What Has Changed in EM

  • US Treasury Secretary Mnuchin announced that he invited his China counterparts for another round of high-level trade negotiations
  • Czech central bank has signaled another imminent rate hike
  • The European Parliament voted to censure Hungary for eroding democratic values
  • The US State Department announced that it is working on a second round of sanctions on Russia for November
  • Central Bank of Russia delivered its first rate hike since 2014
  • Central Bank of Turkey delivered a hawkish surprise, raising all rates by 625 bp
  • Former Brazil President Luiz Inacio Lula da Silva officially endorsed his running mate Fernando Haddad as the PT candidate
  • Incoming Mexico President Andres Manuel Lopez Obrador (AMLO) pledged to boost Pemex spending Continue reading “What Has Changed in EM”

Dollar Losses Extended

  • The US dollar remains on the defensive after retreating yesterday
  • A weaker than expected Swedish CPI report is weighing on the krona
  • The Turkish lira rallied in response to yesterday’s surprising 625 bp hike
  • US data highlights include retail sales, IP, and the University of Michigan’s consumer confidence survey
  • Central Bank of Russia is expected to keep rates steady at 7.25% Continue reading “Dollar Losses Extended”

Russia Central Bank On Hold as Sanctions Pile Up

The Central Bank of Russia is expected to keep rates steady tomorrow. Just today, a new round of sanctions was just announced by the State Department while the EU extended existing sanctions for another six months. More are expected in the coming months and tensions with the West remain high as Russia conducts the largest military exercise since 1981 this week. Continue reading “Russia Central Bank On Hold as Sanctions Pile Up”

Draghi Sticks to Script

The euro went bid in response to the ECB meeting and Draghi’s seeming optimism.  The staff shaved the GDP forecasts for this year and next while keeping inflation forecasts steady.  Risks were seen as broadly balanced.  

Continue reading “Draghi Sticks to Script”

Markets Vulnerable to Disappointment

  • There is an eerie calm in the markets ahead of the highlight for the day and week
  • Australia reported 44k new jobs in August, nearly three times more than expected
  • After deciding unanimously to lift rates last month, there is practically no chance of another BOE rate hike today
  • The main feature of the ECB meeting may be the staff’s forecasts.
  • US CPI may not get much attention as the ECB press conference commands more attention
  • Central Bank of Turkey is expected to hike rates 325 bp to 21%; ahead of the decision, Erdogan explicitly called for rates to be cut
  • Peru central bank is expected to keep rates steady at 2.75% Continue reading “Markets Vulnerable to Disappointment”

WTO Reforms

The WTO is in need of modernization.  Canada will formally kick off the process next week.  Expectations should be kept low as rising protectionism and trade tensions warn that a consensus for change will be elusive.  

Continue reading “WTO Reforms”

Turkey Central Bank Preview

The Turkish central bank meets tomorrow and is expected to hike rates 325 bp to 21%. The lira has stabilized since last week, after the bank pledged to act after the high August CPI print. However, the bank has tended to disappoint at every juncture during this crisis and we expect this streak to continue. Continue reading “Turkey Central Bank Preview”

Dollar Chops in Narrow Ranges

  • Eurostat confirmed that EMU industrial output fell for a second consecutive month in July
  • We anticipate that the ECB staff will shave its growth forecasts, which are announced tomorrow
  • The EC’s confrontation with Hungary may come to a head today
  • The Canadian dollar is firm on reports that it is willing to make a concession on dairy, a sector not included in the current NAFTA
  • The US session features the August PPI and the Fed’s Beige Book ahead of the meeting on September 26
  • China reported weaker than expected money and loan data for August
  • Singapore retail sales contracted -2.6% y/y in July vs. +0.7% expected; India reports August CPI and July IP Continue reading “Dollar Chops in Narrow Ranges”

Did the CRB Bottom?

Commodity prices have been retreating for the past several months.  It is possible that a low of some importance is in place.  Commodity prices often move inversely with the dollar, but that inverse correlation appears near an extreme so that a recovery in commodity prices does not necessarily prejudice our dollar outlook, even if there is a small negative bias.  

Continue reading “Did the CRB Bottom?”