Divergence between the U.S. and other Economies Keeps Dollar Bull Case Alive
Our underlying constructive outlook for the US dollar remains intact. It is broadly based on the divergence between the US and most other major economies. The US acted early and aggressively to counter the Great Financial Crisis. Unorthodox policies, such...
Other Currencies Matter
The US dollar is easily the most traded currency, and despite the plethora of other currencies, it is on one side of nearly 90% of all trades. Yet the movement in the foreign exchange market presently is not so much...
When is a Bottom a Bottom?
With the Bank of England apparently surprising the market more than one might have expected, given the split surveys, many are thinking sterling has bottomed. If it has bottomed, where could it go? A number of technical considerations suggest toward...
Is the Yuan Really Weak?
Here are two Great Graphics that portray two time series: the dollar-yuan exchange rate and the yuan against a trade-weighted basket. The first chart comes from a highly reputable consulting firm. It replicates the trade-weighted basket that Chinese officials unveiled...
Pound Pounded as BOE Action Portends Easing and UK PMI Comes in Weak
The British pound has been hammered to fresh lows just above $1.3115. The euro is moving toward GBP0.8500. The immediate catalyst is three-fold. First, one of the UK's largest property funds has moved to prevent retail liquidation. Second, the BOE...
Currency Speculators Limited Position Changes and were Divided around the Brexit Vote
In the sessions before and after the UK referendum speculators in the currency futures did three things. First, they generally reduced exposure. This means gross longs and short positions were reduced. Of the 16 gross speculative currency futures positions we...
Foreign Exchange Market Technical Condition Changes
The dramatic reaction to the UK decision to leave the European Union has changed the technical condition in the foreign exchange market. While the precipitating factor is a fundamental political development, it is mediated by psychology. Group psychology is the...
Are We at Peak Pound Yet?
Sterling is recording its daily advance since 2008 today. It is up about 2.3%. The ostensible driver is the weekend polls suggesting that, as we suspected the murder of the UK MP acting as a catalyst of sorts for public...
Technically Speaking: Could We See a Shaky Dollar?
The US dollar recovered from the sell-off sparked by the poor employment data released on June 3. It continued to move higher after the Federal Reserve met and shaved its forecasts for the next year and 2018. The number of...
Is Singling Out the Yuan as Manipulated Fair?
We have a lot of power with China. We can’t continue to allow China to rape our country, and that’s what they’re doing. – Donald Trump, May 1, Fort Wayne, Indiana We have a lot of power with China. We can’t...
U.S. Treasury Department Lays Down the Currency Law
For over a quarter-century now, the US Treasury Department has released a formulaic report on the currency policy and practices of key economies on a semi-annual basis. On occasion, it has hauled up a trading partner as a ‘currency manipulator’...
Collateral Currency Damage from Poorly Timed Rate Hikes
Renewed allegations of “currency manipulation” in the US-China bilateral agenda have less to do with the Chinese renminbi than US election politics and the Fed’s anticipated rate hikes. Even before the start of the eighth and final Strategic and Economic...
Intervention or Valuation Change?
News that Switzerland's reserves rose to a new record high of CHF602.1 bln in May from CHF587.9 bln in April spurred talk that the SNB has been intervening covertly. One media account cited one trader that terms the intervention as...
Data, So Far Mixed, Confuses the Currency Picture
The US dollar is trading with a heavier bias to start the month of June. Weaker stocks and firmer bonds has seen the yen rise the most, while sterling's losses have been extended after an ICM telephone survey showed a...
So Much for a Market Forces-Based Yuan Exchange Rate
The Wall Street Journal is reporting that minutes of a meeting in China two months ago reveal that officials there have abandoned their commitment to give market forces greater sway in setting the yuan's exchange rate. The Wall Street Journal...