Tag Archive: federal-reserve
Key Chart Points Hold and the Dollar’s Rally Stalls Ahead of the Weekend
Overview: Hawkish comments from Fed officials and the first
decline in continuing unemployment claims below 1.8 mln in two months boosted
US rates and the odds of a June rate hike rose to about 37%. This represents a
near tripling of the probability in the past week. It has been a trend with the
odds rising in 9 of the past 11 sessions. The two-year note yield has risen for
the past five sessions coming into today for a cumulative gain of about 35...
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Sterling is Not Immune to Greenback Gains ahead of the BOE
Overview: The US dollar has come back bid today. It
is rising by 0.25%-0.50% against all the G10 currencies. The Canadian dollar is
the most resilient today, which is often the case when the greenback is firm. The
Australian dollar is off the most after reaching its strongest level since late
February yesterday. Sterling is a middling performer today ahead of the
anticipated Bank of England rate hike. The dollar is also firmer against most
emerging...
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Narrow Ranges in FX: Calm before the Storm?
Overview: Equity markets are mostly weaker, and
benchmark 10-year yields are a little softer. The foreign exchange market is subdued
ahead of today’s US CPI. The large bourses in Asia Pacific region with the
exception of India worked lower and Europe’s Stoxx 600 is off for the second consecutive
session. US futures have a heavier bias. Yesterday the US bank share indices
filled the gap created at the end of last week but recovered. Today’s price...
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The Greenback Continues to Struggle
Overview: There is a nervousness that hangs over the capital markets.
Although US banks shares recovered at the end of last week, many continue to
see the sector’s challenges as the harbinger of a dramatic reversal in the Fed’s
stance. America’s debt ceiling looms large and could be a few weeks away. China
led Asia Pacific bourses higher, and, ironically, its bank shares extended their
rally. Japan, returning from last week’s holiday was notable...
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The Euro Stalled Near Its Best Level since April 2022 Ahead of ECB’s Decision
Overview: Without making
a commitment, the Federal Reserve opened the door to a pause in its tightening
cycle and the market has concluded it is over. The dollar slumped to new lows
for the move against sterling (and the Mexican peso), while euro stalled as it
approached last week's high, which was the best level since April 2022. The
dollar remains soft against most of the G10 currencies, today. The Norwegian
krone is leading after the 25 bp hike...
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Fed Day
Overview: A sharper than expected decline in US job
openings and weaker factory orders coupled with intensifying bank stress sent
ripples through the capital markets. The large US bank index fell 4.5%
yesterday, the most in six weeks, while the regional bank index fell nearly
5.5%, its biggest loss since March 13. Both indices took out the March lows. The
US 10-year yield unwound Monday's increase and the two-year note yield fell
back below 4.0%...
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Bank Stress Hobbles the Dollar, while Dissents Make the 50 bp Hike by Sweden less than Hawkish
Overview: The re-emergence of bank stress
reverberated through the US markets yesterday, downgrading the perceived
chances of a Fed hike next week and sending the US 2-year yield sharply lower. The
yield settled 13 bp lower, the largest drop in three weeks. The risk-off sent
the US dollar higher against most of the major and emerging market currencies. Follow-through
US dollar gains today has been mostly limited to the Australian dollar, where...
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Risk-Off Mood Dominates
Overview: Perhaps it was the extent of First Republic
Bank's loss of deposits that were reported with earnings yesterday, but risk
appetites dried up today. Asia Pacific equities were trounced outside Japan
today. Hong Kong and mainland shares that trade there set the tone today
falling 1.7%-1.9%. China's CSI 300 fell for the fifth consecutive session. Taiwan
and South Korean markets fell more 1.4%-1.6%. Europe's Stoxx 600 is off almost
0.5%,...
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The Dollar Begins New Week mostly Softer
Overview: The dollar is mostly lower, led by the Swiss
franc and euro. However, despite softer US rates and a victory for the LDP in
local Japanese elections, the yen is trading with a softer bias. Japanese
stocks recovered from the pre-weekend profit-taking seen after the Nikkei make
new highs for the year. Most other large bourses in the region except Taiwan
and India also moved lower. Note that China's CSI 300 fell for the fourth
consecutive...
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Equities Retreat while the Dollar is Confined to Narrow Ranges
Overview: Equities are mostly lower, while bonds have risen. The
dollar is trading in narrow ranges and mixed against the G10 currencies and
emerging markets. Most Asian bourses were lower. The Nikkei (though not the
Topix) and Hong Kong were the chief exceptions. Europe's Stoxx 600 is off for
the second consecutive day, in what looks like the first back-to-back loss
since early this month. US equity futures are lower, with the NASDAQ, which
eked...
