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Bond yields rope-a-dope and fight back

Posted on April 15th, 2019

The market absorbed more negative news on the global economy last week, including the IMF forecast downgrade, pessimistic ECB, trade threats by the US towards Mexico and Europe. However, by end week, bond yields, risk assets and the EUR were stronger, suggesting the market has built-in a quite negative scenario and may respond more to […]

Watch out for dovish noises from the Fed and RBA

Posted on April 10th, 2019

We see scope for dovish noises from the FOMC minutes and Fed speakers.  The Fed appears to be in the process of shifting towards adopting an average inflation target, which should make them more sanguine if inflation rises above the 2% target and more responsive to signs that economic growth may be slowing.  We expect […]

Yield grab supports the USD, Japanification fear weakens EUR

Posted on April 5th, 2019

FX markets are meandering with no clear trends, and it seems investors have little market conviction.  This appears to be resulting in choppy price action influenced mainly by short term technicals rather than macroeconomic developments. We have noted that in recent years the FX market has appeared to be less pre-emptive, and often responds surprisingly […]

Alternative Brexit vote on Monday may lift GBP

Posted on March 30th, 2019

The defeat of May’s deal on Friday was narrower but still emphatic, rendering it almost dead. We see a higher probability, perhaps even a high probability, of a majority of MPs now supporting a customs union Brexit in the indicative votes on Monday. The bigger the vote, especially a majority, for a customs union will […]

RBNZ pressures the RBA to adopt easing bias

Posted on March 28th, 2019

New Zealand rates plunged and the NZD dropped relatively sharply after the RBNZ said the next move in rates was more likely to be a cut.  The RBNZ appeared to be significantly influenced by the policy easing abroad and upward pressure on the NZD. The RBA shifted from a mild tightening bias to a neutral […]

Labour data may snap RBA policy tension

Posted on March 20th, 2019

Lower US rates and yields appear to be fuelling broad weakness in the USD and gains in EM assets over the last two weeks.  Global risk appetite is on an improving trend, suggesting hopes are high that easier central bank policies, in the US, China and globally, will stabilise global growth.   Gold continues to pay […]

ECB was the last straw, AUD’s hold onto 70 slipping

Posted on March 12th, 2019

While the downgrades to the ECB outlook may not have been unexpected, they appear to have been viewed as the last straw for EUR bulls.  EUR has failed to respond to lower US rates in recent months or a moderate recovery in global risk appetite.  An expectation that ECB rates policy normalisation may take much […]

Global manufacturing PMI slump at odds with equity and commodity price rebound

Posted on March 6th, 2019

The slump in the global manufacturing PMIs that is broad-based in major economies and alarming in Japan, Korea and Taiwan, appears to reflect a disruption in global trade that may relate to US tariff policy. Services PMIs, on the other hand, are relatively stable and have recovered recently, and may help the global economy avoid […]

Pressure on the RBA mounts

Posted on February 28th, 2019

The pressure is building on the RBA to cut rates as the construction data proves much weaker than expected in the second half of 2018; pointing to sub-trend GDP growth over the year ahead.  The RBA may cling to their outlook for stable rates, for the time being, citing recent strength in the labour market, […]

US real yields fall, and the Fed wants higher inflation

Posted on February 26th, 2019

The surge in Chinese equities, leading a broader rebound in emerging market assets is significant and hard to ignore.  The AUD has significantly lagged the rebound in risk appetite indicators, including copper, other commodity and Asian currencies.  Fears over Australia’s housing market have dominated recent developments, but labour market indicators suggest the RBA will be […]