US Dollar Weighed Down by Dovish Fed Governors

Dollar Broadly Weaker Despite Rising Risk-Off Sentiment

  • Global markets continue to adjust for the deteriorating coronavirus outlook
  • US February jobs data will be reported, though the data has lost all meaning for the time being
  • Fed easing expectations continue to intensify
  • The Italian government announced another stimulus package to cushion the impact of the virus
  • Oil prices took a heavy hit on reports that Russia will not agree to new supply cuts
  • Reports suggests the BOJ is likely to cut its economic assessment at its policy meeting March 19 due to the coronavirus

Continue reading “Dollar Broadly Weaker Despite Rising Risk-Off Sentiment”

Dollar Takes a Breather as Risk Appetite Recovers

  • The dollar rally is taking a breather; Fed Chair Powell’s first day of testimony was a largely subdued affair
  • Bernie Sanders won the New Hampshire Democratic primary with 26% of the vote
  • Eurozone industrial production fell sharply to -4.1% y/y; Riksbank kept rates steady at 0.0%, as expected
  • Geopolitical tensions in Syria are rising
  • New Zealand kept rates steady at 1.0%, as expected; India reports January CPI and December IP Continue reading “Dollar Takes a Breather as Risk Appetite Recovers”

Dollar Firm Ahead of US Holiday Weekend

  • The dollar remains bid as optimism on US-China trade is still running high
  • China reports official August PMI readings Saturday local time; Hong Kong reported weak retail sales; Hong Kong protests show no sign of ending
  • US data highlight today is Chicago PMI, which is expected at 47.5 vs. 44.4 in July
  • Eurozone reported preliminary August CPI; Japan reported a huge raft of data
  • Bank of Korea delivered a dovish hold Continue reading “Dollar Firm Ahead of US Holiday Weekend”

Dollar May Prove Resilient if it is Turn Around Tuesday

  • The euro and sterling extended their recovery, helped by more constructive comments from the EC on Brexit
  • Sterling was also helped by stronger than expected UK weekly earnings data
  • The US economic calendar features the JOLTS report and wholesale trade and inventories
  • South Africa July manufacturing production is expected to rise 1.1% y/y; Argentina central bank is expected to keep rates steady at 60% Continue reading “Dollar May Prove Resilient if it is Turn Around Tuesday”

Globalization is more than Pax Americana

Doubts about globalization in light of the trade tensions may be understandable, but it arguably too pessimistic.  The EU and Japan signed a free-trade agreement that gets rid of more than 90% of the tariffs.  

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Beware of Linear Thinking about the Yield Curve

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The flattening of the US yield curve is causing anxiety as an inverted curve is widely seen as a reliable indicator of a looming recession.  This is one of the debates among Fed officials and could impact the trajectory of monetary policy.

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Dollar’s Downside Correction Set to Continue

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The US dollar entered a technical corrective phase after trending higher in recent weeks.  That technical correction has more room to run.  On the other hand, US 10-year yields may be near a low some 30 bp below the May peak, and oil prices may have another run at the highs, but the move is getting stretched.  The S&P 500 had a strong move ahead of the weekend, but 2800 needs to be overcome to be anything of note.  

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Strong Job Creation, but Disappointing Earnings Growth

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The optics of the US jobs data were mixed.  Jobs growth was better than expected, but earnings growth disappointed.  The rise in the unemployment rate, the first in many months, is a reflection of the increase in the participation rate.  Canada’s jobs and trade data disappointed, but not sufficiently so to alter expectations for a hike next week.   Continue reading “Strong Job Creation, but Disappointing Earnings Growth”

Dollar Slips After Tariffs and Before Jobs Data

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  • The first round of US-China tariffs went into effect.  The next round (~$16 bln) is expected in a few weeks.
  • Japan reported a strong rise in wages but poor consumption.
  • Germany followed yesterday’s sharp rise in factory orders with a dramatic increase in industrial output
  • May’s new customs union proposal looks dead-on-arrival.
  • Focus now on US and Canadian jobs and trade data.  Barring a major surprise, the Bank of Canada will likely hike rates next week.

Continue reading “Dollar Slips After Tariffs and Before Jobs Data”