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Emerging Market Chaos returns

Posted on August 31st, 2018

Emerging market chaos has resumed and is spreading to some USD strength against majors.  CHF has been the big winner offering the most reliable store of value in a crisis in the last month.  There is a remarkable dichotomy between chaos in EM markets and relative stability in the US and some other developed market […]

Short-term USD up-cycle clashes with approaching long-term down-cycle

Posted on August 29th, 2018

The FX market is likely to keep swinging from short-term cyclical strength in the USD to a desire to look over the cycle to building longer-term weakness in the USD.  For the most part, this year has been characterised by short-term cyclical factors boosting the USD.  But in the last two weeks, the market is […]

New Australian PM Offers a Path to AUD Redemption

Posted on August 25th, 2018

The AUD sunk and then rebounded again on political developments this week.  The ascendency of Scott Morrison to PM offers the ruling party a road to redemption.  Morrison comes from the most senior ministry role of Treasurer and has built a strong reputation as a pragmatist in controversial posts in immigration and social services ministries.  […]

US Politics – More drama than risk

Posted on August 24th, 2018

Political risk is driving down currencies in Turkey, Brazil, the UK and Australia. Politics is undermining Italian assets and poses a threat to the EUR.  However, US assets remain largely unmoved by the US political and legal troubles.  Trump has proven his ability to operate through chaos and combat controversy.  Even if Democrats take control […]

USD facing a negative feedback loop, JPY placed to benefit more than EUR

Posted on August 21st, 2018

Asian markets have stabilized awaiting fresh US-China trade talks.  Chinese policymakers may be more focused on stabilising the CNY and Chinese equities ahead of these talks, helping stabilise Asian markets.  Turkish asset markets remain in deep distress, notwithstanding some rebound in the TRL.  Italian markets are also likely to display ongoing stress.  Combined with fears over […]

TRL for USD; exchanging one twin deficit and populist government for another

Posted on August 15th, 2018

Safe haven demand is strong for the USD with alternatives gold, JPY and bitcoin missing in action.  This may be helping drive the USD higher in the recent upheaval led by Turkey. And it may be adding to the woes of other EM currencies with significant dollar-debt.  However, when you exchange TRL for USD, you […]

RBA and RBNZ may reveal doubts

Posted on August 3rd, 2018

In a follow-up note from our report last week (Major commodity currencies may diverge – CAD set to shine) we preview the RBA and RBNZ policy meetings next week and see risks of dovish surprises in both.  Business surveys have ebbed, particularly in New Zealand.  The Australian economy is showing more resilience, but risks from […]

Major commodity currencies may diverge – CAD set to shine

Posted on July 29th, 2018

A lot is happening in global markets this week.  No doubt you are reading much about key central bank meetings in Japan and the UK, and key data releases including Euro GDP and CPI.  However, we have decided to hone in on the AUD, NZD and CAD which present there own opportunities in a market […]

AUD – what gives? – risks and strengths

Posted on July 18th, 2018

The AUD faces a number of downside risks; these include a weakening housing market, a persistent jump in Australian bank funding costs, tightening credit conditions for Australian borrowers, tightening shadow-finance in China, a slowing Chinese economy, and threats related to a trade war between the US and China. However, to date, China is managing its […]

QE come-back and regional forces drive JPY

Posted on July 13th, 2018

The rise in USD/JPY is surprising many, breaking away from US yields and perceptions that JPY should act as a safe haven in times of global market uncertainty.  However, the USD/JPY 10-year yield advantage is around a high since 2007 and consistent with a weaker JPY in a broad sense.  JPY assets have been behaving […]