News & Analysis

We provide our clients with proactive, timely analysis and insight into the currency market

Light data calendar ushers in Summer liquidity

Light data calendar ushers in Summer liquidity

This morning, the pound has struggled to make inroads against the dollar, weakening even against the euro. We expect the pound to continue trading on a softer footing this week. Read more

Thin data calendar could limit volatility this week

Thin data calendar could limit volatility this week

This week, the UK data calendar is completely sparse until Friday’s release of preliminary Q2 GDP, after last week's BoE meeting saw the pound fall. Read more

Week Ahead: Inflation takes centre stage following strong jobs growth

Week Ahead: Inflation takes centre stage following strong jobs growth

Next week, the data calendar thins out, but the focus for markets will remain the same as July's CPI report is released from the US. Read more

Payrolls leaves Powell with egg on his face

Payrolls leaves Powell with egg on his face

Today, just over a week since a deceleration in the Fed’s hiking cycle, payrolls data highlighted that labour demand still remains high in the US economy. Read more

Markets brace for slowdown in US employment gains

Markets brace for slowdown in US employment gains

Potentially muting the impact of today’s decision on FX markets is the fact that August’s payrolls report is also due out ahead of September’s Fed meeting. Read more

BoE hikes rates by 50bp while signalling an imminent recession

BoE hikes rates by 50bp while signalling an imminent recession

The Bank of England met market expectations today by hiking rates 50bp to 1.75%, exceeding our base case in doing so. Read more

BoE set to underwhelm irrespective of the rate hike size

BoE set to underwhelm irrespective of the rate hike size

Downside in the pound may be visible again today as the Bank of England takes centre-stage for markets at 12:00 BST. Read more

Dollar rises on diplomatic tensions and hawkish Fed rhetoric

Dollar rises on diplomatic tensions and hawkish Fed rhetoric

This morning, with bond yields fading yesterday’s rally, the dollar is back trading on the defensive, with focus very much still on political developments in South East Asia. Read more

Monex’s August 2022 FX Forecasts

Monex’s August 2022 FX Forecasts

DXY index is likely to stay supported, owing to our expectation that the euro-area’s growth outlook will force another run on parity this month. Read more

Pelosi’s trip to Taiwan sends risk assets south

Pelosi’s trip to Taiwan sends risk assets south

The pound trades roughly lower with other pro-cyclical currencies as the risk backdrop deteriorates slightly due to events in Taiwan. Read more

Further dollar downside is viewed as growth concerns continue to pin policy expectations

Further dollar downside is viewed as growth concerns continue to pin policy expectations

In the monetary policy space, we expect plenty of Fed headlines over the next five trading days as the Fed’s communications blackout ends, although most of the scheduled events for Fed speakers don’t start until tomorrow. Read more

Week Ahead: Growth and inflation tango will keep FX volatility elevated

Week Ahead: Growth and inflation tango will keep FX volatility elevated

In the week commencing August 1st, growth and inflation dynamics will continue to dominate G10 FX markets with the release of multiple PMI reports globally and key rate decisions from Australia, Brazil, and the United Kingdom.  Read more

Dollar drops as markets price lower US growth and rates

Dollar drops as markets price lower US growth and rates

This morning, with risk assets better supported, the pound trades a third of a percentage point higher, in line with the early move in the euro. Read more

Dollar drops as Powell signals slowdown in Fed hiking cycle

Dollar drops as Powell signals slowdown in Fed hiking cycle

With this risk prominent, traders may take profit in the recent GBP rally at current levels unless the broad dollar continues to exhibit substantial downside pressures.  Read more

Powell suggests Fed tightening cycle will drop down a gear, weighing on the dollar

Powell suggests Fed tightening cycle will drop down a gear, weighing on the dollar

Today, the Federal Reserve voted unanimously to raise the target range for the federal funds rate by 75 basis points to 2.25-2.5%, in line with expectations. Read more

Markets await the latest Fed decision, with a 75bp hike widely expected

Markets await the latest Fed decision, with a 75bp hike widely expected

The Fed is widely expected to hike by 75bps, with almost 96% of Bloomberg survey respondents calling for such a move, with the remainder of economists evenly split between 50 and 100bps. Read more

Dollar stumbles as recession fears abate

Dollar stumbles as recession fears abate

After initially being buoyed by renewed recession fears overnight, the dollar’s strength was faded by European traders in what was a relatively light data session. Read more

