Marc Chandler

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Marc Chandler
About the author:

Head of Global Currency Strategy at Brown Brothers Harriman.

In a Bank Bail-In/Bail-Out, Who Loses First?

Date: 11 July 2016

After the 2007-2008 bank recapitalization by governments, which means taxpayers' money, Europe changed the rules.  The new rules require that private investors be "bailed in" before the bank is "bailed out." 

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Major Currencies still Losing to the Dollar

Date: 11 July 2016

The combination of the rebounding US job growth and gains in the S&P 500 to near record levels before the weekend is helping boost the US dollar against the major currencies, while the emerging market currencies are mixed.  In addition, indications that Japan will put together another fiscal stimulus package and the Bank of England may cut rates late this week are helping global equities.

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Emerging Markets now Between US Jobs Data and the FOMC Meeting

Date: 11 July 2016

EM and other risk assets rallied on Friday after the strong US jobs data.  It appears that markets are pricing in a benign backdrop for risk near-term; that is, the US economy is recovering but not by enough to warrant an imminent Fed rate hike.  The July 27 meeting seems unlikely, and so the next likely window would be September 21.  Yet EM typically weakens in the run-up to FOMC meetings and so investors should be very careful about taking on too much risk.

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Investment Choices continue to Narrow

Date: 11 July 2016

Investors are under siege.  A growing proportion of bonds in Europe and Japan offer negative yields.  The German and Japanese curves are negative out 15-years, while one cannot find a positive yield among any tenor of Swiss government bonds.  Despite a string of robust data, US Treasury coupon yields are at record lows.

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CFTC: Currency Speculators still on the Dollar Sidelines

Date: 11 July 2016

The UK voted to leave the EU. The German and Japanese yield curve is negative out through 15 years.  The entire Swiss curve has negative yields.  There is little doubt that the US economy was recovering from a soft six-month stretch even before the recent string of data.  Even then, speculators in the futures market mostly added to foreign currency exposures.

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The Strong Dollar Surprises No One

Date: 11 July 2016

The US dollar had a good week.  It was helped by the strongest service ISM this year, with strong gains in forward-looking new orders component and an increase in export orders. Non-farm payrolls snapped back from a downwardly revised 11k jobs (-6k private sector) to 287k (265k private sector).

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Jobs Report Unlikely to Sway the Fed

Date: 8 July 2016

There is something for everyone in today's US jobs report, and at the end of the day, it is unlikely to sway opinion about the direction and timing of the next Fed move.  The greenback itself may remain range bound after the initial flurry.  On the other hand, the disappointing but noisy Canadian data underscores the risk of a more dovish slant to the central bank's neutral stance next week.

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The Markets, and Jobseekers, would Appreciate Better Jobs Data

Date: 8 July 2016

The US employment data tends to be among the most important economic reports during the monthly cycle.  It often injects volatility into the market.  The report itself tends to be volatile and subject to revisions.  Economists have little input on which to base their forecasts.

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Is the Yuan Really Weak?

Date: 7 July 2016

Here are two Great Graphics that portray two time series: the dollar-yuan exchange rate and the yuan against a trade-weighted basket.  The first chart comes from a highly reputable consulting firm. It replicates the trade-weighted basket that Chinese officials unveiled and shows how it would have performed in the past.

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Payroll Data Precedes Jobs Data in the U.S.

Date: 7 July 2016

The US ADP private sector employment estimate is the main US economic report today ahead of tomorrow's BLS report.  The Bloomberg median call is for 160k after ADP reported 173k gain for May.  There was nothing in the ADP report that prepared investors for the lowly 38k non-farm payroll print.   The employment component of the service sector ISM jumped to 52.7 from 49.7. 

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Making Creditors Whole is not Fixing a Country's Economic Crisis

Date: 6 July 2016

The conventional narrative has it backward.  It worries about the threats to stability emanating from the periphery in Europe.  Policymakers, investors, and economists still refer to the "Greek, Irish, Portugal and Cyprus' bailouts.  The biggest threats do not come from the periphery but the core.  The peripheral countries were not bailed out, the official and many private sector creditors were made whole.

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Low Bond Yields Highlight Lingering Investor Anxiety

Date: 6 July 2016

What a difference a few days make.  Many saw last week's equity market advance a sign that Brexit anxiety was overdone.  However, quarter-end position adjustments appear to have been misread.  Equity markets are falling now. Bond yields in the US, Japan, and Germany, are at new record lows.  Japan's 20-year bond yield briefly dipped below zero for the first time.

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From Political Disarray Comes the BOE's Carney as the Voice of Reason

Date: 5 July 2016

Sterling is continuing to move lower.  It has tested the $1.3050 area in the North American morning, having been under pressure through the Asian session and the European morning.  That the UK economy is slowing down, materially, as BOE Governor Carney said, is not really new news. Nor is the fact that the BOE reversed its previous decision to force banks to boost their capital buffers.  This was anticipated last week.

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Pound Pounded as BOE Action Portends Easing and UK PMI Comes in Weak

Date: 5 July 2016

The British pound has been hammered to fresh lows just above $1.3115.  The euro is moving toward GBP0.8500.  The immediate catalyst is three-fold.  First, one of the UK's largest property funds has moved to prevent retail liquidation. Second, the BOE reversed an earlier decision on the capital buffer for banks, which is tantamount to easing policy by boosting the banks' lending capability by as much as GBP150 bln.  Third, UK services PMI was weaker than expected.

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Tuesday Morning Quarterback

Date: 5 July 2016

Monday, while Americans were celebrating the original Brexit, the US dollar drifted lower.  The Australian dollar fully recovered from electoral uncertainty drop to finish about 0.5% higher.  Asian and emerging market equities rallied, but Europe faltered.  The MSCI Asia-Pacific Index gained 0.8% to extend the advancing streak to a fourth session.  MSCI Emerging Market equity index extended its streak to five sessions by rising 0.5%. 

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Emerging Markets Stage Nice Recovery

Date: 4 July 2016

EM and risk recovered nicely from the Brexit turmoil last week.  Yet we think markets are being too carried away with the "low rates forever" theme and are likely underestimating the capability of the Fed to tighten before 2018.  This Friday, the June jobs data could spark a shift in sentiment with a strong reading.  Consensus is currently 175k jobs created, up from 38k in May.

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That was Quick...UK already Losing Influence

Date: 4 July 2016

There have been two developments that are shaping investment climate.  The first was the dramatic rally in equity markets last week, with many recovering nearly all that was lost on the Brexit wobble.  The second was clear indications that the UK will not begin the formal divorce proceedings in the coming months.

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Indonesia, Czech Republic, and Brazil Lead the EM Headlines

Date: 1 July 2016

Indonesia’s parliament approved a tax amnesty bill, Korea announced KRW20 trln ($17 bln) in fiscal stimulus, Czech President Zeman said a referendum on EU and NATO membership should be held, Russia ended its tourism ban to Turkey, Brazil’s central bank is sending hawkish signals, Banxico hiked rates by a larger than expected 50 bp to 4.25%

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