Dollar Weakness Continues Ahead of ECB Decision

  • Joe Biden became the 46th President of the US; three Democratic Senators were also sworn in; weekly jobless claims data will be the highlight of an otherwise quiet week; Fed manufacturing surveys for January will continue to roll out; Brazil kept rates on hold at 2.0%, as expected
  • ECB is expected to keep policy unchanged; Norges Bank kept rates steady at 0%, as expected; Chancellor Sunak is reportedly drawing up plans to extend support for the UK labor market in the coming months; South Africa is expected to keep rates steady at 3.5%; Turkey central bank kept rates steady at 17%, as expected
  • BOJ kept policy unchanged, as expected; Australia reported solid December jobs data; Korea is posting strong export figures at the start of the year; Indonesia kept the 7-day target rate steady at 3.75%, as expected Continue reading “Dollar Weakness Continues Ahead of ECB Decision”

Dollar Continues to Soften Ahead of Inauguration

  • President-elect Biden will be inaugurated and becomes the 46th President of the United States at noon; he will hit the ground running by announcing a raft of executive orders upon taking office; Janet Yellen’s confirmation hearing was revealing; Canada and Brazil are expected to keep rates unchanged
  • Italian political tensions appear to have calmed; German government announced a hardening of mobility restrictions; UK reported December CPI
  • BOJ began its two-day meeting; PBOC left policy rates on hold, as expected; Malaysia kept rates steady at 1.75%, as expected; Taiwan December export orders surged Continue reading “Dollar Continues to Soften Ahead of Inauguration”

Dollar Soft as US Returns From Holiday

  • The Senate reconvenes and will immediately begin work on confirming Biden’s cabinet choices; we fully expect Yellen will be questioned about Biden’s $1.9 trln stimulus plan; reports suggest that if asked, Yellen will disavow a weak dollar policy whilst affirming commitment to a market-determined exchange rate
  • Eurozone January ZEW survey came in firm; Italian political intrigue continues; UK Chancellor Sunak is reportedly drawing up plans to boost welfare payments
  • Reports suggest the BOJ will consider widening the target band for the 10-year yield from the current 20 bp; China’s policymakers are signaling no change in stance after stronger than expected growth was reported in Q4 Continue reading “Dollar Soft as US Returns From Holiday”

Drivers for the Week Ahead

  • President-elect Biden will be inaugurated Wednesday; security in Washington DC and many state capitols has been beefed up due to concerns of violence; the Senate reconvenes Tuesday and will immediately begin work on confirming Biden’s cabinet choices; reports suggest that if asked, Yellen will disavow a weak dollar policy whilst affirming commitment to a market-determined exchange rate
  • Weekly jobless claims data Thursday will be the highlight of an otherwise quiet week; Fed manufacturing surveys for January will continue to roll out; BOC meets Wednesday and is expected to keep policy unchanged
  • ECB meets Thursday and is expected to keep policy unchanged; Italian political intrigue will continue this week; Norges Bank meets Thursday and is expected to keep policy unchanged; UK has another busy data week
  • BOJ meets Thursday and is expected to keep policy unchanged; Japan and Australia have busy weeks Continue reading “Drivers for the Week Ahead”

EM Preview for the Week Ahead

The EM FX rally took a bit of a breather last week as the dollar got some broad-based traction. Risk- off impulses picked up from rising virus numbers and the worsening US economic outlook. Those impulses may continue this week due to heightened fears of violence ahead of the inauguration Wednesday. However, we believe the underlying Blue Wave trades will resume as the income Biden administration focuses on providing more stimulus. Continue reading “EM Preview for the Week Ahead”

Dollar Bounce Running Into Resistance

  • President-elect Biden unveiled a $1.9 bln fiscal package; Fed Chair Powell stressed his dovish leanings; US December retail sales will be the highlight; December PPI will also be reported; Fed manufacturing surveys for January will start to roll out
  • UK monthly data dump underscores ongoing weakness in the economy; we fully expect another slug of fiscal stimulus; we also expect further monetary easing but downplay notions of negative rates by the BOE; the ECB warned that the full impact of the pandemic has yet to be felt by eurozone banks
  • The Trump administration blacklisted 9 more Chinese companies; Korea kept rates steady at 0.5%, as expected Continue reading “Dollar Bounce Running Into Resistance”

Dollar Struggles as Stimulus Talk Revives Blue Wave Trades

  • The House of Representatives impeached President Trump; President-elect Biden will announce plans for the next round of fiscal stimulus today; weekly jobless claims will be of interest
  • Fed Beige Book report was suitably cautious; Fed officials continue to push back against any notions of tapering; Peru is expected to keep rates steady at 0.25%
  • Italian political turbulence continues; Germany reported stronger than expected 2020 GDP data; Japan reported stronger than expected data; China reported strong December trade data Continue reading “Dollar Struggles as Stimulus Talk Revives Blue Wave Trades”

Dollar Regains Some Traction as Markets Search for Direction

  • House Democrats will move ahead with impeachment proceedings today; December CPI data will be the US highlight; heavy UST supply this week wraps up with a $24 bln sale of 30-year bonds; December monthly budget statement will be of interest the Fed releases its Beige Book report; several Fed officials pushed back against notions of tapering anytime soon
  • Italian political noise continues; UK and Germany warned of more restrictive measures; Russia will restart its reserve accumulation policy; Poland is expected to keep rates steady at 0.10%
  • Japan’s government extended a state of emergency to seven more prefectures; BOJ may downgrade its economic assessment at next week’s meeting; PBOC may be getting uncomfortable with yuan strength Continue reading “Dollar Regains Some Traction as Markets Search for Direction”

Dollar Runs Out of Steam as Sterling Leads the Way

  • The US curve continues to steepen; real US yields have become less negative; UST supply will remain an issue as $38 bln of 10-year notes will be sold today; Brazil reports December IPCA inflation
  • Yields in Europe and UK are following the trend higher in the US markets, but not as fast; Italy is facing another bout of political instability; BOE Governor Bailey pushed back against negative rates
  • Japan’s government will declare a state of emergency for Osaka, Kyoto, and Hyogo prefectures as soon as tomorrow; Malaysia assets are underperforming on further lockdowns Continue reading “Dollar Runs Out of Steam as Sterling Leads the Way”