Risk Assets Rally as Major Tail Risks Ease

The biggest tail risks impacting markets this year have cleared up; risk assets are rallying, while safe haven assets are selling off

During the North American session, US November retail sales will be reported

Russia central bank cut rates 25 bp to 6.25%, as expected

Bank of Japan released a mixed Q4 Tankan report Continue reading “Risk Assets Rally as Major Tail Risks Ease”

Three UK Election Takeaways

There were at least three big consequences from the UK elections. (1) The Conservatives won a decisive majority and Brexit is happening by January 31, 2020. (2) Labour is likely to move to the centre after the resounding defeat and the poor showing from the Liberal Democrats. (3) The SNP will interpret their victory in Scotland as a mandated for a second referendum. Below we discuss each one. Continue reading “Three UK Election Takeaways”

Dollar Soft in the Wake of FOMC as ECB and UK Post Event Risk

  • The dollar sold off after the Fed kept rates on hold, as expected; US November PPI will be reported
  • Brazil cut rates 50 bp, as expected, while S&P revised the country’s outlook to positive; Peru is expected to keep rates steady at 2.25%
  • ECB meets; UK goes to the polls; SNB kept rates steady, as expected
  • Turkey cut rates 200 bp to 12.0%, slightly more than expected; Israel announced its third election in less than a year
  • Japan reported weak October core machine orders; USD/HKD traded in the lower half of its 7.75-7.85 trading band; Philippines left rates steady, as expected Continue reading “Dollar Soft in the Wake of FOMC as ECB and UK Post Event Risk”

ECB Preview

Christine Lagarde will chair her first ECB meeting Thursday after taking over as ECB President on November 1. She faces growing skepticism within the ECB regarding the need for further monetary stimulus as well as the efficacy of negative rates. Markets have priced out any further ECB rate cuts, which we believe is premature. Simply put, we would not underestimate Lagarde’s capacity to pursue further easing in 2020 if needed. Continue reading “ECB Preview”

Dollar Mixed, Markets Calm Ahead of FOMC Decision

  • Reports suggest there will be a delay on the US tariffs on China due this Sunday
  • The FOMC decision comes out this afternoon; US CPI will be reported
  • USMCA is moving forward; Brazil is expected to cut rates 50 bp to 4.5%
  • Anxiety about tomorrow’s UK elections is starting to set in; Sweden reported higher than expected November CPI
  • BOJ officials see a “sizable” impact from the government’s proposed fiscal stimulus package Continue reading “Dollar Mixed, Markets Calm Ahead of FOMC Decision”
Policy not Data to Drive the Dollar

Dollar Marks Time Ahead of FOMC and Data

  • The two-day FOMC meeting begins today and the decision will come out tomorrow afternoon
  • Negotiators agreed to a revised version of the US-Mexico-Canada trade deal (USMCA)
  • UK data came in weaker than expected; Norges Bank’s regional survey paints a gloomy picture
  • Japan November machine tool orders contracted -37.9% y/y; China reported November inflation and new loan data Continue reading “Dollar Marks Time Ahead of FOMC and Data”

Dollar Steady as Eventful Week Begins

  • The dollar finally got some traction Friday after the blockbuster US jobs report
  • During the North American session, there are no US data releases; Mexico November CPI is expected to rise 3.0% y/y
  • UK Conservative Party still holds a commanding lead ahead of this Thursday’s elections; we are in for another week of turbulence in France
  • Oil prices remain elevated after Saudi Arabia surprised markets Friday with a large output cut
  • Chinese exports declined for the 12th consecutive month in November; Japan reported final Q3 GDP at 1.8% SAAR (0.4% q/q) Continue reading “Dollar Steady as Eventful Week Begins”

Drivers for the Week Ahead

  • The dollar finally got some traction Friday after the blockbuster US jobs report
  • Trade talks appear to be progressing but the December 15 deadline is looming large; geopolitical risks are running high
  • FOMC meeting Wednesday is the highlight of the week ; US also reports CPI, PPI, and retail sales
  • ECB meeting Thursday will be the first under Madame Lagarde; UK general elections will be held Thursday; SNB also meets
  • Japan reports a fair amount of data this week Continue reading “Drivers for the Week Ahead”