Dollar Broadly Weaker Despite Rising US-China Tensions

  • The jubilant market mood is being tested by US-China conflict theme; the dollar remains under pressure
  • President Trump will hold a press conference today to discuss China; Trump is also opening up a Pandora’s Box in his latest offensive against social media companies
  •  May Chicago PMI will be the data highlight today; Fed Chair Powell speaks
  • Canada and Brazil report Q1 GDP data; Colombia is expected to cut rates 50 bp to 2.75%
  • Germany is reportedly preparing a second stimulus package of between €50-100 bln; eurozone May CPI was reported
  • Japan data dump was seen overnight; Bank Indonesia opined that the rupiah is undervalued; China reports official May PMI readings Sunday local time Continue reading “Dollar Broadly Weaker Despite Rising US-China Tensions”

Dollar Firm as US-China Tensions Continue to Rise

  • Tensions between the US and China continue to rise; the dollar is finding some traction
  • Fed Beige Book contained no surprises; NY Fed President Williams said the Fed is “thinking very hard” about targeting yields; weekly jobless claims are expected at 2.1 mln vs. 2.438 mln last week
  • Germany reports May CPI; ECB is likely to ease next week; BOE continues to show its dovish colors; Poland is expected to keep rates steady at 0.5%
  • Japan’s Cabinet Office maintained its view that the economic outlook continues to deteriorate; Korea cut rates 25 bp to 0.5%, as expected Continue reading “Dollar Firm as US-China Tensions Continue to Rise”

Dollar Broadly Weaker as Markets Focus on Stimulus from Europe and Japan

  • Market sentiment remains positive despite still-rising tensions between the US and China ; the dollar remains under pressure
  • Reports suggest the Trump administration is considering a range of sanctions on Chinese entities; regional Fed manufacturing surveys for May will continue to roll out;
  • The Fed releases its Beige Book report for the upcoming FOMC meeting June 10; Banco de Mexico releases its quarterly inflation report
  • Reports suggest the EC will propose a fiscal rescue package worth EUR750 bln; Bank of France Governor Villeroy de Galhau called for the removal of the so-called capital key
  • Japan announced another round of fiscal stimulus; USD/HKD continues to drift lower Continue reading “Dollar Broadly Weaker as Markets Focus on Stimulus from Europe and Japan”

Dollar Broadly Weaker with Markets Moving into Risk-On Mode

  • The virus news stream is largely positive; cross-market measures of implied volatility have been trending lower; the dollar is soft
  • Regional Fed manufacturing surveys for May will continue to roll out; Brazil reports mid-May IPCA inflation and April current account data
  • BOE Chief Economist Haldane confirmed that the bank is still reviewing negative rates; parts of the UK curve remain negative
  • ZAR is outperforming on positive reopening news and the favorable outcome from S&P; Hungary is expected to keep policy steady
  • PBOC continues to let the yuan drift weaker; China tried to reassure observers that Hong Kong’s judiciary will remain intact and independent; Singapore announced its fourth round of fiscal stimulus Continue reading “Dollar Broadly Weaker with Markets Moving into Risk-On Mode”

Drivers for the Week Ahead

  • US-China tensions are likely to ratchet up further; the dollar is bid as risk-off sentiment takes hold
  • Regional Fed manufacturing surveys for May will continue to roll out this week; the Fed releases its Beige Book report Wednesday for the upcoming FOMC meeting June 10
  • The account of the ECB’s April 30 meeting supports our view that it will add stimulus at the June 4 meeting; BOE comments last week were universally dovish, feeding expectations that it may eventually go negative
  • Japan data dump will be seen Friday; all eyes are on China this week after the conclusion of the National People’s Congress; Protests erupted in Hong Kong over the weekend Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

US-China tensions are likely to ratchet up further. The fact that China took such a controversial step with Hong Kong supports our view that President Xi will come out of the National People’s Congress with a much more confrontational stance.  China has been quiet as Trump and company take their shots but it’s not in China’s nature to remain a punching bag for long.  If this scenario plays out, we think equities will tank and that’s a risky outcome for Trump.  EM will really come under pressure again too in this scenario.  Continue reading “EM Preview for the Week Ahead”

Dollar Firm as China’s Hong Kong Gambit Triggers Risk-Off Trading

  • Legislation was introduced that allows Beijing to directly impose a national security law on Hong Kong; US-China tensions are still rising; the dollar is bid as risk-off sentiment takes hold
  • There are no US data reports or Fed speakers today; Canada reports March retail sales; Mexico reports mid-May CPI
  • ECB publishes the account of its April 30 meeting; UK reported April retail sales and public sector net borrowing; parts of the UK curve remain negative
  • China scrapped its long-standing policy of setting an annual growth target
  • Legislation was introduced that allows Beijing to directly impose a national security law on Hong Kong; political risk has seen USD/HKD move off the strong end of the 7.75-7.85 trading band
  • BOJ met overnight; Fitch cut the outlook on its AAA rating for Australia to negative from stable Continue reading “Dollar Firm as China’s Hong Kong Gambit Triggers Risk-Off Trading”

Dollar Firm as US-China Tensions Flare

  • The virus news stream is mixed; the dollar has stabilized; US-China tensions continue to ratchet up
  • We will get some more US economic data for May; weekly jobless claims are expected at 2.4 mln
  • Eurozone and UK reported firm preliminary May PMI readings; BOE officials continue to take a very dovish tone
  • South Africa is expected to cut rates 50 bp to 3.75%; Turkey is expected to cut rates 50 bp to 8.25%
  • Japan and Australia reported preliminary May PMIs; Korea reported weak trade data for the first 20 days of May Continue reading “Dollar Firm as US-China Tensions Flare”

Dollar Treads Water Ahead of FOMC Minutes

  • The virus news stream is mixed; the dollar has stabilized a bit
  • FOMC minutes will be released; Canada reports April CPI and March wholesale trade sales; the news from Brazil keeps getting worse
  • Another group of EU nations will release their own plan in a rebuttal of France and Germany; UK reported April CPI data
  • Japan reported March core machine orders; Australia reported weak preliminary April retail sales
  • China kept its benchmark Loan Prime Rates unchanged; Thailand cut rates 25 bp to 0.50%, as expected Continue reading “Dollar Treads Water Ahead of FOMC Minutes”