Category: Economic Conditions

Blame it on the Brits? Fed Points at Brexit


Citing the economic risk of Britain leaving the European Union, Federal Reserve chief Janet Yellen kept interest rates low in an effort to help America’s deteriorating economy.

While several negative economic indicators at home have moved analysts to predict a rate hike would not happen in June, the Fed chair cited the risks of a Brexit for both Americans and people around the world. When asked if the possibility of a Brexit influenced the Fed’s decision to delay its plan on increasing Americans’ borrowing costs, Yellen said it was a factor.

Long-Lasting Headwinds


The US dollar is higher against the major currencies but the Japanese yen and the New Zealand dollar.  The dollar fell to new two-year lows against the yen to JPY103.55 before bouncing in the European morning back to JPY104.40.

Positioning for Life after the UK Referendum Continues


A spate of opinion polls showing a tilt toward Brexit, and the leading UK newspaper urging the Leave vote on the front page, keep the global capital markets on edge.  Equities are lower, though of note ahead of the MSCI decision first thing Wednesday in Asia, Chinese shares eked out a small gain.

Core bond yields are 4-5 bp lower, which pushes the 10-year German bund yield into negative territory for the first time.

Short-term Volatility is Up, Encouraging Capital Market ‘Risk-Off’


The risk that the UK votes to leave the EU next week is the dominant force in the capital markets.  It is a continuation of what was seen at the end of last week.  Sterling fell 1.4% against the US dollar before the weekend and is off another 1% today.  A week ago, it traded as high as $1.4530.  Now it is nearing $1.41.

Technically Speaking: It’s Still the FOMC and UK Referendum


The US dollar traded heavily in the first few days of last week as investors continued to respond to the poor employment report.   However, Yellen’s willingness to defer judgment while noting the underlying economic strength, JOLTS and the initial jobless claims, coupled with the ongoing anxiety over the June 23 UK referendum helped the dollar recover in the second half of the week. 

Down, then Up, the Dollar is Ready for the Weekend


The US dollar weakened in the first half of the week as participants continued to react to the shockingly poor jobs report and shift in Fed expectations.  However, it recovered smartly yesterday and is seeing some modest follow through buying today. 

The Dollar Meanders, South Korea Delivers a Surprise Rate Cut


The US dollar is posting modest upticks against most of the European currencies and the Canadian and Australian dollars. However, it has fallen against the yen and taken out the recent low, leaving little between it and the May 3 low near JPY105.50.  The New Zealand dollar though is the strongest of the major currencies; gaining 1.5% following the RBNZ’s decision to leave rates on hold, and signal of little urgency to cut again in the near-term. 

Economic Data Overshadowed by the UK Referendum, US Election


The foreign exchange market is quiet.  The euro remains confined to the narrow range seen on Monday between $1.1325 and $1.1395.  We continue to look for higher levels near-term as the drop from May 3 (~$1.1615) to May 30 (just below $1.11) is corrected.  A move above $1.1420 would likely spur more buying. 

Yellen Speaks while the Yen and Sterling get Testy


The Japanese yen is the only major currency not to be gaining against the US dollar.  Emerging market currencies, save the Chinese yuan, are also advancing against the greenback today.  The yen rose 3.5% against the dollar last week, and rising equities and commodities are weighing on the yen.

The dollar rose to almost JPY108 in Asian trading and is consolidating in the European morning.  The JPY108.30 area is the first retracement objective, which is a little above the five-day moving average (~JPY108.05).

Swiss Reject Referendums, European Growth Slows, and Yellen Speaks


After the shellacking it took after the shockingly poor jobs data, the US dollar has only managed a shallow recovery against the euro and yen.  The euro peaked near $1.1375 before the weekend.  The mild pullback to almost $1.1335 drew some fresh buying.