Possible Head and Shoulders Top in Euro

Our technical analysis supports our medium-term bearish euro outlook, while at the same time, is consistent with a potential limited bounce near-term.   Continue reading “Possible Head and Shoulders Top in Euro”

Why Tariffs will Not Reduce the US Trade Deficit

US tariffs are ostensibly to reduce the trade deficit, but we are skeptical that it will work, due to rising input costs, retaliatory tariffs and ongoing growth differentials.  At same time, the funding of the US imbalance is still smooth and has actually improved.

Continue reading “Why Tariffs will Not Reduce the US Trade Deficit”

Turkey Drives Risk-Off, but Pressure Abating

Turkey’s response to the pressure on it currency fell well shy of what is needed to stabilize the situation.  This continues to encourage risk-off activity, which seems, among the major currencies to be exaggerated. 

  Continue reading “Turkey Drives Risk-Off, but Pressure Abating”

Drivers for the Week Ahead

  • One of the key questions facing investors is whether Turkey is the canary in the coal mine the way Thailand was in the 1997-1998 Asian Financial Crisis
  • While our outlook for the dollar remains constructive, it is over-extended
  • The US retail sales report Wednesday may be the most important data release this week
  • The UK reports employment, inflation, and retail sales in the coming days
  • Minor measures were announced by Turkey as pain threshold has not been crossed yet
  • EM FX is coming under greater pressure as the situation in Turkey deteriorates

Continue reading “Drivers for the Week Ahead”

Erdogan Signals A Lot More Pain Ahead For Turkey

It seems that rather than offer any orthodox policy solutions, Turkish President Erdogan is doubling down on his confrontational stance. This spells more trouble for Turkish markets when they open Monday. The rumored emergency meeting between Turkish regulators and banks did not materialize this weekend.   Continue reading “Erdogan Signals A Lot More Pain Ahead For Turkey”

Dollar Surges, but Recent Gains Seem Exaggerated

The recent price action confirms the dollar’s break out of the spring and early summer ranges against most of the major currencies.  While our understanding of the macro drivers anticipates additional dollar gains, we are concerned that the technical condition is stretched and the markets may be exaggerating the systemic risk posed by Turkey. 

Continue reading “Dollar Surges, but Recent Gains Seem Exaggerated”

What Has Changed in EM

  • Moody’s upgraded Vietnam one notch to Ba3 with stable outlook
  • The National Bank of Romania delivered a dovish surprise
  • US State Department announced new sanctions on Russia for its nerve gas attack
  • Central Bank of Russia said it may reduce its volume of daily FX purchases under the budget rule in order to help reduce FX volatility
  • US President Trump added fuel to the fire by announcing increased tariffs on Turkish imports
  • Turkey tweaked foreign currency reserve requirements for commercial banks
  • S&P upgraded Israel a notch to AA- with stable outlook
  • A widening graft probe in Argentina is raising concerns Continue reading “What Has Changed in EM”

Profit & Loss Video: A Different Kind of Alpha

Jay Moore, BBH’s Global Head of Currency Administration, was a panelist at the 2018 Profit & Loss Forex Network conference held in New York City on May 24. Jay made the case that providers of passive currency administration services can set themselves apart beyond achieving the basics of risk management by preserving fund performance, a form of “operational alpha” for their clients. 

Continue reading “Profit & Loss Video: A Different Kind of Alpha”