Recession fears are back supporting the dollar

Recession fears are back supporting the dollar

Given the firm consensus for this week’s decision, the focus for markets will rest on the Fed’s forward guidance, with the September decision subject to much finer margins now the Fed’s target rate is well within neutral territory. Read more

Week Ahead: Week Ahead: Fed set to hike by another 75bps, focus on September’s guidance

Week Ahead: Week Ahead: Fed set to hike by another 75bps, focus on September’s guidance

In the upcoming week, there will be plenty of market-moving economic data, with the Federal Reserve set to hike by another 75bps. Read more

Eurozone PMIs and Q3 SPF reinforce our confidence in a second 50bp hike from the ECB in September

Eurozone PMIs and Q3 SPF reinforce our confidence in a second 50bp hike from the ECB in September

This morning, markets received fresh information on growth conditions in Europe and forecasters expectations for inflation. Read more

ECB conducts historic meeting but euro struggles for direction

ECB conducts historic meeting but euro struggles for direction

Today, markets will be paying close attention to the Q3 Survey of Professional Forecasters, released at 09:00 BST, which the ECB had priority access. Read more

ECB breaks the shackles of its own forward guidance, hiking 50 basis points

ECB breaks the shackles of its own forward guidance, hiking 50 basis points

The European Central Bank raised all three key interest rates by 50bps today, marking the first rate hike in 11 years and an end to an 8-year negative interest rate framework. Read more

ECB set to hike rate rates for the first time in 11 years as the macroeconomic backdrop remains complicated

ECB set to hike rate rates for the first time in 11 years as the macroeconomic backdrop remains complicated

After 11 years, the European Central Bank is set to hike rates today, with the decision very much live after ECB sources reopened the debate for a 50bp hike on Tuesday. Read more

Robust core CPI measures to keep BoC on track despite underwhelming headline print

Robust core CPI measures to keep BoC on track despite underwhelming headline print

Headline inflation in Canada rose by 0.7% MoM in June, lifting the YoY rate from 7.7% to 8.1% despite base effects that would have taken 0.3pp off the headline rate. Read more

Inflation data isn’t compelling enough to make 50bp in August the base case

Inflation data isn’t compelling enough to make 50bp in August the base case

June’s CPI data saw headline inflation rise from 9.1% YoY to a new multi-decade high of 9.4%, a print that marginally exceeded expectations. Read more

EURUSD eyes 1.03 but hurdles remain

EURUSD eyes 1.03 but hurdles remain

While the latest developments have been music to EUR bulls’ ears, downside risks to EURUSD persist, with the next few days proving pivotal for whether markets return to testing parity in the pair. Read more

Dollar retraces as inflation expectation data moderates curve inversion in US rates

Dollar retraces as inflation expectation data moderates curve inversion in US rates

Today, the dollar remains on the back foot amid a light data calendar and easing expectations of the Fed’s tightening cycle this year in response to Friday’s inflation expectations data and Governor Waller’s comments. Read more

Wage growth isn’t strong enough to force a 50bp hike from the BoE

Wage growth isn’t strong enough to force a 50bp hike from the BoE

UK labour market data for May showed a continued increase in employment, but with no signs of rising wage pressures, Bank of England policymakers are likely to be little concerned by today’s release. Read more

Dollar declines as Fed expectations ease at the start of a busy week for European markets

Dollar declines as Fed expectations ease at the start of a busy week for European markets

The broad dollar will likely take cues from cross-asset price action this week, while developments in the eurozone may mean that EURUSD sets the pace for the DXY index. Read more

Week Ahead: The ECB are next up to bat as the euro continues to test parity

Week Ahead: The ECB are next up to bat as the euro continues to test parity

In the week ahead, the market focus will shift to the ECB for official commentary as the central bank is expected to hike rates for the first time in 11 years, while the prospect of a 50bp hike from the BoE in August will be weighed as a fresh batch of UK economic data is released. Read more

Dollar drives higher before Waller tempers Fed expectations

Dollar drives higher before Waller tempers Fed expectations

GBPUSD will be dictated by broader market conditions as traders weigh valuations in the dollar against high beta currencies as growth and inflation concerns persist.   Read more

Dollar continues to climb as markets speculate on larger Fed hike

Dollar continues to climb as markets speculate on larger Fed hike

With growth conditions still a major concern for markets and pressure from US rates reigniting, G10 FX pairs find themselves under renewed pressure this morning as the dollar reverses yesterday’s losses. Read more

