Marc Chandler

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Marc Chandler
About the author:

Head of Global Currency Strategy at Brown Brothers Harriman.

At Least the U.S. Created Jobs...Canada, not So Much

Date: 5 August 2016

The market's angst over the underlying trend in the US labor market eases with the help of the second consecutive robust report.  The 255k rise in non-farm payrolls was well above expectations, and the details were mostly favorable. There were upward revisions to the May and June reports.

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The BOE Makes a Widely Anticipated Cut, and can Cut Again

Date: 5 August 2016

Sterling has slumped two cents in the wake of the Bank of England's announcement.  It cut the base rate 25 bp and announced a resumption of its asset purchase program.  It will buy GBP60 bln of Gilts and added corporate bonds to its purchase plan, which will be completed over the next six months.

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The U.S. Jobs Backstory

Date: 5 August 2016

The focus is squarely on the US employment data today, ahead of which the capital markets are mostly consolidating yesterday's Bank of England inspired moved. The Australian and New Zealand dollars, alongside sterling, which is up about half a cent after losing two yesterday.

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Today is the BOE's Day to Surprise or Disappoint

Date: 4 August 2016

The Bank of England owns today, though tomorrow will be about the US jobs report. The BOE disappointed the market last month by not immediately responding to the UK referendum.  It had laid out a somber economic and financial scenario as a risk case if the UK chose to leave the EU. At the time, and even after the referendum, some accused Carney of being too partisan.

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Excess Industrial Capacity was not Part of China's Plan

Date: 3 August 2016

Americans have a saying about an 800-pound gorilla in a room.  It refers to a person or organization so powerful that it can act unilaterally.  The British have an expression about an elephant in a room.  It refers to a "fact" or problem that is not being addressed.

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PMIs Make News and the Dollar takes a Break

Date: 3 August 2016

The US dollar is consolidating yesterday's losses.  The greenback's upticks have thus far been shallow and unimpressive, except perhaps against the New Zealand dollar, which is off 0.8% ahead of next week's RBNZ meeting.  Softer than expected labor cost increase reinforces the conviction that a 25 bp rate cut will be delivered next week.

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Durable Goods Prices are Falling

Date: 2 August 2016

This Great Graphic is deceptively simple.  It is chart from the Bureau of Economic Analysis based on the price indices from components of personal consumption expenditure.

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Abe Delivers Unimpressive, but Needed, Fiscal Policy

Date: 2 August 2016

The Japanese government is delivering the other half of its fiscal policy today.  Earlier, Abe decided to postpone the sales tax hike for the second time.  Today, the cabinet approved a JPY28 trillion (5.6%) of GDP package. 

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For a Clearer Picture, Use the Real Trade-Weighed Dollar

Date: 2 August 2016

This Great Graphic, created on Bloomberg, depicts the Federal Reserve's real broad trade-weighted index of the dollar.  Real means that it is adjusted for inflation differentials.  Broad means that it covers a wide number of US partners.  Trade-weighted means that the countries that the US has more trade with are given greater role in the index.

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Currencies React to the RBA Rate Cut

Date: 2 August 2016

The negativity toward the US dollar is offsetting the rate cut in Australia and further evidence that the UK domestic economy is taking a hit in the immediate post-referendum period.  The rate cut by the RBA was widely anticipated.  The cash rate now stands at 1.5%.  There was no forward guidance and the monetary policy statement at the end of the week is now looked upon for fresh insight.

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Could More Underwhelming News be on the Way?

Date: 1 August 2016

The US dollar is trading with a small upside bias in narrow trading ranges.  The main news has consisted of PMI reports, while investors continue to digest last week's developments.  In particular, the BOJ's underwhelming response to poor economic data and a missed opportunity to reinforce the fiscal stimulus, and the dismal US GDP.

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What's Up for the Emerging Markets?

Date: 1 August 2016

EM ended last week on a firm note, helped by the weaker than expected US Q2 GDP report as well as the small bounce in oil.  With the RBA and BOE expected to ease this week, the global liquidity backdrop remains favorable for EM and “risk.”  US jobs report Friday will be very important for EM going forward.

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The Importance of Being August

Date: 1 August 2016

Four events this week will command the attention of global investors.  1. The Reserve of Bank of Australia is first.  It is a close call, though the median in the Bloomberg survey favors a cut, including most of the banks in Australia that participate in the poll.  2. Investors are more confident of the outcome of the Bank of England's meeting than the RBA meeting.  3. Japan's Prime Minister Abe seemingly hurriedly confirmed some details of his fiscal plan.  4. The US July employment report caps the week.

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CFTC: The Euro Bears Make a Move, but That's about It

Date: 1 August 2016

There does not seem to be a large pattern in the speculative position adjustments in the CFTC reporting week ending July 26.  There was only one significant position adjustment (10k of more contracts).  The euro bears added another 10.3k contracts to their gross short position, which brought it to 221.8k contracts.

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GDP News Puts the Brakes on Dollar Advance

Date: 1 August 2016

The US dollar advance was stopped in its tracks by the disappointingly weak Q2 GDP figures.  The 1.2% annualized growth rate was roughly half of the pace expected.  The FOMC statement earlier in the week did not leave the impression that a September hike was likely, and with the poor growth numbers, the odds were downgraded further.

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Indonesia Leads EM Headlines with a Cabinet Reshuffle

Date: 29 July 2016

Indonesian President Widodo shuffled his cabinet.  The most important change is Sri Mulyani Indrawati coming back as Finance Minister.  She is very well-respected by the markets, and held the same Finance post from 2005-2010.  Widodo also appointed two retired generals to important posts.  Former Defense Minister Wiranto will become Coordinating Minister for Politics, replacing Luhut Panjaitan, who becomes Minister for Maritime Affairs.

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The BOJ's Kuroda Opts for Low Hanging Fruit

Date: 29 July 2016

Bank of Japan Governor Kuroda appears to be the central banker that the markets have the most difficulty in reading.  The activist Governor provides the barest of tweaks to what is by nearly any reckoning among the most aggressive monetary policies by a high-income economy.  Moreover, much of the important data reported during the BOJ's meeting, including inflation and consumption were weaker than expected.

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A Wild Ride into the Weekend

Date: 28 July 2016

Tomorrow could be among the most challenging sessions of the third quarter.  The focus is primarily on Japan and Europe, but the US reports its first estimate of Q2 GDP.  After a six-month soft patch that heightened fears in some quarters that the world's largest economy was headed for a recession, the US economy appears to have returned to trend growth.  It enjoyed good momentum as the quarter wound down, and currently, Q3 GDP is also projected to be above trend.

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Looking Further Out for Fed Action Clues

Date: 28 July 2016

After reversing lower yesterday after the FOMC statement, the US dollar has continued to move lower against the major currencies, save sterling.  While the market is not fully confident of a rate cut by the Reserve Bank of Australia, indicative pricing in the derivative markets suggest a UK rate cut has been fully discounted (and a new asset purchase plan may be announced).

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