Economic Conditions

Idiosyncratic Risk and Dollar Movement


The US dollar is narrowly mixed.  The euro, yen and Swiss franc are higher, while the dollar-bloc and sterling are softer.  The moving element here is not so much the greenback, which serving more as a fulcrum, but idiosyncratic, country-level developments. 

A Random Pattern


As Nassim Taleb instructed, we should not be fooled by randomness. If you see six red results in a row at a roulette table, do not conclude the game is rigged.  If you flip a coin, and it is tails six consecutive times, the contest is not necessarily rigged.

See You in December


The US dollar has lost another 0.5% against most of the major currencies today, as Asia and Europe respond to the Fed's decision.  There are few exceptions to this generalization.  The Norwegian krone has gained nearly three times as much, with the help of its central bank, which has played down for lower rates at today's meeting.  The euro is at its lowest level against Nokkie since the end of last year. 

Merkel's Support Fades, as does the Dollar's


The US dollar, which finished last week on a firm note, is under pressure to start the new week that features Bank of Japan and Federal Reserve meetings.  The slighter stronger August CPI reading helped lift the greenback ahead of the weekend, but investors continue to see a low probability of a Fed hike this week. 

The Fed Meeting is Overshadowing European Politics


Yellow lights are flashing.  Bonds remain heavy despite a weak spate of data that would seem to remove nearly any chance that Fed will hike rates next week.  The implications of the disappointing retail sales data indicates that estimates for Q3 GDP will be revised lower. 

This quarter does not seem to be the breakout that had appeared to be the case previously.  The output from industrial sector, which accounts for a little less than GDP fell in August, and the July gains were shaved in revision.  

The Day's Data/Events Likely not to Push the Needle


Looking at the diary, today is the most important day of the week. The Bank of England and the Swiss National Bank meet.  The UK reports retail sales.  EMU reports CPI figures.  The US reports retail sales, industrial output, and two September Fed surveys.  Yet the economic updates are unlikely change sentiment ahead of next week FOMC and BOJ meetings.

Searching for Stability


The markets are trying to catch their collective breath after yesterday's dramatic moves.  The sharp slide in US equities may have weighed on Asian markets, but losses are mild. Still, the MSCI Asia-Pacific Index was off 0.8%, the fifth consecutive losing session. European bourses are slightly firmer, but appear to be awaiting the US open for stronger directional cues.