Bank of Canada hikes 100bps to destroy demand and cool inflation

Bank of Canada hikes 100bps to destroy demand and cool inflation

The Bank of Canada unexpectedly raised its policy interest rate by a full percentage point to 2.5%, dashing concerns that it would follow the Federal Reserve with only 75bps. Read more

US inflation accelerates on gas price spike, but composition remains strong

US inflation accelerates on gas price spike, but composition remains strong

Headline inflation increased by 1.3% month-on-month in June, raising the year-on-year rate by 0.5 percentage points to 9.1%, the fastest pace of price growth since November 1981. Read more

US CPI holds the potential to break EURUSD parity

US CPI holds the potential to break EURUSD parity

This morning’s price action is likely to be tentative, as June’s CPI data out of the US is likely to dictate how most G10 FX pairs close out the day. Read more

Speculation over EURUSD parity continues as resistance on route holds up

Speculation over EURUSD parity continues as resistance on route holds up

Unlike other pro-cyclical currencies that felt pressure from a stronger dollar, the euro sank to 20-year lows, with parity very likely in the near-term. Read more

EURUSD remains at the mercy of European energy benchmarks

EURUSD remains at the mercy of European energy benchmarks

The dollar starts this week on a stronger footing again as markets weigh increased recession risks in Europe and monitor the rise in Covid cases in China. Read more

Week Ahead: A summer lull in FX markets isn’t due anytime soon

Week Ahead: A summer lull in FX markets isn’t due anytime soon

FX markets defied a dull economic calendar last week, delivering substantial volatility and abnormally-large moves on the back of global recession fears and a mounting energy crisis in Europe. In the week ahead, there will be plenty of market-moving economic data, alongside central bank decisions from the Reserve Bank of New Zealand, which we expect to hike 50bps, and the Bank of Canada, which is likely to follow the US Federal Reserve with a 75bp hike. Read more

Contraction in Canadian employment won’t derail the BoC from hiking 75 basis points

Contraction in Canadian employment won’t derail the BoC from hiking 75 basis points

Canada lost 43,200 net jobs in June, a substantial surprise considering economists expected the economy to add 22,500 new jobs, which would have been a milder but still positive increase compared to last month’s 39,800 gain. Read more

Nonfarm Payrolls exceed expectations, keeping the Fed on track for 75bps

Nonfarm Payrolls exceed expectations, keeping the Fed on track for 75bps

The threshold for today’s jobs data to change the tightening course for the Fed at the end of the month was elevated, mainly due to the fact that labour market conditions seldom change markedly over the course of a month (lockdowns withstanding) and the US labour market entered today’s release at historically tight levels. Read more

North American jobs data draws attention following dramatic week in FX markets

North American jobs data draws attention following dramatic week in FX markets

Following yesterday’s 0.8% rally, GBPUSD is retracing somewhat today in line with the broad USD move. Read more

The EURUSD parity sharks circle as blood is left in the water

The EURUSD parity sharks circle as blood is left in the water

The persistent stagflationary shock stemming from Europe’s energy market has left blood in the water, and at current levels, the parity sharks are circling EURUSD. Read more

Markets meltdown as European energy concerns resonate

Markets meltdown as European energy concerns resonate

Despite the UK economy’s greater insulation from Europe’s energy crisis due to a more diverse supply network and reduced dependence on Russian gas, higher gas and electricity prices are still mapping over the channel. Read more

FX price action remains tentative leading into key meeting minutes

FX price action remains tentative leading into key meeting minutes

Today, with global bond yields cooling somewhat and equities pointing higher, the more conducive risk backdrop has spurred the pound to trade a tenth of a percentage point higher against the dollar heading into the European open. Read more

The dollar’s domination on growth fears is unlikely to abate this week

The dollar’s domination on growth fears is unlikely to abate this week

This morning, with US markets closed for the July 4th celebration, volatility in G10 pairs is limited as traders can’t take cues from how Treasury markets and US equity markets are trading at the start of the week. Read more

Week Ahead: Recession fears continue to dominate and prop up the dollar

Week Ahead: Recession fears continue to dominate and prop up the dollar

The dollar remaining bid is unlikely to change next week as upcoming data releases won’t offset concerns over heightened probability of incoming recessions. Read more

Monex’s July 2022 FX Forecasts

Monex’s July 2022 FX Forecasts

Read Monex's July 2022 FX Forecasts. Find our what our top forecasters expect for currency markets, amid ongoing recession concerns and higher inflation. Read more

USD firms as growth fears continue

USD firms as growth fears continue

Unlike yesterday, however, the dollar is trading higher this morning on these dynamics as it resumes its role as a global safe haven. Read more

