Dollar Consolidates Ahead of Thanksgiving Holiday

  • The divergence in developed markets yield curves continues; the dollar is consolidating ahead of the US holiday
  • FOMC minutes will be released; weekly jobless claims data will be released a day early; October personal income and spending will be reported; Banco de Mexico releases its quarterly inflation report
  • UK Chancellor Sunak’s spending review will lay out his plans for next year; South Africa reported higher than expected October CPI
  • Japan’s Cabinet Office maintained its “severe” assessment of the economy; RBNZ gave an upbeat outlook in its FSR, further lowering odds of negative rates; cryptocurrencies remain in the spotlight as bitcoin trades at record highs above $19,000 Continue reading “Dollar Consolidates Ahead of Thanksgiving Holiday”

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”

Drivers for the Week Ahead

  • The dollar has stabilized but weakness is likely to resume
  • Treasury Secretary Mnuchin is trying to revive stalled stimulus talks; President-elect Biden will reportedly name his first cabinet picks Tuesday; FOMC minutes will be released Wednesday; it’s a quiet week in the US due to the Thanksgiving holiday
  • Brexit talks continue this week; eurozone reports some key data this week; ECB publishes the account of the October 29 meeting Thursday
  • UK preliminary November PMI readings will be reported Monday; UK Chancellor Sunak will lay out his fiscal plans for next year Wednesday; Riksbank meets Thursday and is expected to keep policy unchanged; Japan has a pretty quiet week Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

Most EM currencies were up last week, once again taking advantage of broad dollar weakness. In addition, EM equities also performed well, with MSCI EM up for the third week in a row and for seven of the past eight. We expect EM assets to continue benefiting from the global liquidity story as well as the weak dollar trend. Continue reading “EM Preview for the Week Ahead”

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”

“Benefits Cliff” Warns of Downside US Risks

The US faces a “benefits cliff” at year-end. With the economy already suffering from widening lockdowns across the country, the Q4 outlook is bad and the year-end expiration of emergency unemployment programs suggests Q1 may be even worse. All the more reason to pass another fiscal stimulus package, and possibly see increased Fed action. Continue reading ““Benefits Cliff” Warns of Downside US Risks”

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”