"Broad-based dollar strength to continue, subject to positioning adjustments.
We expect the dollar to continue outperforming within G10 heading into year-end. Policy differentials will consolidate in the dollar's favour and the latest round of data suggest that the balance of risks has shifted towards the Fed becoming more assertive. On top of the strong September payrolls report, our economists note that September ISM figures appeared 'consistent with 5% real GDP growth and 300k'…
Added by Daologic on October 7, 2014 at 5:33am — No Comments
"The dollar is trading soft into the summer against higher yielding currencies as investors expect the Federal Reserve will continue to keep interest rates unchanged far into 2015. US yields at 2.53% for ten year paper remain well below the 3.00% levels seen at the start of 2014.(...)
Counting Petrodollars, Seeking Risk - and near record low levels of currency market volatility are encouraging investors to use the dollar as a funding currency for carry trades. But the softness in the…Continue
Added by Daologic on June 30, 2014 at 5:39am — No Comments
"The European Central Bank's decision to adopt negative interest rates, undertake new Targeted Longer-Term Refinancing Operation loans and increase liquidity is set to cap the euro in its current 1.35-1.40 range against the dollar. In order for the single currency to make further losses in the near term, the Federal Reserve will need to keep tapering its asset purchases and signal its willingness to start raising interest rates in 2015.
But while the ECB's actions this month may not be…
Added by Daologic on June 9, 2014 at 6:39am — No Comments
UBS - "The European Central Bank will be the focus in the week ahead, eclipsing the Bank of England, Reserve Bank of Australia and Bank of Canada policy decisions and America's ISM and payrolls releases. The risk of the ECB pursuing negative interest rates or expanding its balance sheet is set to keep the euro trading heavily into the Governing Council meeting. But the franc may incur more volatility in June if the Swiss National Bank matches any ECB decision to cut deposit rates below zero.…Continue
Added by Francesc Riverola on June 2, 2014 at 9:30am — No Comments
UBS - "In the week ahead, US April core PCE inflation will show whether the Federal Reserve needs to consider earlier tightening. In contrast, Japan's national CPI release will test the Bank of Japan's resolve to keep its current pace of quantitative easing unchanged and Eurozone M3 money supply is likely to show credit growth remaining too subdued to revive inflation quickly in the Eurozone. The dollar is set to keep gaining as the Federal Reserve tapers its balance sheet expansion while…Continue
"The euro is falling ahead of the European Central Bank's next meeting. More easing will weaken the single currency. But the euro's underlying direction has already turned down as changes in the Federal Reserve's balance sheet relative to the ECB's favour the dollar now.
The rise in the euro from 1.20 against the greenback in 2012 to almost 1.40 earlier this year has been driven by the Fed's balance sheet expanding through quantitative easing while the ECB's balance sheet has…
Added by Daologic on May 23, 2014 at 4:59am — No Comments
UBS - "Financial markets are giving out inconsistent signals. A firmer yen, stronger Treasuries and bunds, weaker Eurozone peripheral bonds and lower stocks point to increased risk aversion. But the Swiss franc is weakening while commodity currencies are stable. The major currencies are more likely still to be driven by shifts in monetary policy. The Federal Reserve is set to keep tapering, helping the dollar recover from this year's lows. The likelihood of European Central Bank easing next…Continue
Added by Francesc Riverola on May 19, 2014 at 10:08am — No Comments
Exchange rate a factor, but BoE only vigilant on 'persistence'
On balance, the result of the QIR was probably better for sterling longs rather than rate shorts. Although there was an explicit acknowledgement that currency strength was exerting downward pressure on inflation, Carney said the BoE was willing to 'look through' this development for now, and revisit if strength became 'persistent'. In contrast, there was much greater caution on the prospect of a higher base…
Added by Daologic on May 15, 2014 at 5:20am — No Comments
UBS - "The dollar continues to trade at weak levels against the euro, pound and Swiss franc as the Federal Reserve is still printing money and buying bonds. In the week ahead the Federal Open Market Committee is likely to taper its asset purchases by another $10bn to $45bn a month. We expect the greenback to rise across the board as the end of quantitative easing comes into sight by the autumn. But this month's FOMC decision may only provide marginal support to the dollar as the Fed will…Continue
Added by Francesc Riverola on April 28, 2014 at 9:19am — No Comments
UBS - "In the week ahead, Fed Chair Yellen makes two public appearances while US retail sales, CPI inflation, industrial production and the New York and Philadelphia Fed manufacturing surveys are released. The greenback has been held back in Q1'14 by weather-affected data. But the US economy is likely to record stronger prints in Q2'14 as the latest weekly jobless claims numbers show. That will increase the risk of the dollar recovering from its current weak levels. This week's key points…Continue
Added by Francesc Riverola on April 14, 2014 at 10:58am — No Comments
"The pain trade in the currency markets is the renewed weakness of the dollar against the euro, yen, Swiss franc and Australian dollar. Despite US jobless claims falling to its lowest levels since 2007, the greenback has been sold since March's Federal Open Market Committee minutes were published. In the very near term dollar longs may still be cut. But the market's position adjustment is also painful for policymakers outside the US seeking weaker domestic currencies against the greenback.…Continue
Added by Daologic on April 14, 2014 at 5:30am — No Comments
UBS - "The foreign exchange markets reacted to America's March employment report by favouring higher-yielding emerging markets and commodity currencies. But US data is unlikely to remain 'not too hot' to spur fears of Federal Reserve tightening and 'not too cold' to raise concerns about the recovery. Instead Friday's payrolls report clearly showed America's economy emerging from the winter slowdown. The Fed is thus on track to finish tapering its bond purchases by the autumn, raising the…Continue
Added by Francesc Riverola on April 8, 2014 at 10:37am — No Comments
"EURUSD: The pair itself was net sold, but flows through the euro overall
were finely balanced. Hedge fund sellers ran into corporates on the bid.
