Rally Stalls as Dollar Consolidates Recent Gains

  • US-China tensions are still rising; we retain our strong dollar call
  • FOMC minutes will be released; Canada reports March retail sales
  • Brexit headlines came roaring back yesterday; we remain bearish on sterling
  • Japan exports contracted for the fifth straight month; Korea is getting more concerned about the weak won
  • South Africa reported softer than expected April CPI; SARB on hold tomorrow Continue reading “Rally Stalls as Dollar Consolidates Recent Gains”

Dollar Firm as Divergence Theme Returns

  • The dollar rally has resumed as the divergence theme remains alive and well
  • There is mounting political risk in the UK; sterling remains heavy
  • Japan reported weak April department store sales; dovish RBA minutes were released
  • Thailand Q1 GDP growth slowed as expected to 2.8% y/y; Korea reported weak trade data for the first 20 days of May
  • Turkish central bank effectively loosened policy after taking limited steps to stabilize the lira Continue reading “Dollar Firm as Divergence Theme Returns”

Dollar Rally Derailed by Surprise Election Results in Australia and India

  • We believe the dollar rally remains on track
  • Eurozone political noise came from an unexpected source
  • Japan Q1 GDP grew 2.1% SAAR vs. -0.2% expected; AUD bounce from the shock weekend election results has run out of steam
  • India exit polls suggest that Prime Minister Modi has won another term; Chile Q1 GDP is expected to grow 1.8% y/y
  • Bank of Israel is expected to keep rates steady at 0.25% Continue reading “Dollar Rally Derailed by Surprise Election Results in Australia and India”

Dollar Firm as Trade Tensions Rise

  • Rhetoric from both sides is getting more heated, making a US-China deal seem a long way off (if at all)
  • We would downplay headlines claiming the PBOC won’t let the yuan weaken past 7 per dollar
  • Jitters about Italy helped push the euro lower yesterday and that has continued today
  • The US announced it would cut tariffs on Turkish steel by half to 25%
  • Singapore reported weak April trade data; BRL real continues to underperform Continue reading “Dollar Firm as Trade Tensions Rise”

Dollar Mixed as Markets Await Fresh Drivers

  • The Trump administration is fighting a trade war on many fronts
  • Recent developments suggest that China has become the sole focus for the trade hawks
  • We see no letup in the hardline stance being taken against all US trading partners
  • The Atlanta Fed’s GDPNow model is now tracking 1.1% SAAR for Q2, down from 1.6% previously
  • Australia reported April labor market data
  • Bank Indonesia kept rates steady at 6.0%, as expected; Banco de Mexico is expected to keep rates steady at 8.25% Continue reading “Dollar Mixed as Markets Await Fresh Drivers”

Dollar Firms Even as US Rates Fall and Curve Inverts

  • The dollar is getting traction even as US rates continue to fall
  • The US data highlight is April retail sales
  • Trump’s efforts to influence the Fed continue
  • China reported weak April IP and retail sales
  • Canada reports April CPI
  • Turkish lira remains under pressure; Poland is expected to keep rates steady at 1.5%.
  • Argentina April CPI is expected to rise 56.3% y/y; Brazil COPOM minutes were surprisingly dovish Continue reading “Dollar Firms Even as US Rates Fall and Curve Inverts”

Dollar Mixed as Some Calm Returns to Global Markets

  • Global markets have calmed down after yesterday’s bloodbath
  • Yet the tit for tat continues; the big surprise was that China is reportedly discussing the sale of UST holdings
  • The dollar remains firm even though markets are pricing in more than one rate cut this year
  • UK reported mixed labor market data; implied rates on short sterling futures continue to fall
  • Sweden reported April CPI
  • MSCI EM FX has given up over 75% of this year’s rally; Brazil COPOM minutes will be released Continue reading “Dollar Mixed as Some Calm Returns to Global Markets”

Dollar Firm as Friday’s Optimism Gives Way to Greater Pessimism on Trade

  • Trade tensions are feeding the negative tone of global financial markets as the week begins
  • The yuan is the worst performing currencies in EM over the past week at -1.6% vs. USD
  • We retain our bullish dollar call for now with the expectations that the trade war will eventually end with a compromise and no recession
  • Australia reported weak March home loans; Norway reported weak Q1 GDP
  • A long and protracted trade war is another headwind for EM to contend with
  • Turkey April current account came in at -$589 mln; India April CPI is expected to rise 2.99% y/y Continue reading “Dollar Firm as Friday’s Optimism Gives Way to Greater Pessimism on Trade”

Eerie Calm in Global Markets as Trade War Escalates

  • Higher US tariffs on Chinese goods went into effect today at midnight; markets should go further into risk-off trading
  • US data highlight today is April CPI; Fed’s Brainard, Bostic, and Williams speak
  • Canada highlight will be April jobs data; RBA released its Statement on Monetary Policy
  • RBA released a dovish quarterly Statement on Monetary Policy
  • UK reported Q1 GDP; Norway reported April CPI
  • Japan reported March household spending and cash earnings; risk-off trading should push USD/JPY lower
  • ANC is headed to a solid victory; Brazil April IPCA inflation is expected at 5.0% y/y Continue reading “Eerie Calm in Global Markets as Trade War Escalates”