The FOMC was significantly more dovish than expected and might keep the USD on its recent weaker path for the time being. The dovish surprise came in the FOMC member projections for rates, growth, inflation and unemployment. Their rates outlook was lowered significantly both in the near term and over the medium and longer term, […]
Exempting MRFs from negative rates narrows the BoJ’s NIRP more clearly to large institutions and allows retail investors to park their cash in safe zero-yielding funds. NIRP was before and even more so now is aimed at weakening the JPY. However, by standing by and letting the JPY strengthen in the face of this policy, […]
The panic in global markets in the first month of the year has reversed course and there has been almost as much panic to get back into the markets that people exited in the first place. Emerging market currencies are leading the charge higher boosted by a reversal of fortunes in the energy market, a […]
The ECB delivered a comprehensive set of further policy easing measures. But it eschewed the concept of a tiered rate policy, in contrast to the BoJ, and suggested that it was unlikely to target further declines in cash rates. Its policies are more focused on boosting domestic asset prices and domestic bank lending and place […]
RBNZ Governor Wheeler sent mixed messages in his 28 January policy statement and 3 Feb speech on the Policy Targets Agreement. The statement concluded with an easing bias, although Wheeler claimed that core inflation and inflation expectations were consistent with his PTA, implying he was in no rush to cut further. Few in the market […]
After a volatile start to the year that has involved a significant downward revision to global growth expectations, we try to take stock of the major global market developments to attempt to develop a sense of the prevailing themes in the market. A key driver of global developments has been the price of oil; it […]
The RBNZ have had a clearer easing bias than the RBA and have called for a weaker exchange rate. After the RBA proved ambivalent this week, the RBNZ may seize its opportunity next week to gain an advantage in its little currency war with the RBA and move up its timetable to cut rates. The […]
The USD is behaving like it is punching with one hand tied behind its back, struggling to rise even as the USA’s recent inflation data have diverged from that of a host of other countries. One reason is the sentiment expressed by New York Fed President Dudley, worried by low inflation expectations and global market […]
The RBA may have an enviable 2.00% of rate cuts it can deliver, but it also has bubble in its housing market and cutting rates now may derive little benefit and generate a bigger problem down the road. Its rate cutting tool is blunt and rusty and may infect the patient. It has been increasingly […]
We have been observing more than participating in choppy FX markets over most of this month, unconvinced that a weaker USD would persist, but accepting a period of weakness might unfold as US rate hike expectations were whittled down and some correction may have been required after the steady build-up to the first rate hike […]