Recession fears resonate but month-end flows likely to dominate

Recession fears resonate but month-end flows likely to dominate

This morning, the pound is bid against the dollar, likely due to depressed valuation, as data continues to highlight the weakening economic backdrop. Read more

Inflation in Spain jumps to 10%, fuelling speculation of a 50bp hike by the ECB

Inflation in Spain jumps to 10%, fuelling speculation of a 50bp hike by the ECB

With the inflation data trickling out ahead of the main event at Sintra at 14:00 BST, which sees President Lagarde join Governor Bailey and Chair Powell on a panel, price action in EURUSD and European rates is likely to remain volatile as traders weigh up the likelihood of the ECB hiking rates by 50bp at July’s meeting. Read more

ECB could unveil new tools and point towards 50bp in July today

ECB could unveil new tools and point towards 50bp in July today

ECB sources have already hit the wires this morning to outline the possible way the ECB is looking to offset the impact of its new anti-fragmentation tool. Read more

Sintra starts amid a quiet economic calendar

Sintra starts amid a quiet economic calendar

The data calendar is more populated this week as the ECB’s annual central banking forum in Sintra is set to begin. Read more

Week Ahead: It’s time for Sintra as rates take dovish turn

Week Ahead: It’s time for Sintra as rates take dovish turn

FX markets became more navigable for traders this week as the cross-asset backdrop focused predominantly on the rising probability of recessions in Europe and the US. Read more

FX markets trade in narrow ranges after recession alarms ring

FX markets trade in narrow ranges after recession alarms ring

Released one-minute past midnight, consumer confidence data for June continued to plumb fresh all-time lows as the cost-of-living crisis persists. Read more

June’s flash PMIs signal a marked slowdown in H2 for the eurozone and UK economies

June’s flash PMIs signal a marked slowdown in H2 for the eurozone and UK economies

Today’s flash PMIs for June out of the eurozone and UK highlighted a consistent theme: momentum in economic activity. Read more

Recession fears continue to dominate

Recession fears continue to dominate

This morning, even as yields retrace yesterday’s move across European sovereigns and the US, UK Gilt yields continue to moderate. The vulnerability of market pricing for the Bank of England’s rate path are becoming starkly apparent. Read more

The BoC will need to up the ante as inflation heats up in Canada

The BoC will need to up the ante as inflation heats up in Canada

Speculation over a 75 basis point hike from the Bank of Canada at their July 13th meeting was rife heading into today’s CPI report. Read more

CPI reports offer markets guidance on central bank policy actions

CPI reports offer markets guidance on central bank policy actions

The pound opened this morning on the defensive as the previous constructive risk backdrop flipped. However, a softer than anticipated May inflation report is only compounding downside momentum in the pound as rates markets price out the probability of a preposterous rate path for the Bank of England. Read more

UK CPI rises to 9.1% YoY, but details will keep BoE hawks in check

UK CPI rises to 9.1% YoY, but details will keep BoE hawks in check

Headline UK CPI increased 0.1 percentage points from April’s reading to hit a fresh 40-year high of 9.1% YoY in May. This was largely in line with economists' expectations, which saw CPI increasing at 0.7% MoM. Read more

US markets to come back online to a mildly weaker dollar

US markets to come back online to a mildly weaker dollar

Despite the US Treasury market reopening with the curve up around 5bp higher, global equities continue to point higher. Read more

Week Ahead: There’s panic in policymakers voices

Week Ahead: There’s panic in policymakers voices

After a highly volatile week for short-term interest rate markets after a string of surprising central bank decisions, which induced heightened FX market volatility, markets turn their attention to incoming inflation data in Canada and the UK. Read more

Dollar is back in demand after turmoil in USDJPY overnight

Dollar is back in demand after turmoil in USDJPY overnight

Today, with turmoil in Japanese markets overnight, the dollar is back trading on the offensive. In the economic calendar, events are light in the US with just Chair Powell’s welcoming comments at a dollar conference standing out at 13:45 BST. Read more

Spooked by services inflation, the BoE doves fall back in line

Spooked by services inflation, the BoE doves fall back in line

The Bank of England voted 6-3 in favour of raising rates by 25bps to 1.25%. The dissenters (Haskell, Mann, and Saunders) all voted to hike rates by 50bps, in order to mitigate against risks that wage growth, firms’ pricing decisions, and inflation expectations fuel persistence in above-target inflation. Read more

