IT disruption driving up Asia EM currencies, GBP risk builds, AUD yield advantage gone

Posted on November 17th, 2017

Investors are pursuing gains in equity markets; in particular, EM markets that are big exporters of IT goods.  These capital flows are tending to drive currencies; Asian EM currencies are out-performing other EM regions.  The USD is tending to weaken as the US growth outlook is moderate and no more special than other economies.  The […]

Political risk for a number of currencies (AUD, NZD, GBP and CAD)

Posted on November 14th, 2017

It is getting harder to know where to turn with political risk in the UK palpable. A dual citizenship debacle in Australia, NAFTA negotiations hanging over the CAD outlook, a significant change in policy direction in New Zealand, German coalition negotiations, and political uncertainty has never been far from mind in the US in the […]

Diverging EM assets and currencies, Global investor jitters, AUD Vulnerable

Posted on November 10th, 2017

The USD has strengthened since September after trending down for the first eight months of the year.  Its gains have stalled in recent weeks, and the jury is out as to whether it will revert to its weaker trend earlier in the year or push on.  The rebound in the USD since September has some […]

RBNZ Governor Spencer thrown into the deep end

Posted on November 6th, 2017

The RBNZ must revamp the monetary policy outlook this week facing a political minefield.  The starting point for inflation is significantly higher than previously forecast, and it is now close to target.  The exchange rate has fallen to a low since mid-2016 and is likely to place some upward pressure on inflation. The economy is […]

Bank of England Sets Glacial Hike Projections

Posted on November 3rd, 2017

The market had a glacial pace of hikes priced-in for the UK over the next three years, and the Bank of England Inflation Report largely reinforced these expectations.  Two of nine MPC members dissented from the hike and appear to reflect market expectations that inflation pressures (beyond that driven by GBP depreciation) will remain subdued, […]

Without tax reform division may swamp the USD

Posted on November 1st, 2017

Political turmoil has risen to the fore again in the USA.  There are so many parts intertwined in the political and social turmoil in the USA that it is hard to know how much it will affect the real economy or financial markets. It is a moving feast that will persist for the foreseeable future. […]

Major moves afoot (EUR, CAD, NZD & AUD)

Posted on October 27th, 2017

Major corrective moves may be underway in EUR and NZD. Further weakness may also be in stall for CAD and AUD.  In the case on EUR, CAD and AUD, long positions and bullish sentiment leave them vulnerable to position-squaring.  The EUR has moved too far from its yield disadvantage, and it is not as cheap […]

Bank of Canada on hold this time

Posted on October 25th, 2017

In our view, the probability of a Bank of Canada hike on Wednesday is essentially zero, creating some risk of a further kneejerk rise in USD/CAD.  The market is pricing in a modest 19% chance of a hike.  The tone of the Bank’s statement, press conference and Monetary Policy Review will probably reflect the message […]

ECB unlikely to over-deliver on taper

Posted on October 24th, 2017

It is universally anticipated that the ECB announces a significant taper or reduction in the pace of its asset purchases on Thursday this week.  Expectations have settled on a halving in the monthly amount to EUR30bn, while adding nine months to the current program that ends in December this year. However, it appears that most […]

New Zealand dollar charts a new course

Posted on October 20th, 2017

The NZD has taken a hit on the formation of a un-proven left-leaning coalition, after nine years of a right-leaning, essentially one-party led government that oversaw a return to significant budget surplus and stable solid economic growth.  At least some change was always coming, since the election on 23-September, as NZ First held the balance […]