Dollar Weakness Resumes as Short-Covering Fades

  • Sentiment is being buoyed by two incrementally positive stories; cross-markets implied volatility measures continue to trend lower; dollar weakness has resumed
  • President-elect Biden will reportedly officially name his first cabinet picks today; Fed manufacturing surveys for November will continue to roll out; Brazil and Mexico both reports mid-November inflation readings
  • German IFO Business Climate survey for November was mixed; UK national lockdown will end next week; UK CBI reported its November distributive trades survey
  • Japan reported October department store sales; markets are reassessing RBNZ dovishness after reports that it may add house prices to its mandate Continue reading “Dollar Weakness Resumes as Short-Covering Fades”

Dollar Weakness Resumes as Markets Start Another Week in Risk-On Mode

  • Covid vaccine results from AstraZeneca and Oxford University brought another wave of optimism; dollar weakness has resumed; that said, we will refrain from making any longer-term calls for the demise of the dollar
  • Reports suggest President-elect Biden is pushing House Democrats to reduce the size of their fiscal package demands to unlock negotiations; Republicans have an interest in compromising
  • President-elect Biden has reportedly picked his diplomatic team; it’s a quiet week in the US due to the Thanksgiving holiday
  • The latest Brexit headlines have been as optimistic as can be for this stage of the process; Eurozone preliminary November PMI readings were weaker than expected; UK preliminary November PMI readings were stronger than expected
  • Korea posted a strong bounce in exports for the first 20 days of November Continue reading “Dollar Weakness Resumes as Markets Start Another Week in Risk-On Mode”

Dollar Steadies Despite Fed-Treasury Spat

  • The dollar is stabilizing as the week winds down but weakness is likely to resume
  • President-elect Biden said he has chosen his Treasury Secretary; US Treasury Secretary Mnuchin requested that unspent funds allocated to the Fed be redirected to other areas of the economy; the Fed pushed back; there are several negative implications to this spat
  • Talks regarding the EU budget and recovery fund yesterday did not lead to any breakthroughs; Brexit talks have hit a little speed bump; UK reported October retail sales and public sector borrowing data
  • Japan reported very weak data; Australia reported strong preliminary October retail sales; China left its lending rates on hold; Taiwan reported firm October export orders; Thailand eased limits on capital outflows to take some pressure off the surging baht Continue reading “Dollar Steadies Despite Fed-Treasury Spat”

Dollar Bounce Likely to Fade

  • The negative virus news stream is taking a toll on market sentiment; the dollar is benefiting from the risk-off price action but is likely to fade
  • Weekly jobless claims data will be of interest; Fed manufacturing surveys for November will continue to roll out; Judy Shelton’s Fed confirmation is looking less and less likely
  • The row about EU funding takes center stage today as leaders hold a conference call to iron out their differences; UK CBI November industrial trends survey came in weak; Turkey delivered the consensus 475 bp rate hike; SARB is expected to keep rates steady at 3.5%
  • Record levels of infections in Japan led officials to raise its virus alert to the highest level; Australia reported strong October jobs data; Indonesia and Philippines both surprised markets with 25 bp rate cuts Continue reading “Dollar Bounce Likely to Fade”

Dollar Continues to Weaken in Absence of Any Fresh Drivers

  • The dollar continues to soften
  • Stimulus talks could be back on the table; October retail sales came in weaker than expected yesterday; Judy Shelton’s nomination to the Fed Board of Governors was blocked; Canada reports October CPI
  • UK government has launched its well-telegraphed climate change push; UK inflation data for October surprised on the upside; traders are understandably trying to hedge the risks around tomorrow’s Turkish central bank meeting
  • Japan reported mixed October trade data; the outgoing Trump administration is pushing for restrictions against Chinese companies trading on US stock exchanges Continue reading “Dollar Continues to Weaken in Absence of Any Fresh Drivers”

Dollar Weakness Continues Ahead of US Retail Sales Data

  • The dollar continues to soften
  • October retail sales will be the US data highlight; Fed manufacturing surveys for November have started to roll out; Republican Senator Alexander opposes Judy Shelton’s nomination to the Fed
  • Newswires reported (again) that a Brexit deal is at hand; Hungary and Poland will veto the EU budget and recovery fund; ECB signaled that they are focused on asset purchases and long-term funding for the next round of stimulus; Hungary is expected to keep the base rate steady at 0.60% 
  • RBA released its minutes; concerns over credit risk in China are weighing on local assets, but not the yuan; the Korean won remains unfazed by official verbal intervention Continue reading “Dollar Weakness Continues Ahead of US Retail Sales Data”

Dollar Soft as Markets Start the Week in Risk-On Mode

  • The odds of national-level action in the US against the second wave virus outbreak remains small, even after Biden takes over; the dollar continues to soften
  • There is growing speculation about former Fed Chair Yellen becoming Biden’s Treasury Secretary; Fed manufacturing surveys for November will start to roll out; Peru’s interim President Merino resigned under pressure from more demonstrations
  • Several UK MPs and Prime Minister Johnson were forced to isolate due to a Covid outbreak; contrary to the peak globalization narrative, 15 Asian nations managed to sign a major trade deal; Japan reported strong Q3 GDP data
  • The week starts off with mostly upbeat data from China; PBOC delivered a net injection of funds through its 1-year MLF but left the rate unchanged at 2.95%; Indonesia October trade figures showed a huge decline in imports (-27% y/y) Continue reading “Dollar Soft as Markets Start the Week in Risk-On Mode”

Dollar Outlook Worsens as Pandemic Rages in US

  • The dollar continues soften; virus numbers in the US show no signs of slowing; given Europe’s past success in controlling the virus, we have more confidence that policymakers there can do it again; tensions are growing over the lack of a fiscal package
  • October PPI data will be the highlight for the US; preliminary November University of Michigan consumer sentiment is expected at 82.0 vs. 81.8 in October; Mexico surprised markets by holding rates at 4.25% yesterday
  • UK Prime Minister Johnson’s powerful (and controversial) aide Dominic Cummings will reportedly resign by year-end; the latest round of Brexit negotiations comes to an end with little to show for it; Poland is threatening to block the EU budget over the rule of law clause, just as Hungary has done
  • RBNZ continues to push back against negative rates; the US fired another salvo at Chinese corporates; Improved risk appetite over the last couple of weeks is already showing up in foreign equity flows into Asian markets Continue reading “Dollar Outlook Worsens as Pandemic Rages in US”

Dollar Softens Ahead of CPI Data

  • Pressure on the dollar has resumed; October CPI data will be the US highlight; US bond market was closed yesterday but yields have eased a bit today
  • Weekly jobless claims data will be reported; monthly budget statement for October will hold some interest; Mexico is expected to cut rates 25 bp to 4.0%; Peru is expected to keep rates steady at 0.25%
  • UK Q3 GDP rebounded strongly but September data show a loss of momentum; Brexit talks remain unresolved; the domestic political outlook is getting (even more) turbulent; eurozone reported weak September IP
  • Crude prices remain well supported by the dual engines of positive vaccine news and continued OPEC output restraint; Japan reported soft September core machine orders and October PPI; India reports October CPI and September IP Continue reading “Dollar Softens Ahead of CPI Data”