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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.
Much of what the Bank of Japan announced today had been largely leaked. While there was a sizeable response in the asset markets, the dollar's knee-jerk gains against the yen were quickly unwound.
The BOJ lifted its self-imposed restrictions on its asset purchases and shifted the focus of policy from the monetary base to the yield curve. It is not clear that this shift increases the chances of the BOJ reaching its inflation target.
The dollar-value of all the goods and services the US produces has never been larger. Two other metrics capture the recovery. These two Great Graphics come from the Wall Street Journal and draw from Census Bureau figures.
Tomorrow's Bank of Japan and Federal Reserve meetings are serving to dampen activity in the foreign exchange market. The US dollar is little changed against the euro, yen, and sterling. The Antipodeans are firm.
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 US dollar rose against the major currencies except the Japanese yen last week. It also appreciated against most of the emerging market currencies, with the South African rand, the Brazil real, and the Chinese yuan the notable exceptions.
In our age of disparity, it may be easy to accept that all time is not equal. Touch a hot surface; time seems to move slowly. Time doing an enjoyable activity goes by lickety-split.
Another inequality of time is inflection points. These are non-linear jumps, breaks in time series or investors’ reaction function--how they respond to news. Is bad fundamental news good for stocks and bonds? Is a stand pat Fed bad for the dollar? Is easing by the BOJ positive or negative for the yen?
Summer vacations have mostly ended. The news stream has picked up. Yet speculators have been mostly reluctant to make meaningful changes in their exposure to the currency futures.
There are a few notable exceptions. First, over the past several weeks, speculators have reduced gross short euro positions by more than 20% since the end of July. It stands at 173.3k contracts, after the bears covered 16.7k contracts in the CFTC reporting period ending September 13.
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.
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.
There has been much discussion in the US presidential campaign about immigration, especially from Mexico. Trump has proposed a wall for the 2000-mile border. Different types of fences are on about a third of the border as it stands today.
However, as this Great Graphic, from Pew Research shows, Mexican immigrants may have been a problem previously, but for the past decade (2005-2014) more Mexicans have left the US than entered (hat tip to Philip Bump).
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.