Dollar Builds on Recent Gains

  • The news on the virus front is decidedly mixed
  • DXY remains resilient and has retraced about a third of last week’s plunge; US manufacturing data today are expected to show continued weakness
  • Mexico announced yesterday that it will start using the dollar swap lines with the Fed; Chile is expected to cut rates 50 bp to 0.50%
  • Japan’s government proposed a stimulus package worth JPY60 trln ($554 bln); China reported strong official March PMI readings Continue reading “Dollar Builds on Recent Gains”

Dollar Starts the Week on Firm Footing

  • There has been some positive news on the virus front, especially from Italy
  • President Trump announced that social restrictions will likely have to be extended beyond Easter
  • This week, we will get more evidence of just how deep the damage to the US economy could be
  • Brazil reports central government budget data
  • Germany remains at risk; both South Africa and UK were downgraded Friday
  • Oil prices are making new lows to levels not seen in 17 years
  • China delivered another wave of monetary easing; MAS eased aggressively, as expected Continue reading “Dollar Starts the Week on Firm Footing”

Drivers for the Week Ahead

  • Markets continue to digest the implications of the Fed’s bazooka moment last week
  • The data highlight this week will be March jobs data Friday; key manufacturing sector data will come out earlier in the week
  • On Friday, BOC delivered an emergency 50 bp rate cut to 0.25% and started QE
  • Final eurozone and UK PMI readings for March will be reported; late Friday, Fitch cut UK’s rating by a notch to AA- with negative outlook
  • Japan has a fairly busy data week; RBA minutes will be released Wednesday Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

EM went along for the ride last week as risk sentiment got a huge boost from the Fed’s QE and the passage of the US Senate-led stimulus bill.  This week, improved China PMI readings for March may help the risk rally extend for a bit.  Yet the economic toll will still be large as more and more countries go into lockdown.  When the scope of the downturn becomes better known, we believe risk sentiment will worsen.  Continue reading “EM Preview for the Week Ahead”

Dollar Ends Bad Week on Firmer Footing

  • The number of confirmed cases in the US (85.6K) has overtaken that of China (81.3K)
  • S&P oversaw an absolute bloodbath in the ratings of the oil exporters late yesterday
  • Funding markets remain stressed, but they are improving in some areas; credit markets have followed the improvement in broad risk appetite over the last few sessions
  • There will be some minor US reports; Mexico reports February trade; Colombia is expected to cut rates 50 bp to 3.75%.  
  • Portugal is working on legislation for a moratorium on debt payments of up to six months
  • Japan passed the budget for FY2020 and reported Tokyo March CPI; RBI cut rates in an emergency move and suspended loan payments for companies and consumers Continue reading “Dollar Ends Bad Week on Firmer Footing”

ECB Approaching its Bazooka Moment

The ECB appears to be moving closer to activating Outright Monetary Transactions (OMT).  Despite being part of Draghi’s “whatever it takes” moment, OMT has never been used.  If the Fed’s open-ended QE is seen as dollar-negative, then OMT should be seen as euro-negative. Continue reading “ECB Approaching its Bazooka Moment”

Dollar Soft, Equities Down Despite Passage of Senate Stimulus Bill

  • Spain is quickly becoming the next epicenter of the Covid-19 crisis; the dollar remains under pressure
  • The US senate approved the $2 bln stimulus plan by a 96-0 vote just before midnight last night; US jobless claims data will be the main focus today
  • The ECB has removed issuer limits on its most recent emergency EUR750 bln bond purchase program; reports suggest ECB officials are broadly in favor of activating OMT
  • UK reported weak February retail sales; BOE meeting is likely a non-event
  • Czech National Bank is expected to cut rates 50 bp to 1.25%; Singapore announced more stimulus as Q1 GDP disappoints; BOK started bond purchases; India announced stimulus measures Continue reading “Dollar Soft, Equities Down Despite Passage of Senate Stimulus Bill”

Market Sentiment Boosted by Senate Deal on Stimulus Bill

  • A deal was struck on the US stimulus plan, giving risk appetite another boost.
  • Markets continue to digest the Fed’s recent moves to open up the floodgates
  • Canada saw nearly 1 mln jobless claims filed last week, nearly double Prime Minister Trudeau’s estimate last week of 500k; this suggests huge upside risks to US claims data
  • Sterling received an extra boost from a report suggesting that hospitalization rates in the UK could be far lower than other countries
  • SARB will begin a bond purchase program; nationwide lockdown was announced in India yesterday; Thailand unexpectedly kept rates steady Continue reading “Market Sentiment Boosted by Senate Deal on Stimulus Bill”