Marc Chandler

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Marc Chandler
About the author:

Head of Global Currency Strategy at Brown Brothers Harriman.

The Fed Meeting is Overshadowing European Politics

Date: 15 September 2016

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.

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The Day's Data/Events Likely not to Push the Needle

Date: 15 September 2016

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.

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Less of a Problem than You May Have Heard

Date: 14 September 2016

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. 

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Searching for Stability

Date: 14 September 2016

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.

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Maxed Out Monetary Policy

Date: 13 September 2016

The market has not changed its mind.  Following Brainard's comments yesterday the market had downgraded the chances, which were already modest, of a Fed hike next week.  The September Fed funds futures is unchanged on the day.  The implied yield of 41 bp matches the 50-day moving average.

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Is there Room to Raise Rates?

Date: 13 September 2016

Our approach to Fed-watching is clear:  Among the cacophony of voices, the Troika of Fed leadership, Yellen, Fischer and Dudley provide the clearest signal. They are most often on message, and their comments have been the best indications of policy.

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When Governor Brainard Talks, People Listen

Date: 12 September 2016

Stocks and bonds have begun the new week much like last week ended.  Sharp losses are being recorded.  The US dollar is mixed, with minor losses against the euro, yen, and sterling, but a firmer tone is evident against the dollar-bloc and emerging market currencies.

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Teeing Up the Emerging Markets

Date: 12 September 2016

EM ended last week on a soft note. Perhaps it was the North Korean nuclear test (see below).  Perhaps it was disappointment in the ECB or rising Fed tightening odds. Whatever the trigger was, EM FX weakness persisted and appears likely to carry over into this week.

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Expectations are for a Capital Market Continuation

Date: 12 September 2016

The week ahead will likely be shaped by a combination of what happened last week and what will happen the week after next.  The end of last week saw a sell-off in equities and bonds and a recovery in the US dollar. The week after next the FOMC and BOJ meet in apparently live meetings, meaning that policies may be adjusted.

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CFTC: Long Position Liquidiation

Date: 12 September 2016

Over the summer, the US dollar was out of favor with the speculators in the futures market. This means that gross long positions increased and gross short positions tended to fall.  Speculators are only short three of the eight currency futures we track, the euro, sterling and Mexican peso.

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The Dollar Bulls Hold Their Ground

Date: 12 September 2016

It took the market a few days to overcome the shockingly poor non-manufacturing ISM (51.4 vs. 55.5). However, by the end of the week, the US dollar bulls had regained the upper end.  The September Fed funds was implying a yield of 41.75 bp, up a quarter of a basis point from the September 2 close.

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India, North Korea and Mexico Dominated the EM Headlines

Date: 12 September 2016

In the EM equity space as measured by MSCI, Colombia (+4.1%), Hong Kong (+3.9%), and China (+3.6%) have outperformed this week, while Thailand (-4.4%), Qatar (-3.3%), and the Philippines (-2.7%) have underperformed.  To put this in better context, MSCI EM rose 1.2% this week while MSCI DM fell -0.5%.

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Europe (German Data) Sets a Heavy Tone

Date: 9 September 2016

The US dollar is lower against all the major currencies this week as North American participants close it out.  On the day, the dollar is consolidating swings yesterday and is narrowly mixed.  Bond yields are higher and equities are mostly lower. 

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ECB Rate Policy Unchanged, but Growth Forecast is Shaved

Date: 8 September 2016

The shaving of 2017 and 2018 growth forecasts, recognition of continued downside risks did not prompt the ECB to adjust monetary policy.  Rates were left unchanged, as widely expected.  The ECB also refrained from extending the asset purchases.  This is somewhat disappointing.  It was the only action that investors were discussing as a possibility.  Bond yields appear to be backing up in response.

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Are Quality Jobs being Created?

Date: 7 September 2016

The pessimists have claimed that the US is generating low paying jobs. Nearly every monthly jobs report is followed by what seems to be a canned retort.  The media picks up on the story and continues to regenerate it.  Earlier in the recovery, the argument made sense.  It makes less sense now.

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Investor Response to Rate Change Prospects has been Uneven

Date: 7 September 2016

Disappointing industrial output figures from Germany and UK are helping stabilize the US dollar after yesterday's shellacking.  Investors have been fickle about the prospects for a rate hike this month, and the unexpected dramatic slide in the service spurred a downgrading of such expectations, and a flight out of the dollar.  It was not simply a quest for yields, though that was part of it.  Surely, the yen and euro's strength is not a function of superior yields than the US.

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Service ISM Hits a Six-Year Low, and the Dollar

Date: 6 September 2016

The US dollar was already trading with a heavier bias before the shockingly poor service ISM.  The August non-manufacturing ISM tumbled to 51.4, a six-year low, from 55.5 in July.  Markit, which does its own survey, showed a smaller decline in its August read to 51.0 from 51.4 in July.  This was up slightly from the preliminary 50.9 estimate.

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Another Round of Central Bank Meetings begins Down Under

Date: 6 September 2016

The US dollar is trading heavily against most of the major and emerging market currencies. However, the losses are modest, and the greenback remains within recent ranges.  The Antipodean and Scandi bloc currencies are performing best.

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Meanwhile, the Rest of the World Markets had a Work Day

Date: 6 September 2016

Several developments took place while US markets were closed for its Labor Day holiday.  Most of the economic news was favorable.  This included a strong snap back in the UK service PMI,  more evidence that the moral suasion campaign to lift wages in Japan is yielding some success and a rise in the Caixin's  China's service PMI.

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ECB Grabs Central Bank Watchers' Attention

Date: 5 September 2016

The last two weeks have been about the US.  First, it was Jackson Hole. The leadership of the Federal Reserve, Yellen, Dudley and Fischer sang from the same songbook. They all signaled that the time was approaching to take another step in the normalization of monetary policy, without specifying precisely when.

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