Monetary Policy

The only way to explain the largest swing in the euro in six years yesterday is to appreciate the disconnect between what was expected and what was delivered by the ECB.  Draghi's urgency and commitment to do "what it must"...

Market participants knew that volatility would rise today with the ECB meeting.  What they got was far worse than could have been anticipated.  Market participants knew that volatility would rise today with the ECB meeting.  What they got was far...

The much-anticipated ECB meeting is at hand.   Yesterday's disappointing Eurozone CPI figures only fanned the anticipation. Today the service PMI was softer than expected at 54.2, down from 54.6.  What will Draghi do?  There are four moving parts.  The much-anticipated...

On Monday, the Federal Reserve met to discuss the discount rate.  There has been a steady increase in the number of regional Federal Reserve presidents requesting an increase in the discount rate.  The minutes of the October 26 meeting were...

The divergence of monetary policy is discounted, they argued. Ahead of next week's big events, which include the IMF's SDR decision, the ECB meeting, OPEC meeting, and the US jobs data, the euro, against which speculators have amassed a large...

With the vast majority of economists and primary dealers expecting the Federal Reserve to lift rates next month, the subject of discussion has shifted toward the pace of the hikes and the peak or terminal rate.  With the vast majority...

The dollar-bloc currencies and the Norwegian krone were the strongest major currencies last week but are leading the downside today.  The slump in commodity prices is taking a toll.  WTI is off by nearly 3%.  Copper is off about half...

The Federal Reserve holds a discount rate meeting on Monday.  There is some speculation that the 75 bp discount rate could rise.  At the September meeting, which is not the same at the FOMC meeting five of the 12 regional...

The US dollar is rebounding today after yesterday's correction.  Those losses seemed to have been a function of some profit taking after the seeming confirmation in the FOMC minutes that the Fed was set, barring a significant surprise, to raise...

The British historian Lord Acton famously said, "power corrupts and absolute power corrupts absolutely."  The American response is a system of checks and balances.  The Federal Reserve represents a concentration of power that became abundantly clear during and after the...

December will be a month to remember.  ECB President Draghi continued to fan expectations of further accommodative measures at the December 3 meeting.  At the same time, the strength of last week's US employment report, reinforced by comments from the...

After 271,000 were jobs added in October, US unemployment rate fell to 5.0 percent. Meanwhile, average annual hourly earnings climbed by the most since 2009. As a result, the dollar strengthened and treasuries plunged. The report was a green light...

The US dollar and yields surged as the divergence meme, increasingly doubted, returned with a vengeance.  The 271k rise in nonfarm payrolls was most this year. The 2.5% year-over-year increase in average hourly earnings is the most in six years. ...

Divergences in central bank policies continue to drive the global investment environment. This holds true not just across Developed Markets, but Emerging Markets as well.  We thought it would be helpful to summarize our expectations of central bank policies going...

The US-German 2-year interest rate differential (swap rate) is a useful directional guide to the euro-dollar exchange rate.  At about 105 bp, it is the highest since 2005.  The US premium had peaked in late 2004 near 185 bp.  In...