• US rates continue to march higher
• Meanwhile, trade tensions continue to ratchet up
• UK reported higher than expected August CPI
• Yen weakness continues in the wake of the BOJ decision overnight
• Bank of Thailand kept rates steady at 1.5%, as expected; Brazil COPOM is expected to keep rates steady at 6.5%

Continue reading “Dollar Soft Even as US Rates Rise and Trade Tensions Mount”

• The main drivers for global markets remain in play: trade tensions and higher US rates
• The US moved ahead with its plan to slap 10% tariffs on another $200 bln of Chinese imports next Monday
• Markets have to start thinking about the inflationary implications of these tariffs
• The implied yield on the December 2019 Fed Funds contract has shot up this month
• EM remains under pressure; National Bank of Hungary is expected to keep rates steady at 0.9%

Continue reading “Markets Calm Even as Trade Tensions Mount”

• The trajectory of monetary policy in the US and Europe has been fairly clear
• This week’s high-frequency UK data is expected to reinforce the notion that there will not be another increase in the base rate until after next March
• The Bank of Japan has been more difficult to read for investors
• Norway’s central bank meets Thursday and is likely to hike rates
• After the hawkish surprises last week from Turkey and Russia, all eyes are on Brazil and South Africa this Wednesday and Thursday, respectively

Continue reading “Drivers for the Week Ahead”

• The global capital markets are finishing the week on a more stable note than it began
• To be sure, Germany is not the only source of disappointment in the EMU today
• The euro’s resilience strikes us as a potentially important reflection of market psychology
• When news broke yesterday that President Trump may next turn his attention on bilateral trade with Japan, the initial instinct was to buy the yen
• US jobs growth disappointed in July, and most are looking for a rebound in August; Canada also reports August jobs data today
• Mexico August CPI is expected to rise 4.85% y/y; Chile August CPI and trade will be reported

Continue reading “Emerging Markets Stabilize While Euro Shrugs Off Disappointing Data”

• The global capital markets are calmer today
• The Riksbank kept rates steady but the sub-text was dovish as it sees excessively low inflation as a risk
• Although the gains in euro and sterling are modest, their resilience in the face of negative developments is noteworthy
• A theme that has emerged this week, and which is also supportive for the euro, is the recovery in Italy
• The US economic calendar is chock full today
• South Africa Q2 current account deficit came in at -3.3% of GDP; Brazil August IPCA inflation is expected to rise 4.29% y/y

Continue reading “Fragile Calm Weighs on Greenback”

• While the trade tensions were cited for disappointment in the manufacturing PMIs, today’s service PMIs were also mostly disappointing
• UK manufacturing and construction PMIs disappointed, but the service PMI made up for it
• Australia reported softer services and composite PMIs, but Q2 GDP surprised on the upside
• The Bank of Canada meets and is widely expected to keep its overnight rate steady at 1.50%
• Philippines and Taiwan reported August CPI; Colombia reports later today
• Bank Negara kept rates steady at 3.25%, as expected; National Bank of Poland is expected to keep rates steady at 1.5%

Continue reading “Continuing EM Pain Helps the Dollar, Does Little for Yen”

• The US dollar is rising against all the major and emerging market currencies today
• The Bank of Japan sent a clear message to the market today to dampen ideas that it is engaged in so-called “stealth tapering”
• AUD briefly moved higher on the back of the RBA, which was a bit more upbeat than anticipated
• Sterling has been sold with the help of a weak construction PMI, which follows a disappointing manufacturing PMI released yesterday
• The US economic calendar is chock full today with the manufacturing PMI/ISM, construction spending, and auto sales
• South Africa Q2 GDP contracted -0.7% SAAR; Brazil July IP is expected to rise 2.2% y/y; Chile central bank is expected to keep rates steady at 2.5%

Continue reading “Dollar Gains Broadly”