Marc Chandler

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Marc Chandler
About the author:

Head of Global Currency Strategy at Brown Brothers Harriman.

Post-referendum Fear of Contagion Lessens

Date: 20 July 2016

It is a bizarre turn of events.  Just as the Game of Throne's Westeros is a map of the UK put on top of an inverted Ireland, so too do UK events seem to be a strange permutation of the pre-referendum views.  Although sterling and interest rates have not fully recovered from the Brexit decision, equity markets have, and fear of contagion has died down.

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Divergence between the U.S. and other Economies Keeps Dollar Bull Case Alive

Date: 19 July 2016

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 as quantitative easing, were adopted years before the ECB and BOJ.  This has produced different outcomes.  US economic growth may not be impressive by pre-crisis standards, but it does not seem particularly fragile.

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Italian PM Renzi's Banking Challenge

Date: 19 July 2016

The European Court of Justice upheld the principle of making creditors bear the burden for investment in banks that sour before government funds could be used.  Italian banks are particularly sensitive to the ruling, which cannot be appealed because the European Banking Authority and European Central Bank stress tests on July 29 are expected to show that some Italian banks are under-capitalized.

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Top 5 Tuesday

Date: 19 July 2016

The US dollar is sporting a firmer profile today, but it is not the driver.  Heightened speculation that Australia and New Zealand may cut interest rates next month is pushing those respective currencies more than 1% lower today.  The Canadian dollar is being dragged lower (~).5%0 in what looks to be primarily sympathy, but it had seemed vulnerable to us in any event.

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I See Your (Article) 7 and Raise You 50

Date: 18 July 2016

Due to an unlikely string of events, the UK had sorted out its government more than two months quicker than it had looked likely in the immediate aftermath of the referendum when Cameron resigned.

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How Turkey Looks Post-Coup

Date: 18 July 2016

After last Friday’s failed coup attempt in Turkey, a measure of calm has returned to global markets.  We did not think Turkish developments have wide-reaching implications for EM assets, but we do remain very negative on Turkish assets in the wake of the coup and ongoing political uncertainty.

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Emerging Markets Hit by Turkey, Recover, but Defensive Posture Warranted

Date: 18 July 2016

EM ended last week on a soft note, due in large part to the attempted coup in Turkey.  Weakness in the lira spilled over into wider EM weakness in thin Friday afternoon market conditions.  The situation in Turkey has calmed, and so EM may gain some limited traction this week.  However, that calm will likely be very fragile and so we retain a defensive posture concerning EM.

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Turkish Coup Over, Risk Assets Rise

Date: 18 July 2016

The US dollar and the yen are trading heavy, while risk assets, including emerging markets, and the Turkish lira, have jumped.  Sterling is the strongest of the majors.  It is up about 0.5% (~$1.6365), helped by the opportunity of GBP23.4 bln foreign direct investment and comments from a hawkish member of the MPC suggesting not everyone is onboard necessarily for a rate cut next month.

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The Markets' Eyes Turn Towards the EMU

Date: 18 July 2016

Four large dramas being played out among the major high income countries. The drama in the Eurozone moves center stage in the days ahead, with an important European Court of Justice ruling due and the ECB meeting.

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CFTC: From the Long to the Short of It

Date: 18 July 2016

The combination of a robust US jobs report, speculation of bolder action by Japan, the possibility that the ECB drops the capital key to overcome the ostensible shortage of some core bonds (e.g. German bunds), and the anticipation of easier BOE policy appears to have generated a change in sentiment among speculators in the currency futures market.

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Other Currencies Matter

Date: 18 July 2016

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 driven by the dollar, as it is other currencies.

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Investors Anticipate Fiscal and Monetary Stimulus from Japan

Date: 15 July 2016

The US dollar is broadly mixed against the major currencies.  The Swiss franc's 0.25% gain puts it at the top of the board, after sterling's earlier gains were largely unwound in late-morning turnover.  The yen is the weakest major, extending its loss by 0.6%, to bring the weekly decline to more than 5%.  The pre-referendum result high for the dollar was near JPY106.85.  Today's high has been about JPY106.30. In emerging markets, we note that the Taiwanese dollar is at 11-month highs, helped by $3 bln portfolio capital inflow this week.

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When is a Bottom a Bottom?

Date: 14 July 2016

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.

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Post-BOE Meeting

Date: 14 July 2016

The Bank of England surprised many, if not most, participants by not changing policy.  There was no rate cut and no asset purchase plan.

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Pre-BOE Meeting

Date: 14 July 2016

After a nearly three weeks of turmoil following the UK referendum, there is now a sense of order returning to UK politics.  Two elements of the new government are particularly relevant.  First, May demonstrates strategic prowess by putting those like Johnson and Davis, who campaigned for Brexit, to lead the negotiations with the EU, while putting Tories who favored remaining in the EU in the internal ministries.

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Keep Spain on Your Radar

Date: 13 July 2016

With Brexit, the pressure on Italian banks, and the surge and then sell-off in the yen, Spain may have been pushed off some investors' radar screens.  There are three important developments to note.

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May Moves Into No. 10 but Uncertainty Remains

Date: 13 July 2016

The two main developments in the foreign exchange market this week in recent days has been the opposite of what has transpired over the past several weeks.  Sterling moved higher quickly.  The yen moved down just as fast.  Over the past five sessions through late-morning levels, sterling has gained 2.5% while the yen has shed 2.8%.

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UK Politics Settling Down while the BOE Sticks to its Plan

Date: 12 July 2016

Sterling is leading the new appetite for risk as one element of political uncertainty has been lifted.  It is moving higher for the third consecutive session today; advancing by more than 1.5 cents to reach $1.3180. It staged an impressive recovery yesterday after trading down to $1.2850, nearly a retest on last week's 30-year+ low just below $1.28.  Recall last week's high was set near $1.3340.

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