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Dollar up today, but down tomorrow? Fed and govt shut-down risk

Posted on December 12th, 2018

It feels a bit like if I write something on the FX today, it will be redundant by tomorrow as conditions in the market are changing so quickly due to a range of global risk factors. Today French budget risk and Brexit uncertainty are dragging down the GBP and EUR, despite growing political risk in […]

pro-EU side gains ascendancy in UK parliament

Posted on December 5th, 2018

Risk aversion on uncertain events from the US-China truce to Brexit and various other issues; including the OPEC meeting, and uncertainty over the global economy dominated markets on Tuesday. However, the Fed has softened its tone, the US and China have restarted negotiations,  Pro-EU members of the UK parliament appear to have gained ascendancy, and […]

Clarida puts the ball in Powell’s court, but amenable to a pause

Posted on November 28th, 2018

Last week we saw the first signs that the Fed might be softening its tone on the path for higher rates.   Both the Fed’s Powell and Clarida suggested that they have to be more data-dependent and pay closer attention to a range of factors from global growth indicators, liaison with business, and financial market conditions.  […]

Fed rate pause in view

Posted on November 20th, 2018

A Fed pause, if not a peak, may be coming into view.  Financial conditions in the US are tightening up, and the Fed Chair and Vice Chair expressed more caution last week.  They suggested that rate hikes are no longer on auto-pilot, but are more dependent on data and financial market conditions.  With the increased […]

A grimmer view on global risks boosting the dollar

Posted on November 13th, 2018

The market appears to be taking a grimmer view of big global risk factors (Brexit, Italy, Chinese economy, and US trade policy).  The relative certainty that the Fed will persist with rate hikes despite souring global growth confidence may by driving up the USD.  Asian markets may be undermined by signs of weaker demand for […]

The dollar and the meeting between Trump and Xi

Posted on November 2nd, 2018

The G20 is scheduled for 26 November to 1 December in Argentina.  The schedule starts with deputies and sherpas.  The leaders’ summit is on 30 Nov and 1 Dec.  Presumably, Trump will meet Xi on one of those two days. The meeting of the two leaders provides an opportunity for some kind of agreement on […]

The Dollar and Mid-Term Elections 6 November

Posted on November 2nd, 2018 betting odds give the Democrats a 70% chance of winning control of the House, and the Republicans a 35% chance. analysis of the polls gives Democrats an 85% (6 in 7) probability of winning the House. On the other hand, gives the Democrats only a 13% chance of winning control of the […]

USD held down by a large risk premium

Posted on October 24th, 2018

The failure of the USD to make clearer gains despite near record high yield advantages across a wide range of currencies suggests that there is a sizeable risk premium built into the USD.  This risk premium may reflect the high-risk domestic and foreign policies adopted by the Trump administration, the polarisation of the US electorate […]

ECB and Fed QE reversal in play, Credit risk dampening CNY and EUR

Posted on October 19th, 2018

The CNY has developed a steady downtrend.  While this is often discussed in the context of political relations between the US and China, it may just reflect the fundamental realities.  These include policy easing in China to offset credit tightening related to increased regulatory scrutiny on shadow-finance.  Risk metrics in the Eurozone have deteriorated further; […]

Fundamentals battle positioning, real yields support the USD

Posted on October 17th, 2018

In the FX market, fundamentals are battling excessive positioning in several currencies, including the AUD and NZD where positioning data suggest that the market is near record net shorts.  After around six months of exodus, funds may also be looking to rebuild positions in emerging markets.  Asia has lagged other regions recently as the market […]