Drivers for the Week Ahead

  • With risk-on sentiment still in full force, we acknowledge that the dollar may remain under pressure near-term
  • Recent developments take some pressure off the Fed to cut rates again this month, which is ultimately dollar-positive
  • US data highlight this week will be September retail sales Wednesday
  • UK Parliament reconvenes Monday; EU summit October 17-18 is seen as the last opportunity to submit workable Brexit deal
  • China September data deluge comes this week; MAS and BOK meet and both are expected to ease Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM benefited greatly from the improvement in US-China trade relations and quite possibly Brexit.  The dollar is likely to remain under some pressure near-term as a result.  Yet we must caution investors against getting too optimistic.  The details of the partial trade deal still need to be worked out, while existing tariffs will still remain in place if the deal is signed next month as most expect.  Brexit negotiations have accelerated but we note that any deal must still be passed by UK Parliament, which has already scuttled several attempts.  Lastly, geopolitical risks abound in the Middle East.    Continue reading “EM Preview for the Week Ahead”

Some Thoughts on a Possible US-China Currency Pact

There has been increased talk about a possible “currency pact” from China as a key component for a partial trade deal. The notion was first discussed in February, when Treasury Secretary Mnuchin touted that the US and China had agreed on a currency pact that was “the strongest ever.” No details were ever divulged, as US-China talks broke down in May over the deeper structural reforms that China was unwilling to commit to. So what can we expect of a trade pact this time around? Continue reading “Some Thoughts on a Possible US-China Currency Pact”

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”

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”

EM Preview for the Week Ahead

EM got some traction last week as the dollar came under renewed pressure.  However, the global backdrop remains negative for EM.  US-China trade talks this week are unlikely to yield any progress, which means the next round of tariffs will go into effect mid-October.  While odds of a Fed rate cut this month have risen, we do not think the positive liquidity story will outweigh the negative global growth story for EM.  Continue reading “EM Preview 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”

EM Preview for the Week Ahead

US-China trade tensions are likely to remain high.  China reported slightly firmer than expected September PMI readings over the weekend.  With more tariffs going into effect in September and again in December, however, the economy is still facing stiff headwinds.  This will continue to have negative knock-on effects on the rest of EM.  Continue reading “EM Preview for the Week Ahead”