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Firm US Dollar as Market is Feeling More Comfortable with May Hike
Overview: The dollar fell most of last week
but reversed higher before the weekend. It has seen some follow-through gains,
albeit limited against most of the G10 currencies today. Despite some seemingly
dovish comments by a few Fed officials last week, the Fed funds futures is
pricing in the greatest chance for a hike at the early May meeting since the
banking stress erupted last month. The greenback is also trading with a firmer
bias against most...
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US Dollar Slumps and China Surprises with Twice the Expected Trade Surplus
Overview: The market took US short-term rates and
the dollar lower after the CPI data, which was largely in line with
expectations. On the one hand, the odds of a quarter-point hike next month
increased slightly (73.6% vs. 71.6%) to 5.25%, but it reinforced that sense
that it is last hike and that the Fed will unwind this hike and more before the
end of the year. The year-end implied policy rate fell by about six basis points to
4.33%. The dollar...
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Firmer Rates and Higher Bank Stocks Give the Greenback Little Help
Overview: Financial strains eased yesterday, and
short-term yields jumped. The two-year US yield jumped 25 bp to pierce 4%. Yet,
the dollar fell against most of the major currencies yesterday and is mostly
softer today. Banking stress is ebbing. The Topix bank index snapped a
three-day decline and jumped nearly 2% today to recoup the lion's share of its
three-day decline. The Stoxx 600 index of EMU banks is extending yesterday's
1,7% advance. The...
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Calmer Markets to Start the New Week
Overview: There did not appear to be any negative
surprises over the weekend, and this is helping calm investors' nerves at the
start of the new week. Deutsche Bank shares have recovered most of the
pre-weekend loss in the German market, and Stoxx bank index is posting a gain
for the first time in four sessions. The AT1 ETF is slightly softer. In Japan,
the Topix bank index slipped around 0.5%, its fourth decline in the past five
sessions. Asia...
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Tough Fed Decisions
Overview: The market has concluded that the Fed will
hike rates today. The US two-year yield has risen from about 3.63% at Monday's
lows almost 4.20% yesterday. It needs to rise to 4.35% to recover half of its
decline since March 8 but has come back softer today. Meanwhile, the banking
crisis continues to ease, and Europe's Stoxx 600 bank index is up 1.5%, its
third consecutive advance. The US KBW bank index rallied almost 5% yesterday. Still,...
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Fragile Calm to End the Volatile Week even with the Quadruple Expirations
Overview: The support for First Republic Bank shown
by a consortium of US banks by shifting $30 bln of deposits is helping break
the financial anxiety that has gripped the market for more than a week. The
liquidity provisions for Credit Suisse by the Swiss National Bank also are
contributing to improved sentiment. The Fed's balance sheet expanded sharply
last week as the bridge banks were extended credit to help the unwind of SVB
and Signature...
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US Banking Crisis Swamps Other Considerations
Overview: The US banking crisis has overwhelmed other
market drivers. The strong measures announced as Asia Pacific trading got under
way was embraced by the market even though moral hazard issues and gaps in the
Dodd-Frank regulatory framework were exposed. The dollar is trading heavily. The
prospect of a 50 bp Fed hike next week has evaporated and some are doubting
that a 25 bp increase will be delivered. Rate hike expectations for the ECB
this...
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Powell Sends the Two-Year Yield above 5% and Ignites Powerful Dollar Rally
Overview: Federal Reserve Chair Powell's comments to
the Senate Banking Committee were seen as hawkish by the market, even though it
has been clear to most observers that the 5.10% median terminal rate that the
Fed projected in December would be increased. Also, it seemed well appreciated
a few Fed officials support a 50 bp hike at the February 1 FOMC meeting, two
days before a "hot" jobs report that showed over 500k jobs were
filled. It...
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US Dollar is Better Bid Ahead of Powell, while Aussie Sells Off on Dovish Hike by the RBA
Overview: The US dollar is trading with a firmer bias against
nearly all the G10 currencies ahead of Federal Reserve Chairman Powell's
semi-annual testimony before Congress. Speaking for the Federal Reserve, the
Chair is likely to stay on message which is higher rates are necessary to cool
the overheating economy. This comes on the heels of the Reserve Bank of
Australia's 25 bp hike and indication that it is not pre-committing to an April
hike. The...
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Yields Pull Back to Start the New Week
Overview: The modest economic goals announced as
China's National People's Congress starts was seen as a cautionary sign after
growth disappointed last year. It seemed to weigh on Chinese stocks, though
others large bourses in the region advanced, led by Japan's Nikkei and South
Korea with gains of more than 1%. Europe's Stoxx 600 is little changed after
rising for the past two sessions. US index futures are slightly softer. Strong
gains were seen...
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