Dollar Soft Despite Persistent Risk-off Backdrop

  • The negative virus news stream continues to weigh on market sentiment; yet the dollar safe haven bid is ebbing
  • Any post-election stimulus deal will be very difficult; US data highlight is Chicago PMI; weekly jobless claims data suggest modest improvement continues in the labor market
  • Exxon announced job cuts of 14k globally as low oil prices continue to cut into its margins; Colombia is expected to keep rates steady at 1.75%. 
  • The ECB delivered a dovish hold, as expected; eurozone reported Q3 GDP, preliminary October CPI, and September unemployment
  • Japan reported mixed data; broad brush strokes of the upcoming 5-year plan in China are starting to emerge; Korea reports October trade data Sunday local time Continue reading “Dollar Soft Despite Persistent Risk-off Backdrop”

Dollar Bid as Markets Steady Ahead of ECB Decision

  • Global equity markets are gaining limited traction today after yesterday’s bloodbath; that sell-off helped test a now prevalent hedging thesis for investors
  • The dollar remains bid; US Q3 GDP data will be the data highlight; weekly jobless claims will be reported
  • BOC delivered a dovish hold yesterday; Canada Finance Minister Freeland defended the government’s aggressive fiscal stimulus plans; Brazil left rates unchanged, as expected
  • ECB is expected to deliver a dovish hold; Germany reports October CPI; Hungary is expected to snug rates higher to help support the forint
  • BOJ kept policy steady, as expected; Japan reported weak September retail sales; next year is the 100th anniversary of the Chinese Communist Party Continue reading “Dollar Bid as Markets Steady Ahead of ECB Decision”

Dollar Bid as Negative Virus Developments Dent Market Sentiment

  • The negative virus news stream is weighing on sentiment; implied volatility measures are starting to move higher, especially in the equity space; the dollar is bid today
  • Stimulus will have to wait until after the election, if at all; there are two election scenarios that would likely lead to fiscal expansion; early voting figures continue to come in at a rapid pace with some 70 mln votes cast
  • Canada and Brazil are expected to keep rates steady; Turkey central bank released its quarterly inflation report
  • Harsh lockdown measures by France and Germany will weigh on the economic outlook; we are becoming increasingly concerned about anti-lockdown protests across the region; Spain reported September retail sales
  • Australia reported Q3 CPI; USD/CNY fix today at 6.7195 was the highest since October 16 Continue reading “Dollar Bid as Negative Virus Developments Dent Market Sentiment”

ECB Preview

The ECB meets Thursday and is widely expected to stand pat until the next meeting. Macro forecasts won’t be updated until the December 10 meeting, but the bank will have to acknowledge the deteriorating outlook now. There’s a small risk of more jawboning against the stronger euro, but it should otherwise be an uneventful meeting. We expect the ECB to increase QE in December but another rate cut seems very unlikely, as does activation of OMT. Continue reading “ECB Preview”

Dollar Stalls as Equity Markets Gain Some Traction

  • Geopolitical tensions continue to rise, this time surrounding Taiwan; market sentiment remains iffy
  • Stimulus talks really are dead now; US manufacturing surveys for October will continue to roll out
  • The rebellion within the UK Tory party continues; eurozone September M3 growth surged; Turkey is back in the usual vicious cycle
  • PBOC tweaked how it determines the daily yuan fixing; we think other clues suggest discomfort with the stronger yuan; Korea reported firm Q3 GDP; Hong Kong reported strong September trade data Continue reading “Dollar Stalls as Equity Markets Gain Some Traction”

Dollar Bid as Markets Start the Week in Risk-Off Mode

  • Increasing virus numbers have pushed European governments to once again start imposing national measures; the week is starting off on a risk-off note
  • Today may see the official end of stimulus talks; odds for Biden victory are increasing again but is already mostly priced in
  • US manufacturing surveys for October will continue to roll out; Chile’s referendum on a new constitution passed in a landslide
  • Brexit negotiations have been extended; Germany’s October IFO survey came in on the weak side; TRY has depreciated past the psychologically important 8.0 level against the dollar
  • China’s leadership began meeting in Beijing this week to formulate the 14th five-year plan Continue reading “Dollar Bid as Markets Start the Week in Risk-Off Mode”

Drivers for the Week Ahead

  • Pressure on the dollar is likely to continue; stimulus talks really are dead now; US 10-year yield traded at 0.87% last week
  • US manufacturing surveys for October will continue to roll out; US Q3 GDP data Thursday will be of interest; BOC meets Wednesday and is expected to keep policy steady
  • ECB meets Thursday and is expected to keep policy steady; eurozone data schedule is fairly heavy; Brexit talks are likely to intensify
  • BOJ meets Thursday and is expected to keep policy steady; Japan also reports some key data; Australia reports Q3 CPI Wednesday Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM FX took advantage once again of broad dollar weakness. Most EM currencies were up last week against the dollar, with the only exceptions being ARS, TRY, INR, THB, PEN, and MYR. We expect the dollar to remain under pressure this week and so EM should remain bid. However, the growing spread of the virus in Europe and the US supports our view that Asia is likely to continue outperforming. Continue reading “EM Preview for the Week Ahead”

Pressure on the Dollar Resumes

  • Gilead’s remdesivir got the go-ahead from the FDA; pressure on the dollar has resumed; faint hopes for a stimulus deal are fading; resistance from the Republicans is building
  • The final US presidential debate was far more civil, but probably inconsequential; Markit preliminary US October PMI readings will be reported
  • Eurozone preliminary October PMI readings were mixed; UK reported weak preliminary October PMI readings and firm September retail sales; TRY remains under pressure after yesterday’s dovish surprise
  • Japan reported September national CPI and preliminary October PMI readings; BOJ is not expected to change policy next week; Australia reported solid preliminary October PMI readings; NZ reported low Q3 CPI Continue reading “Pressure on the Dollar Resumes”