USDJPY, EURJPY: The yen was net sold in aggregate, but USDJPY flows were
USDCHF, EURCHF: The Swiss franc was net bought, both through EURCHF and
USDCHF. Turnover was only 82% of normal though, and hedge fund…
Added by Daologic on April 1, 2014 at 5:29am — No Comments
UBS - "The dollar has reached a major turning point against the euro. For the first time in eighteen months, relative central bank balance sheet growth is favouring the greenback as the Federal Reserve tapers its asset purchases. At the same time the European Central Bank's balance sheet contraction is also slowing as commercial banks cut their repayments of Longer-Term Refinancing Operation loans. Since the 2008 financial crisis such shifts have led to major turning points in the currency…Continue
Added by Francesc Riverola on March 31, 2014 at 8:49am — No Comments
1. Strong payrolls would spark sharp dollar rally
In our view the dollar has reached a major turning point against the
euro. Since the summer of 2012 the single currency has traded from 1.20
to almost 1.40 as the Federal Reserve's third round of quantitative
easing led to its balance sheet expanding while at the same time the
ECB's contracted through banks repaying Longer-Term Refinancing
Operation loans. But the Fed's balance sheet expansion is now…
Added by Daologic on March 31, 2014 at 6:39am — No Comments
CHF: KOF Leading Indicator (Mar 31, 07:00GMT)
The monthly KOF leading indicator is likely to remain unchanged in March at its
previous level of 2.03, pointing to firm expectations for the Swiss economy.
EUR: March CPI (Mar 31, 09:00GMT)
We expect March inflation to show further deceleration, to 0.50% (y/y) from 0.7%
(y/y) in February. But this decline is due to a statistical…
Added by Daologic on March 29, 2014 at 6:17am — No Comments
UBS - "The Federal Reserve is only likely to start raising interest rates next year. But this month's Open Market Committee meeting has primed the dollar for a major rally over the next few months. Policymakers agreed to taper monthly bond purchases by another $10bn. In addition, the Fed's forward guidance linking future interest rate hikes to a 6.5% unemployment rate was dropped. But the FOMC also surprised by retaining its bullish economic forecasts despite the winter slowdown in America,…Continue
Added by Francesc Riverola on March 24, 2014 at 2:42pm — No Comments
"1. Strong US data now will lead to sharp dollar rallies
The dollar is primed for a major rally following this month's Federal Open Market Committee meeting. The FOMC met expectations by cutting the Fed's pace of asset purchases by another $10bn to $55bn a month. But policymakers surprised on several other counts.
First, the FOMC dropped its forward guidance linking future interest rate hikes to specific levels of unemployment. The guidance had become increasingly irrelevant as…Continue
Added by Daologic on March 24, 2014 at 8:00am — No Comments
BRL: Current account / Long Term Rate TJLP / 1Q Inflation report / Feb budget (Mar
24 / 25 / 27)
The c/a deficit is expected to narrow along with FDI. Feb public sector budget results
should begin reflecting announced cuts; if not market will be disappointed. 1Q
Inflation Report will be important guide for future policy direction and forecast
revisions. No change expected in long term lending rate.
ILS: Policy rate decision…
Added by Daologic on March 24, 2014 at 6:21am — No Comments
EUR: PMI Indicators (Mar 24, 08:30/09:00GMT)
Consensus expects German manufacturing PMI to fall to 54.5 (from 54.8) and for
the Eurozone figure to drop to 53.0 (from 53.2). The German services index is
expected to decline to 55.5 (from 55.9) while the Eurozone services index is
expected at 52.5 (from 52.6).
EUR: German IFO/ CPI (Mar 25/28, 09:00/13:00GMT)
The survey on business climate and current assessment is likely to…
Added by Daologic on March 24, 2014 at 6:14am — No Comments