10/04/2009 – Dollar stays weak, but holds key levels
* Dollar stays weak, but holds key levels
* US retail sales and consumer prices in the crosshairs
* UK CPI may upset cable
* Bank of England and ECB previews
* Eurozone sentiment and EUR strength
* Key data and events to watch next week
The short answer to that is a definitive, unequivocal ‘maybe.’ The first day of October saw risk assets take a beating for apparently no good reason. True, weekly US jobless claims rose and the ISM manufacturing index disappointed, but we knew from the Chicago PMI that ISM was likely to be weaker, and the jobless claims was not a major jump. Complicating matters further, we had month/quarter-end to contend with the day before and Sept. NFP the day after Oct. 1. Overall, though, we are left with the impression that October has begun on an inauspicious note for risk appetites and risky assets, such as stocks and commodities. If so, we could see further USD strength and potentially signal a multi-week USD low was seen a few weeks ago. Full text »
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10/11/2009 – Dollar stays weak, but holds key levels
* Dollar stays weak, but holds key levels
* US retail sales and consumer prices in the crosshairs
* UK CPI may upset cable
* Eurozone sentiment and EUR strength
The financial media was all atwitter over USD weakness this past week, but the buck managed to hang on despite reports of its imminent demise. The greenback got off to a weak start after a less than supportive G7 statement retained the same language on FX as the April communiqué, rather than a more strongly worded vote of confidence. The dollar then took a beating on the back of a report by a prominent UK journalist that secret meetings between mid-East oil producers and Russia, Japan, and France, among others, were held to discuss pricing oil in a basket of currencies, including gold, and not in US dollars. Those reports were later denied by most of the countries mentioned, but the dollar continued to slide, while gold prices surged higher to new all time highs of around 1061/62. USD sentiment remains undeniably bearish, excessively so in our view, but it’s important to note that the USD tested key support levels (EUR/USD key highs at 1.4850/70; USD/JPY 88.00; and US dollar index at 75.80/90) and ultimately held. Full text »
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10/04/2009 – Has the risk rally finally turned?
* Has the risk rally finally turned?
* Weekend event risk–G7 meeting/Irish EU vote-update coming
* EU Referendum could see significant EUR/USD volatility
* Bank of England and ECB previews
* US continues to be plagued by job losses
* Key data and events to watch next week
The short answer to that is a definitive, unequivocal ‘maybe.’ The first day of October saw risk assets take a beating for apparently no good reason. True, weekly US jobless claims rose and the ISM manufacturing index disappointed, but we knew from the Chicago PMI that ISM was likely to be weaker, and the jobless claims was not a major jump. Complicating matters further, we had month/quarter-end to contend with the day before and Sept. NFP the day after Oct. 1. Overall, though, we are left with the impression that October has begun on an inauspicious note for risk appetites and risky assets, such as stocks and commodities. If so, we could see further USD strength and potentially signal a multi-week USD low was seen a few weeks ago. Full text »
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09/20/2009 – Increasing signs the risk rally is stalling
* Increasing signs the risk rally is stalling
* Mixed signals from Japan’s MOF
* Still a troubling trend in US economic data
* GBP gets thumped by the BOE
* Key data and events to watch next week
The greenback remains under pressure as the global risk rally continues. Concerns over the US fiscal deficit, the status of the US dollar as the primary global reserve currency, and near zero US interest rates all provide background noise to encourage USD selling, but the real source of USD weakness is the ongoing improvement in risk appetites globally. While we strongly believe that current risk asset market gains are overdone and ripe for a correction, solid indications of a pullback are tenuous at the moment. However, we would note that the ratio of the S&P 500 to its 200-day moving average is at historic extremes last seen in May of 1983, which was followed by a 2.5% decline in the following week. Full text »
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09/27/2009 – Increasing signs the risk rally is stalling
Increasing signs the risk rally is stalling
Mixed signals from Japan’s MOF
Still a troubling trend in US economic data
GBP gets thumped by the BOE
Key data and events to watch next week
