Diverging Monetary Policy Expectations
A critical driver in the foreign exchange market and the global capital markets more generally, is the continued preparation by the Federal Reserve for a rate hike, while many other central banks, including the ECB, warn investors that more accommodative...
A Call for Rates Down Under to Go Down
When Australia’s Reserve Bank board meets on Melbourne Cup day next week, the question at hand is whether the RBA will seek to offset recent bank rate raises with a cut to the cash rate. With a cut, the hope...
The BOJ and FOMC Capture Investors’ Attention
The Reserve Bank of New Zealand and Sweden's Riksbank can still surprise investors, but it is the BOJ and FOMC meetings that are the talk of the markets. Surveys suggest that around 40% of investors expect the BOJ to expand...
Central Bank Decisions Complicated by Diverging Economies
The European Central Bank and the People's Bank of China reanimated divergence as a critical driver just when many observers had all but given up on it. The divergence is about monetary policy, broadly understood, not about the data per...
The ECB’s Draghi Gets Dovish
ECB President Draghi sent an unambiguous signal to investors. Although the economic data from the region has been largely stable, the downside risks have grown, and the ECB will take action at its next meeting, which is in early December....
The ECB Steps Up to the Plate
The main event today is the ECB meeting. Many observers expect a dovish tilt as Draghi prepares to expand QE in December. A Bloomberg survey conducted last week found that 80% of economists expect the ECB to eventually do so,...
Central Bank Meetings Begin
Japan's trade balance was worse than expected in September. It posted a JPY114. Japan's trade balance was worse than expected in September. It posted a JPY114. bln deficit. The expectation was a small surplus. Exports rose a mere 0.6% compared...
A Warped WIRP
Bloomberg created a function that claims to give the odds of a Fed move by interpolating from the Fed funds futures and options contracts. It is widely used, but I remain a skeptic. Bloomberg created a function that claims to...
Updating the Divergent Monetary Policy Theme
The main thrust of our bullish US dollar outlook is the divergence in monetary policy trajectories. We do not think the divergence has peaked and anticipate it to persist through next year and into 2017. The main thrust of our...
The Fed Chair Speaks and the Dollar Reacts
The Fed's Chair seemed to have surprised the market with her comments after North American markets closed yesterday. She reiterated what the Fed said last week. It is still on the path to hike rates before the end of the...
BOE Rate Hikes, Like the U.S., are now Less Likely in 2015
The US dollar is trading heavier after extending its post-FOMC gains that saw the euro and sterling record two-week lows yesterday. The euro extended its recovery that was marked by yesterday's outside session. Its gains have stalled in front of...
Market-Based vs. Survey-Based Measures
The Federal Reserve threw investors a curve ball last week. Until then, Fed officials have shown a clear preference for survey-based measures of inflation expectations. Last week, seemingly out of the blue, that Fed made reference to market-based measures of...
Fed Speak Began over the Weekend it Continues All Week
The US dollar started softer in Asia, where Japan is on holiday for the first half of the week, but has come back bid in Europe. The key issues now seem to revolve around intentions and implementations. Those are the...
The Fed Decides to Not to Decide
The Federal Reserve left the Fed funds target at 0-25 bp. It recognized continued improvement in the US economy but raised the level of concern over international developments. The Federal Reserve left the Fed funds target at 0-25 bp. It...
Does the Fed Still Wield the Same Influence?
Markets have been speculating for months about whether the US Federal Reserve would raise interest rates in September. The day has finally arrived, and interestingly, there’s much less certainty now about which way it will go than there was just...