Trade war horse bolts, AUD trades like an Emerging Market Asset

Posted on June 20th, 2018

Trade war escalates and the horse bolts in Asian EM assets.  Uncertainty is likely to remain elevated for some time, keeping Asian EM markets in a weaker trend.  It seems unlikely that the trade threat will de-escalate.  In fact, the risk is high that it ratchets up with the US yet to announce restrictions on […]

How Dovish will the Fed be?

Posted on June 12th, 2018

Every Fed rate hike over the last year and more has resulted in a weaker USD, suggesting the Fed has a habit of delivering ‘dovish’ hikes.  There is every reason to expect the same this week.  The May policy minutes sent a number of dovish signals; concern over a flattening yield curve, ambivalence on the […]

ECB’s stepped up plans to end QE may not be good news for the EUR

Posted on June 7th, 2018

ECB’s Praet signalled that the ECB is thinking about withdrawing from net asset purchases soon.  We should expect a plan at the next Governing Council meeting on 14-June for the APP beyond its current completion date in September.  Praet’s upbeat view on the Eurozone’s growth and progress on convergence to the ECB’s inflation target made […]

A bout of optimism amidst intensifying risks

Posted on June 5th, 2018

The turn lower in the USD in recent sessions feels like a technical retreat from resistance.  It comes despite intensifying risk from a trade war, ongoing political risk in Italy and a tightening US labour market.  However, we are wary that the USD may continue to weaken in the near term.  Political risk in the […]

Add Deutsche Bank to the list of risks for the EUR and Global Markets

Posted on June 1st, 2018

Bank analysis is not my field of expertise, but as a macro analyst of FX markets, it is hard to ignore the rapid slide in Deutsche Bank’s (DB) share price.  DB is one of the top five Globally Systemically Important Banks (G-SIB) as designated by the G20’s Financial Stability Board (FSB).  It is around the […]

Euro inflation, US economy and Canada rates still on track

Posted on May 31st, 2018

Individual country preliminary inflation data for May suggest that Eurozone headline and core measures will rebound more than expected.  Without the political upheaval in Italy, the data might signal a clearer path to exiting QE and support a sizeable recovery in EUR.  Political uncertainty eased somewhat on Tuesday and EUR has rebounded, but the situation […]

Hardened Populist politics in Italy and the USA

Posted on May 30th, 2018

Italian leaders have set on a course to clash with the EU that will be hard to turn back from.  A more prolonged crisis appears likely.  Trump is pursuing his hard-line on trade; announcing plans to move ahead with tariffs on Chinese imports and restrictions on investments and trade in the high tech sector.  It […]

Strident US trade policy supporting the USD

Posted on May 25th, 2018

There are a few different themes to wrap your head around in the FX market.  We started today looking into trade rhetoric and its impact on markets.  Last week it appeared that trade tensions were easing, this week they are ratcheting up again.  Trump is willing to go to significant lengths to redress what he […]

EUR and GBP fortunes may diverge

Posted on May 22nd, 2018

Both the EUR and GBP have taken a beating in the last month.  The EUR is near key support and may recover somewhat as risk aversion related to Italy eases and Q2 economic reports recover.  However, we see the bounce as limited with Italian political risk set to linger and the potential for growing trade […]

Italian leaders pose a new threat to the EUR

Posted on May 17th, 2018

The EUR has been undermined in recent days by political risk in Italy.  The untested young leaders of anti-establishment populist parties in coalition talks to govern Italy have argued for freedoms from the rules of Eurozone monetary union.  Italian bond yields rose 16bp on Wednesday, with some contagion to other periphery government bond markets and […]