Back-to-back inflation shocks The global pandemic delivered a major shock to the global economy. Just as we were coming to terms with the shockwaves of this crisis, the Ukraine war dealt another major shock. A key development from the first shock was inflation. Policymakers reassured us that this would be transitory. They changed their mind […]
The US-China tensions ratcheted higher in recent days with accusations by the US administration of China hacking to steal COVID research followed on Wednesday by the US forcing the China consulate in Houston to be closed in 72 hours. China has threatened counter-measures. This is just the latest salvo across a long list of flashpoints […]
Weak dollar trend taking hold An important point to recognise is how broad-based the fall in the USD has been this week, extending across currencies and commodities priced in dollars. A catalyst may have been the EU fiscal package, helping push the next most significant global currency (the EUR) higher, but it’s clear that the […]
Global markets have the feel of corrective price action after a big run-up in recent months and blow-off top earlier this week. The market had been running up on news of re-openings from lockdowns around the world, and extreme monetary and fiscal policy easing. The market had drawn hope from reports on progress on vaccines […]
Fed commits to low rates and QE at the current pace US 2yr swap rates fell 3bp on Wednesday, about 2bp post-FOMC 10-year bond yields fell 10bp on Wednesday, about 5.5bp post-FOMC The USD was weaker into the FOMC and weakened further afterwards, although moves were volatile and perhaps lack conviction towards further dollar weakness. […]
The market expects the Fed to stay the course on aggressive policy action JPY continues its confounding behaviour, one of the strongest currencies to start this week, even though equities continued their rise to fresh highs since the crisis lows. JPY was surprisingly weak last week and remains within well-worn ranges that should continue to […]
EUR spikes above a 2-year downtrend Volatility in the EUR has picked up around the COVID crisis. It popped and dropped in March, breaking above its previous two-year downtrend, but then returned to that trend through April/May. In the last week, it has again broken above the previous downtrend. The context this time appears more […]
JPY displays structural weakness The JPY is down by about 1% on Tuesday against an otherwise broadly weaker USD. While some of this reflects a move against safe-haven assets, the JPY also underperformed during the heightened risk aversion around March and April. It failed to benefit from the collapse in US yields this year. There […]
The AUD popped on Monday (+2%), along with strong gains in several commodity currencies (CAD +1.5% and NZD +1.5%). Several higher-yielding EM currencies also led gains (IDR +1%), and for the most part, the USD was broadly weaker. AUD rose to a high since January, leading gains on Monday. CNY continues to lag broader weakness […]
AUD/NZD is still languishing around record lows. Pessimism over the AUD increased as the Australian economy stalled in the second half of last year, the Royal Commission into the financial sector unsettled confidence, the housing market downturn accelerated, political uncertainty peaked into the national election in May, and the RBA scurried to cut rates twice […]