JPY has led the recent rebound in the USD since the Jackson Hole Symposium and apart from speculation over a possible rate hike by the Fed, the outlook for BoJ policy is also generating renewed focus. BoJ’s Kuroda has argued he has further scope to ease policy and mounted a defense on the effectiveness of […]
Chair Yellen signaled an incremental improvement in the outlook for rate increases, but she left out a lot of possible comments that might have narrowed the view on the timing of the next hike. She appears to be keeping her options open. To more clearly move the needle in favor of a rate hike, the […]
We look at the performance of AUD/NZD relative to commodity prices, the relative interest rate outlook in Australia and New Zealand, and other factors including the search for yield and influence of China. The AUD/NZD looks under-valued with respect to commodity prices and relative interest rates, but this might be explained by the extreme low […]
San Francisco Federal Reserve President Williams might vote for a hike sooner rather than later, but he appears to be on the hawkish side of the debate, at least with respect to the next rate move. He is also more bearish than his colleagues on potential growth and sees a lower neutral policy rate in […]
FOMC minutes still express concern over downside risks, even though the immediate Brexit turmoil risks have diminished. The core decision makers expressed patience and we do not expect serious consideration of a rate hike until December. Not discussed in these minutes and still hanging over the market are the recent views expressed by Dudley and Williams […]
Fed Presidents Dudley, Williams and Lockhart comments on Monday/Tuesday have helped lift US rate hike expectations modestly and arrested a sharp slide in the USD. While all three see a rate hike later this year based on current perceptions of how the economy is currently tracking, Dudley and Williams have brought more attention to their […]
It has been a complex period in currency markets since the Brexit vote. The USD has been unusually weak considering the lift in its yield advantage. JPY has been volatile and uncertainty over its direction remains high. It has stalled recently as the market struggles to guess the BoJ’s next step. Funds have flowed to […]
The NZD rallied sharply in an extraordinary reaction to a rate cut on Thursday. Even though the cut was fully anticipated, I cannot recall such a powerful perverse response to an RBNZ rate decision. It illustrates the lower liquidity in FX markets in recent years around key events as banks and the wider market rely […]
High beta assets globally have significantly out-performed over recent months. Emerging market equities, bonds and currencies have led the recovery since the Brexit vote. They have been supported by fiscal and monetary policy easing, two strong US payrolls reports and other supporting US economic data including PMI surveys that suggest that the US economy is […]
The Bank of England have pulled out all stops to ease policy and have achieved considerable additional monetary stimulus that will help stabilize the UK economy. This contrasts with the bumbling Bank of Japan that has enacted the most aggressive monetary easing policy in history only to see monetary conditions perversely tighten. The BoJ have […]