Dollar Stabilizes as Markets Consolidate

  • The dollar has stabilized but remains near the recent lows
  • UK House of Commons Speaker Bercow denied Johnson a repeat vote on his Brexit plan yesterday
  • Press reports suggest US and China are approaching an agreement on trade
  • Canadian Prime Minister Trudeau won a second term but will lead a minority government
  • Hungary is expected to keep rates steady; Israel Prime Minister Netanyahu was unable to form a government Continue reading “Dollar Stabilizes as Markets Consolidate”

A New Stage of the US-China Conflict

The US-China diplomatic relationship may be entering a new stage. The balance of power between the key players – Trump, China, the US Congress, and the Democrats – is changing and their roles are being reshuffled. This might be enough to break the endless cycle of agreements and re-escalations. In short, we think both Trump and Chinese officials have a greater incentive to reach a deal (or at least not to escalate) this time around. Continue reading “A New Stage of the US-China Conflict”

Dollar Firmer in Subdued Trading; Sterling Shines

Dollar Remains Vulnerable as New Week Begins

  • We expect markets to remain volatile but as long as sentiment remains on the upswing, the dollar is vulnerable
  • The situation remains fluid but it appears that a hard Brexit will be avoided
  • We are beginning to become more constructive on EM
  • Canada holds national elections today; Asian trade data points to continued weakness in Q4 Continue reading “Dollar Remains Vulnerable as New Week Begins”

Drivers for the Week Ahead

  • We are beginning to become more constructive on EM
  • The Brexit situation remains fluid but it appears that our base case of another delay is coming to fruition
  • The US economic outlook still remains solid; Canada holds national elections Monday
  • ECB, Norges Bank, and Riksbank meet Thursday and are expected to stand pat: Turkey meets Thursday and is expected to cut rates
  • Bank Indonesia meets Thursday and is expected to cut rates 25 bp to 5.0% Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

We are beginning to become more constructive on EM.  The main trigger for some optimism is the shifting US-China dynamic.  In our view, the partial trade deal reveals weakness on the part of the US.  Reports suggest China will begin pushing for all existing tariffs to be dropped as part of Phase 2, which would be very positive for EM.  That is still likely months away but this shifting dynamic bears watching.  We will be putting out a longer MarketView piece on this topic this week. Continue reading “EM Preview for the Week Ahead”

Dollar Broadly Weaker as Brexit Deal Takes Shape

  • The dollar remains under pressure due to weak US retail sales and rising optimism on Brexit and the trade war
  • Brexit negotiations remain tense and we should expect a higher than usual noise-to-signal ratio at this stage
  • China said its goal is to stop the trade war and remove all tariffs
  • US has a full data schedule; we remain constructive on the US economic outlook
  • UK reported September retail sales; Sweden’s unemployment rate hit a 4-year high of 7.4%
  • Australia reported solid September jobs; Singapore reported weak September trade Continue reading “Dollar Broadly Weaker as Brexit Deal Takes Shape”

What is the US Yield Curve Telling Us?

The US yield curve has turned positive again. Did we dodge a bullet? Markets are likely to remain on US recession watch, but we look at past curve inversions to conclude that we may avoid recession in 2020. Other clues support this view, at least for now. Continue reading “What is the US Yield Curve Telling Us?”

Dollar Firm as Markets Get a Reality Check

  • Excitement about the Brexit deal has started to fade after strong objections by the DUP
  • US-China tensions are rising again, but this time because of Hong Kong
  • Russian President Putin has stepped into the vacuum of power between Turkey and Syria
  • The US data highlight is September retail sales; Fed Beige Book for the upcoming October 30 FOMC meeting will be released
  • Canada reports September CPI; UK and eurozone reported soft September CPI
  • New Zealand Q3 CPI rose 1.5% y/y; BOK cut rates 25 bp to 1.25%, as expected Continue reading “Dollar Firm as Markets Get a Reality Check”

Dollar Resilient as Cracks in Risk-On Appear

  • Some cracks have appeared in the market’s risk-on sentiment
  • We continue to believe that recent developments take some pressure off the Fed to cut rates again this month
  • Our base case for a Brexit delay has been strengthened; UK reported weak labor market data
  • The situation is Turkey continues to develop negatively for asset prices; trade data out of China once again showed the impact of the trade war and the resulting global slowdown
  • RBA minutes were released; Japan is readying a supplemental budget to help address the damage from typhoon Hagibis Continue reading “Dollar Resilient as Cracks in Risk-On Appear”