Following last week’s preliminary signals that risk assets may be stalling, this past week saw stock markets lose ground, key commodities reverse gains, and the USD bounce after testing key support levels. To be sure volatility remained high during the week, with new risk highs being made, but weekly closing indications increasingly suggest a peak in key risk markets has been seen. There were a number of data disappointments (see below) that worked to soften risk appetites, but attempts to extend the rally ultimately failed out of exhaustion. This was most evident following the FOMC’s largely as expected statement, which noted that economic activity ‘picked up’ and that the Fed would maintain extremely low rate levels for an extended period. Those comments should have and did lead to a rally in risky assets, but, importantly, those gains could not be sustained and most finished down on the day. Full text »
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09/13/2009 – Irrationality dominates and the USD suffers
* Irrationality dominates and the USD suffers
* US bond market not flashing risk taking
* Gold push higher has no legs
Headlines dominated the week and the news was deemed decidedly US dollar negative. Calls from the UN for a new global currency to replace the dollar dovetailed with musings from a top member of the Chinese hierarchy that the country is alarmed by US money printing. If that wasn’t enough, President Obama asked the Senate to raise the federal debt limit to .1 trillion by mid-October – raising more deficit concerns – and the World Economic Forum’s global competitiveness report showed Switzerland knocking the US from the position of world’s most competitive economy. In broad terms and as we write, the US dollar has given up -1.8% on the week. Full text »
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09/20/2009 – USD to remain under pressure until it’s not
* USD to remain under pressure until it’s not
* G20 meeting outlook for FX
* Fed meeting and Treasury auctions loom large for the buck
* Cable gets hammered on bank woes and BOE reflections
* Key data and events to watch next week
The greenback remains under pressure as the global risk rally continues. Concerns over the US fiscal deficit, the status of the US dollar as the primary global reserve currency, and near zero US interest rates all provide background noise to encourage USD selling, but the real source of USD weakness is the ongoing improvement in risk appetites globally. While we strongly believe that current risk asset market gains are overdone and ripe for a correction, solid indications of a pullback are tenuous at the moment. However, we would note that the ratio of the S&P 500 to its 200-day moving average is at historic extremes last seen in May of 1983, which was followed by a 2.5% decline in the following week. Full text »
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09/13/2009 – The USD bounces back from the brink
* Irrationality dominates and the USD suffers
* US bond market not flashing risk taking
* Gold push higher has no legs
Headlines dominated the week and the news was deemed decidedly US dollar negative. Calls from the UN for a new global currency to replace the dollar dovetailed with musings from a top member of the Chinese hierarchy that the country is alarmed by US money printing. If that wasn’t enough, President Obama asked the Senate to raise the federal debt limit to .1 trillion by mid-October – raising more deficit concerns – and the World Economic Forum’s global competitiveness report showed Switzerland knocking the US from the position of world’s most competitive economy. In broad terms and as we write, the US dollar has given up -1.8% on the week. Full text »
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09/06/2009 – The USD bounces back from the brink
* Still looking for risk aversion to dominate
* Long-term CAD fundamentals positive
* G-20 likely to see more talk than action
* Bank of England set to stay cautious
* German export data should show signs of improvement
We look for the inter-market correlations that have prevailed throughout 2009 but broke down into the latter part of the summer to resume. We’ve seen some of this in the first week of September, with higher EUR correlating with higher stocks and commodity currencies. The market seems to be in the process of putting in a short-term top as better than expected economic data of late have failed to elicit any material extension in equities. The more than 50% rally off the lows in the S&P is unsustainable in our view and we would expect a China-like correction in US stocks in the weeks ahead. Full text »
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08/30/2009 – The USD bounces back from the brink
* A note on end of summer conditions
* Is this as good as it gets?
* Japanese election this weekend
* Details will matter in ECB and RBA rate meetings
* Key data and events to watch next week
Next week sees both month-end and a likely end to summertime trading conditions, both of which have the potential to generate heightened volatility. On Monday, Japanese election results (see below) will start the ball rolling, but liquidity will be hampered midday by the UK Summer Bank holiday which will see most of London absent. NY afternoons will likely remain thin as the US Labor Day holiday on Monday Sept. 7 leads to thinner interest than normal toward the end of the week. At the same time, summer will be ending for many asset managers and an increase in position adjustments may begin from Sept.1. Lastly, Friday will see the August US NFP report, always an important catalyst for volatility. Full text »
