Category: Economic Conditions

Optimistic German Data, Troubles for Turkey

The US dollar is trading choppily but with a distinct softer bias.  The economic news has been limited, and the apparent downing of a Russian plane by Turkey caused a flurry of activity, with Turkish assets coming under initial pressure which has abated somewhat. 

The euro briefly dipped below $1.06 yesterday for new seven-month lows, but there was no follow through selling.  As is often the case with such chart points, a snap back after the violation, the euro reached $1.0670 in early Europe.

The Lingering Effects of the Great Financial Crisis

The global financial crisis (GFC) that precipitated the worldwide great recession in 2008 has largely subsided. Capital markets are generally operating smoothly, liquidity restored and new initiatives toward financial regulation aim at reducing the likelihood of recurrence. However, in other respects the effects of the crisis live on.

Trying Not to Get Ahead of Ourselves

Surveys show that around 90% of primary dealers and economists expect the Fed to raise interest rates in the middle of December. Over the past month, the two-year US note yield has risen by nearly 37 bp to 91 bp. 

The implied yield of the December Fed funds futures contract has risen by 4.5 bp to 21.5 bp at the close before the weekend. It is the highest yielding close in more than a month.  It fully discounts a 25 bp rate hike, IF one assumes that the effective Fed funds rate will average 30 bp (instead of the midpoint of the new range). 

Dovishness or ‘Buy the Rumor, Sell the Fact’?

The US dollar is trading heavily today.  The losses are not particularly steep against either the majors or the emerging market currencies.  A common narrative is attributing the dollar’s pullback to “dovish minutes,” but this is not a fair assessment, we think.  Instead, it seems that a typical buy the rumor sell the fact offers a more robust explanation.  The FOMC minutes did not contain any surprises, and it does not appear anyone’s views really changed.  The December Fed funds futures finished yesterday unchanged for the ninth consecutive sessi

The Market Plays a Data Waiting Game

Amid light news, the US dollar’s recent gains have pared slightly.  Attention turns to the US, were several Fed officials speak, October housing starts/permits will be released, and then later in the session, traders will peruse the minutes from last month’s FOMC meeting. 

U.S. Dollar Underpinnings Include Rate Hike Prospects

The prospect of the Fed rate hike next month while many other countries consider providing more stimuli continues to underpin the dollar.  Corrective downticks remain shallow and brief.  The euro slumps to near seven-month lows just below $1.0645.  The greenback posted a big outside up day against the yen yesterday, and follow through buying today is putting it within spitting distance of a three-month high. 

Asia Falls, Then Stabilizes in Muted Market-Week Start

Investors have mildly responded to the tragic developments in Paris.  Equities tumbled in Asia, with the MSCI Asia-Pacific Index shed more than 1%, and the euro briefly pushed below $1.07.  The dollar fell to almost JPY122.20.   US Treasury yield slipped around 3 bp.  However, the markets have since stabilized. 

The Weekly Market Setup Adds a Tragic Dimension

Nous Sommes Paris:  The attack in Paris is tragic and reprehensible.  Our thoughts and prayers are with the victims and the people in France.  There are several political and economic consequences, aside from the tighter security and elevated alertness.  The attack overshadowed other issues at the G20 meeting. On one hand facing terror, investors often reduce risk.  At the same time, officials often provide reassurances that they have the will and means, to address any liquidity needs. 

A Busy Data Digestion Day Ends the Week

The US dollar has stabilized after yesterday’s flurry that shook out some weak short euro and yen positions.  The push through $1.08 was a new opportunity to short the euro by short-term traders.  Disappointing Eurozone GDP data provided mode fodder for the euro bears and the single currency has retreated nearly 3/4 of a cent from yesterday’s highs.