Economic Conditions

  • Investors long the dollar are hoping for a better May.

    The Dollar Has Seen Better Days

    April was a cruel month for the US dollar.  It fell against all the major currencies; even those whose central banks have negative yields.  The greenback also fell against nearly all the emerging market currencies, but the Philippine peso and the Polish zloty. 

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  • Alice needed to be wary of the White Queen's advice, as should you.

    The Non-Consensus View

    The White Queen in Alice in Wonderland (Through the Looking Glass) confesses that when she was younger, she could believe six impossible things before breakfast.  She encourages Alice to do the same.  It appears many in the market are taking the Queen's advice too seriously. 

    Here is a quick thumbnail sketch of seven of our non-consensus views: 

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  • With little belief in U.S. economic strength, the dollar is losing fans.

    No Love for the Dollar

    Two main forces in the foreign exchange market are rippling through the capital markets.  The first is the continued weaker dollar tone.  The combination of what appears to be a stagnating US economy (0.5% annualized pace in Q1) and a market that does not believe the Federal Reserve will hike rates in June, and is in fact, judging from the Fed Fund futures strip, skeptical of a single hike this year. 

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  • Investor frustration is on the rise as global financial events converge.

    Global Financial Tension is Palpable

    One can appreciate the frustration in Tokyo. The Bank of Japan surprised the world by adopting negative rates in January and the yen rallied. Today it disappointed many by not easing, and the yen rallied. The BOJ next meetings in mid-June and like this week, the outcome of its meeting will be announced the day after the FOMC meeting. There is some idea that BOJ may be waiting for Abe's new fiscal package and the G7 meeting Japan hosts next month.

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  • Market participants are waiting for the FOMC statement.

    Waiting for Incentive to Trade (read FOMC statement)

    The foreign exchange market is largely quiet as the market awaits fresh trading incentives and the FOMC statement later in the North American session.  The main exception to the consolidative tone is the Australian dollar, which is posting its largest loss (~1.7%) in a couple of months. 

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  • The dollar pares losses against its foes.

    The Dollar Fights Back

    The US dollar starts what promises to be an eventful week giving back some the gains score in second half of last week against the euro and yen.  Equity markets are extending their pre-weekend losses.  Commodities are also trading with a heavier bias.  Markets in Australia, New Zealand, and Italy are closed for national holidays.

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  • The dollar's technical indicators improved, oil is stuck, and the Brexit.

    Catching Up with Currencies and Commodities

    It is not that the US dollar had a particularly good week.  It was mixed.  The best performers were sterling and the Canadian dollar. The pound led with a 1.6% gain, followed closely by the Canadian dollar. 

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  • The last week of April is a big week in the markets.

    Market Participants Gear Up for a Big Week

    The last week of April is eventful. The Reserve Bank of New Zealand, the Federal Reserve and the Bank of Japan hold policy meetings.  The UK, Eurozone, and the US provide the first estimates of Q1 GDP. Japan, the Eurozone, and Australia report consumer prices, while the US updates the Fed's preferred (targeted) inflation measure, the core deflator of personal consumption expenditures. 

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  • The dollar has hit some speed bumps, but it is resilient.

    Dollar Down, but Not Out

    The US dollar has had a rough few months.  It has fallen against most major and emerging market currencies this year.  A critical issue for global investors and policymakers is whether the dollar’s uptrend is over, or is this just a respite.  Much is at stake with the answer.

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  • Markets are mostly consolidating ahead of the weekend.

    Less Volatility, More Weekend

    Equity markets are seeing this week's gains trimmed after the S&P 500 fell 0.5% yesterday, recording its biggest loss in two weeks.  Disappointing earnings in some tech leaders spurred profit taking.  The US 10-year Treasuries are consolidating the week's nine basis point increase in yields after nearing 1.90% yesterday.  Asian bonds yields tracked US Treasury yields higher while European bonds are narrowly mixed as they consolidate yesterday's increase. 

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