Uncertain US-Turkey Relations Add to Geopolitical Risk

US-Turkey relations are in flux.  After seemingly capitulating to President Erdogan and withdrawing US forces from Syria, President Trump later threatened to destroy the Turkish economy if anything “off-limits” is done.  The heightened uncertainty comes at a time when geopolitical risk is already elevated, and so EM and risk assets should remain under pressure, led lower by Turkish assets. Continue reading “Uncertain US-Turkey Relations Add to Geopolitical Risk”

Canada Election Preview: Trudeau Weathers Brownface Scandal

Canada Prime Minister Trudeau and his Liberals appear to have escaped negative fallout from recent scandals. Polls suggest the national vote will be very close, but closer analysis suggests the Liberals will likely win the most seats. While possibly falling short of winning an absolute majority, the Liberals appear to have the best chance of forming the next government. Continue reading “Canada Election Preview: Trudeau Weathers Brownface Scandal”

Drivers for the Week Ahead

  • The dollar rally has been derailed by weak US data and rising recession fears
  • The September jobs data was not a game-changer and so we are left waiting for more clues
  • Believe it or not, the US economy remains solid; however, the US repo market has not fully normalized yet
  • The Chinese trade delegation arrives in Washington Thursday for two days of trade talks
  • Brexit optimism has worn off; there are several key EM events Continue reading “Drivers for the Week Ahead”
Dollar Struggles; More Losses Likely Before Better Demand is Found

Musings on the Repo Market, Fed Policy, and the US Economy

The US repo market appears to finally be normalizing. The low pace of normalization is concerning and so a more permanent solution may be needed to head off similar problems at year-end. We do not think this issue has any implications for the economic outlook, which we continue to view as solid. Continue reading “Musings on the Repo Market, Fed Policy, and the US Economy”

Drivers for the Week Ahead

  • We continue to think that the US economy is in better shape than most appreciate, and that underpins our strong dollar call
  • Tensions are likely to remain high after reports emerged last week that the US will look into limiting capital flows into China
  • US September jobs data Friday will be the data highlight of the week; there is a heavy slate of Fed speakers this week
  • UK, eurozone, and Japan are expected to report weak data this week
  • RBA meets Tuesday and is expected to cut rates 25 bp to 0.75%; Reserve Bank of India is expected to cut rates 25 bp Friday Continue reading “Drivers for the Week Ahead”

Drivers for the Week Ahead

  • The dollar has finally gotten some traction; the media embargo has ended and Fed speaking engagements pick up this week
  • CFNAI remains the single best indicator to gauge US recession risks; the US economy remains in solid shape
  • Markit reports eurozone flash PMI readings Monday; Brexit talks will continue this week at the technical level
  • RBNZ meets Wednesday and is expected to keep rates steady at 1.0%; the central banks of Colombia, Mexico, Hungary, Czech Republic, Thailand, and Philippines meet this week Continue reading “Drivers for the Week Ahead”

Bank of Japan Preview

The Bank of Japan meets Thursday. No change in policy is expected ahead of the October 1 consumption tax hike. Risks of easing will rise if the economy continues to soften as we move toward year-end. Continue reading “Bank of Japan Preview”

Some Thoughts on the Fed and Oil Shocks

Oil prices have spiked after the weekend attack on Saudi oil facilities.  Will it impact the Fed tomorrow?  No.  We compare the current (but still unfolding) situation to past oil shocks from the 1970s and discuss the policy responses taken.     Continue reading “Some Thoughts on the Fed and Oil Shocks”

Drivers for the Week Ahead

  • The weekend bombing of Saudi oil facilities is the major story
  • The FOMC meeting Wednesday is the main event; Fed Funds futures continue to adjust
  • US rates continue to adjust, as they should; US economy remains in solid shape
  • BOE, BOJ, SNB, and Norges Bank all meet Thursday
  • In EM, the central banks of South Africa, Brazil, Indonesia, and Taiwan meet Continue reading “Drivers for the Week Ahead”