ECB and Fed QE reversal in play, Credit risk dampening CNY and EUR

Posted on October 19th, 2018

The CNY has developed a steady downtrend.  While this is often discussed in the context of political relations between the US and China, it may just reflect the fundamental realities.  These include policy easing in China to offset credit tightening related to increased regulatory scrutiny on shadow-finance.  Risk metrics in the Eurozone have deteriorated further; […]

Fundamentals battle positioning, real yields support the USD

Posted on October 17th, 2018

In the FX market, fundamentals are battling excessive positioning in several currencies, including the AUD and NZD where positioning data suggest that the market is near record net shorts.  After around six months of exodus, funds may also be looking to rebuild positions in emerging markets.  Asia has lagged other regions recently as the market […]

Rebounds in Asian Currencies and AUD may be short-lived

Posted on October 12th, 2018

Time to step back and take a breath in the FX market.  It lacks conviction, is displaying inconsistent correlations and being whipped around by competing news and views on uncertain events.  The market can no longer rely on the US government to act as a source of stability for global markets.  The rebound in Asian […]

Mounting risks for Eurozone and China

Posted on October 10th, 2018

Under-performing Eurozone corporate assets point to downside risk for the EUR, as does higher US real yields and higher US hedging costs.  German industrial data has deteriorated, and wage pressure in the US is rising.  Unless the Italian budget standoff is resolved, EUR should develop a clearer downtrend.  Chinese equities remain under pressure, and the […]

Old Skool moves in US yields and dollar

Posted on October 4th, 2018

US yields shot higher Wednesday after 10-year yields rose above previous highs for the year.  While rising US yields haven’t helped the USD all that much in the last year or two, the USD experienced a broad-based rise in line with the rise in US yields today.  The rise in yields is too sharp, and […]

Clouds clear for CAD, but shroud EUR and AUD

Posted on October 2nd, 2018

CAD has shot up in recent sessions as the NAFTA cloud has been lifted.  These may not be great levels to buy CAD, but it could continue to strengthen as inflation pressure builds and oil prices rise to new highs.  EUR has dropped on Italian budget risks.  Eurozone core inflation slipped in September and economic […]

New Zealand GDP post-mortem – NZD still vulnerable

Posted on September 21st, 2018

Q2 was a good quarter after a lacklustre three quarters.  Government spending is starting to kick in and may help support the economy, but business activity and consumer confidence surveys suggest growth will sag through the rest of the year.  The RBNZ is likely to retain a neutral policy message in its statement next week, […]

Risks for AUD and NZD coming to the surface

Posted on September 19th, 2018

The USA fired off its biggest missile yet in its trade war with China and has rolled up more artillery.  There is little doubt that they are in for the long fight and this poses significant downside risks for Asian markets.  AUD has been a proxy for tariffs and rebounded on Tuesday, in-line with a […]

Wading through event risks – Trade, Brexit, Fed policy, US mid-terms

Posted on September 14th, 2018

Hopes that the US and China will avert an all-out trade war and one low inflation print in the USA have sparked a ray of hope for emerging-market assets.  Hopes that UK PM May can navigate a Brexit plan through a fractured UK parliament have lifted the GBP.  The US mid-term elections are a risk […]

The USA’s late-cycle fiscal adventure kicks-in

Posted on September 12th, 2018

US yields are kicking to new highs as the US late-cycle fiscal adventure, and America First (tariff and sanctions) policy tighten their grip on the economy and markets.  We expect this to push the USD to new highs in coming months, even if it points to longer-term risks for the US economy.  US Inflation pressure […]