages growth is central to its decision process on the timing and scale of monetary adjustment. The December data bolster the case for more hikes, and the JPY also had the added help from weaker equity markets overnight.

AccuTrade2000

The BoJ has made it clear that the path of wages growth is central to its decision process on the timing and scale of monetary adjustment. The December data bolster the case for more hikes, and the JPY also had the added help from weaker equity markets overnight.

AccuTrade2000

Time to exit Intraday short term trade here. How daily close is very important. (100 day and 200 day avareage)

AccuTrade2000

We stick to our call that EUR/USD will start to lose support once crossing 1.040, as the euro remains broadly unattractive from a macro fundamental perspective and Trump has indicated that the EU should be next on the tariff list. A EUR:USD two-year swap rate gap at -185bp is a mirror of that – via the monetary policy channel – and a key disincentive to chase...

AccuTrade2000

Labour cash earnings rose more than expected in December and the November figures were all revised upwards. If Shunto results are as strong as last year's, we expect the Bank of Japan to hike by 25 basis points as early as May.