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”

Drivers for the Week Ahead

  • With risk-on sentiment still in full force, we acknowledge that the dollar may remain under pressure near-term
  • Recent developments take some pressure off the Fed to cut rates again this month, which is ultimately dollar-positive
  • US data highlight this week will be September retail sales Wednesday
  • UK Parliament reconvenes Monday; EU summit October 17-18 is seen as the last opportunity to submit workable Brexit deal
  • China September data deluge comes this week; MAS and BOK meet and both are expected to ease Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM benefited greatly from the improvement in US-China trade relations and quite possibly Brexit.  The dollar is likely to remain under some pressure near-term as a result.  Yet we must caution investors against getting too optimistic.  The details of the partial trade deal still need to be worked out, while existing tariffs will still remain in place if the deal is signed next month as most expect.  Brexit negotiations have accelerated but we note that any deal must still be passed by UK Parliament, which has already scuttled several attempts.  Lastly, geopolitical risks abound in the Middle East.    Continue reading “EM Preview for the Week Ahead”

Dollar Remains Soft as Risk-On Sentiment Continues

  • Markets have seized on the possibility of a partial trade deal as well as some hopes that a hard Brexit will be avoided
  • The main event for the day will be President Trump’s meeting with Vice Premier Liu He
  • These market movements (if sustained) will take pressure off of the Fed to cut rates this month
  • The notion of a “pathway” to a Brexit deal continues to capture investors’ imagination
  • The EU will discuss sanctions on Turkey at next week’s summit; oil is up on news that an Iranian oil tanker was likely hit by a missile attack
  • Singapore reported weak August retail sales data; Malaysia raised its budget deficit target for next year to -3.2% of GDP Continue reading “Dollar Remains Soft as Risk-On Sentiment Continues”

Some Thoughts on a Possible US-China Currency Pact

There has been increased talk about a possible “currency pact” from China as a key component for a partial trade deal. The notion was first discussed in February, when Treasury Secretary Mnuchin touted that the US and China had agreed on a currency pact that was “the strongest ever.” No details were ever divulged, as US-China talks broke down in May over the deeper structural reforms that China was unwilling to commit to. So what can we expect of a trade pact this time around? Continue reading “Some Thoughts on a Possible US-China Currency Pact”

Dollar Soft as Optimism on Trade Talks Runs High

  • Markets continue to digest a lot of back and forth headlines on the two major issues of the day
  • Two-day talks between the US and China begin; UK PM Johnson will meet Irish PM Leo Varadkar
  • FOMC minutes released yesterday can be characterized as dovish; US reports September CPI
  • A leaked document once again laid bare the divisions within the ECB
  • Eurozone finance ministers agreed on the major elements of a common budget
  • BOT announced rule changes that are meant to ease appreciation pressures on the baht Continue reading “Dollar Soft as Optimism on Trade Talks Runs High”