Drivers for the Week Ahead

  • As of this writing, a stimulus deal is close and a US government shutdown Monday may have been avoided; the Fed gave US banks the go-ahead to resume stock buybacks Friday; Fed manufacturing surveys for November will continue to roll out; weekly jobless claims will be reported on Wednesday due to the holiday
  • All eyes remain on Brexit; things are getting very tricky now in terms of timing; with the UK going into stricter lockdown, we believe the pressure is building on Prime Minister Johnson to strike a deal
  • Japan has a busy week; the BOJ will keep markets guessing after it unexpectedly announced a policy framework review; Australia begins reporting November data Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM FX continues to take advantage of broad-based dollar weakness. Last week, most EM currencies strengthened significantly and many are making new multi-year highs. More policymakers are pushing back against currency strength, and while this may bring more countries into the spotlight as currency manipulators (see our recent report here), that is simply part of the cost-benefit analysis for FX intervention. Poland became the latest to intervene last week. That said, all can only hope to slow the move within this weak dollar environment, not reverse it. Continue reading “EM Preview for the Week Ahead”

Some Thoughts on the Latest Treasury FX Report

The US Treasury’s latest “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” report named Switzerland and Vietnam as currency manipulators. Both countries came under scrutiny in the last report and so this week’s announcement was only surprising in that it was made by a lame duck administration that will be gone in a month. Continue reading “Some Thoughts on the Latest Treasury FX Report”

FOMC Preview

The two-day FOMC meeting starts tomorrow and wraps up Wednesday afternoon. While no policy changes are expected, we highlight what the Fed may or may not do. We expect a dovish hold, with Powell underscoring the growing downside risks facing the US economy in the coming months. Continue reading “FOMC Preview”

Drivers for the Week Ahead

  • The Senate passed a stopgap bill late Friday that will keep the government funded until midnight this Friday; optimism on a stimulus deal appears to be picking up; the two-day FOMC meeting ending with a decision Wednesday will be important
  • November retail sales Wednesday will be the US data highlight for the week; Fed manufacturing surveys for December will start to roll out; weekly jobless claims Thursday will be important; Canada has a busy data week
  • Brexit talks have been extended; BOE, Norges Bank, and SNB decisions come Thursday and no changes are expected; UK reports some key data; eurozone has a fairly quiet week
  • Japan has an eventful data week; BOJ wraps up its two-day meeting Friday; Australia has a fairly busy week Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM FX was mixed as the dollar gained some modest traction as risk-off sentiment picked up. We continue to believe any dollar gains are temporary and that the weakening trend will continue well into Q1. As far as EM foes, global investors should continue to be drawn both to the higher yielding bond markets (especially China, Mexico, South Africa, and Indonesia) as well as the surging equity markets (MSCI EM is up six straight weeks and ten of the past eleven).  EM should remain in a sweet spot of a low rate environment in DM coupled with an improving global growth outlook in 2021. Continue reading “EM Preview for the Week Ahead”

ECB Preview

The ECB meets Thursday and is widely expected to add stimulus. Macro forecasts will be updated and the bank will likely acknowledge the deteriorating outlook. We expect the ECB to increase PEPP by at least EUR500 bln and we see a high chance of an upside surprise. A rate cut is very unlikely but there’s risk of more jawboning against the stronger euro. Continue reading “ECB Preview”

Drivers for the Week Ahead

  • The US government will shut down Friday if Congress fails to pass an omnibus spending bill for the current FY21; expectations for a stimulus package are rising; weak jobs report Friday is likely adding to the sense of urgency for Congress
  • The major US data releases this week center around inflation; market appetite for UST issuance will be tested this week, with a near record $118 bln on offer; we believe the Fed is watching the yield curve closely; November budget statement Thursday will hold some interest
  • BOC meets Wednesday and is expected to keep policy unchanged; Brexit talks stalled ahead of the weekend but have since resumed; two-day EU summit begins Thursday; ECB meets Thursday and is expected to add more stimulus; UK has its monthly data dump Thursday
  • Japan reports some limited data this week; next BOJ meeting is December 17-18 and reports suggest it will extend its emergency programs then; Australia sounded a warning about the impact on trade of its diplomatic spat with China Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM FX took advantage of ongoing broad dollar weakness and posted another strong week. Many currencies are trading at multi-year highs against the dollar. While some EM policymakers have expressed concern and taken limited measures, there’s really not much that can be done in this current environment to prevent further appreciation. Global investors are drawn both to the higher yielding bond markets (especially China, Mexico, South Africa, and Indonesia) as well as the surging equity markets (MSCI EM is up five straight weeks and nine of the past ten). EM remains in a sweet spot of a low rate environment in DM coupled with an improving global growth outlook. Continue reading “EM Preview for the Week Ahead”