Key trends this year include a weaker USD and surprisingly stronger JPY and EUR. This is tending to render the remarkably expansive unconventional monetary policies of the BOJ and ECB ineffective. Japan and the Eurozone have been cajoled by the USA to not engage in competitive currency devaluation and this is worsening the unintended consequences […]
As the UK romances the idea of Brexit, the global financial markets, world leaders and policymakers are watching on in amazement that it would consider such a risky move. It is fair to say we are all transfixed and no decisions will be made until we know the outcome. Markets are likely to be frozen […]
The rampant rally in the NZD reflects rude health in the New Zealand economy compared to a stagnant global economy, rapid immigration and housing shortage underpinning its housing market, sluggish response by the RBNZ in developing its macroprudential policy tools and a melt-up in global emerging market and commodity currencies as global yields are crushed […]
The RBA is not keen to cut rates, and it appears highly agitated by an over-supply of apartments and financial stability risks. The outlook for the Australian economy is highly unstable, further rates cuts are not inevitable but are probable, although may come later than most expect. The most likely scenario for cuts are either […]
The rates and FX market is little changed after the Fed Chair Yellen speech that tended to confirm market expectations that the weak April/May payrolls data has dealt the summer rate hike a knock-out blow. A July hike is possible but only in the unlikely event that payrolls rebounds strongly in the 8-July report. The Fed has […]
JPY gains on what should have been entirely anticipated Abe comments this week suggest there remains strong underlying demand for the currency and power in its rising-trend. USD/JPY may bounce on further central bank policy divergence, but sustained gains look more elusive for the time being. EUR on the other hand looks weaker, unable to […]
We see scope for the AUD to recover modestly after its recent steep fall. Global risk appetite has picked up and Chinese asset markets and currency have stabilized. The AUD is comfortably in the middle of its range since the middle of last year, a period where the Australian economy appeared to be transitioning well […]
The recovery in oil prices since Jan/Feb may help stabilize and even lift inflation expectations potentially from around July and more so from November through to early next year, provided oil prices remain at least stable. We have already seen some effect in pushing up headline inflation and long term inflation expectations in the USA. […]
The Fed minutes and member comments suggest the probability of a hike in July is now significantly above 50%, we see closer to 80%, and two hikes by year end also appear quite likely. The USD and US rates market have responded, but are yet to fully get on-board; still pricing-in less than 50% chance […]
We think the market should get prepared for a July Fed rate hike that we rate as a better than 50% chance. By July the market will be clear of the Brexit vote that is likely to result in a stay-in outcome and avert global market instability. The stronger US retail sales and consumer confidence, […]