SNB hikes 50bp as it targets a stronger real exchange rate

SNB hikes 50bp as it targets a stronger real exchange rate

Swiss National Bank surprised markets with a 50bp hike, bringing the interest rate on sight deposits to -0.25%. While the consensus was for the SNB to use today’s meeting to signal a policy change in September, last week’s hawkish ECB meeting coupled with a more hawkish Federal Reserve last night likely forced the SNB into earlier action. Read more

Bank of England set to round off a busy 24 hours for G10 central banks

Bank of England set to round off a busy 24 hours for G10 central banks

Today, focus shifts back to domestic factors for sterling traders as the Bank of England is set to announce its latest policy decision at 12:00 BST. Consensus is firm around a 25bp hike from the Old Lady, which would bring Bank Rate to 1.25%, meaning the market reaction will be determined by the Bank’s forward guidance. Read more

Fed follows market pricing with hike and dot plot, but could still underdeliver by year-end

Fed follows market pricing with hike and dot plot, but could still underdeliver by year-end

The Federal Reserve voted 10-1 to increase its target range for the effective federal funds rate by 75bps to 1.5-1.75%, while raising its median dot plot projection for 2022 by 150bps to 3.375% and 2023 by 100bps to 3.75%. Read more

Panic brews among major central banks

Panic brews among major central banks

The single currency was buoyed by hawkish commentary from Dutch National Bank President Klaas Knot yesterday. This morning, however, news that the ECB will be holding an emergency meeting at 10:00 BST/ 11:00 CET has lifted the euro by over half a percentage point. Read more

Bank of England set to hike by 25bps and continue pushing back on market expectations

Bank of England set to hike by 25bps and continue pushing back on market expectations

The Bank of England is set to raise its policy interest rate by 25 basis points at 12:00 BST on Thursday, bringing Bank Rate to 1.25%. Given this is widely expected by economists and markets alike, the focus will shift from the hike itself to the way in which the decision is framed by the BoE. Read more

The dollar marches higher as Fed pricing explodes

The dollar marches higher as Fed pricing explodes

Pricing of the Fed’s next policy move in rates markets caused the damage not only in FX markets but also in equities as the probability of the Fed raising rates by 75bps on Wednesday jumped to 93%, up from just 10% prior to Friday’s CPI report. Read more

Dollar drives higher as markets speculate on 75bps from the Fed

Dollar drives higher as markets speculate on 75bps from the Fed

King dollar led the G10 once again on Friday after a hot CPI print suggested to markets that the Federal Reserve will need to move more aggressively to cool inflation. Following risk-off trading sessions in the Asian and European equity markets, the inflation data put further downward pressure on US equities after North American markets opened. Read more

Week Ahead: The full spectrum of central banks 

Week Ahead: The full spectrum of central banks 

This week will be another big one for FX market participants, as they brace themselves for a slew of central bank meetings. Read more

Canada’s labour market continues to fire, but gets outshone by US CPI data

Canada’s labour market continues to fire, but gets outshone by US CPI data

Canada’s economy added 39,800 new jobs on net in May, more than the 27,500 expected by economists and the 15,300 jobs added in April. Read more

May’s CPI report boosts odds for three more 50bp Fed hikes

May’s CPI report boosts odds for three more 50bp Fed hikes

US headline inflation rose in May from 8.3% to 8.6%, outstripping expectations for a flat reading and by doing so, quashed speculation that the US economy had seen peak inflation back in April. Read more

ECB beats hawkish drum, but doesn’t get the desired effect

ECB beats hawkish drum, but doesn’t get the desired effect

Today, the ECB will likely be in damage limitation mode, with French Governor already stating that the ECB has the means to tackle market fragmentation. Read more

BoC is worried about high debt levels and home prices

BoC is worried about high debt levels and home prices

Today’s Financial Stability Report from the Bank of Canada suggests that, on the whole, vulnerabilities in the financial system have intensified. Read more

ECB signals 25bp hike in July and 50bp in September, but price it at your own peril

ECB signals 25bp hike in July and 50bp in September, but price it at your own peril

The European Central Bank maintained its core messaging that rates won’t rise until July’s meeting and will only exit negative territory at the end of Q3. Read more

ECB prepares markets for lift-off

ECB prepares markets for lift-off

Today, with limited data out, the focus for GBP traders will be on the EURGBP cross and whether it can return to its year-to-date high on the back of today’s ECB meeting. Read more

Path higher for Treasury yields isn’t smooth as growth concerns still remain

Path higher for Treasury yields isn’t smooth as growth concerns still remain

A decline in US yields towards the back-end of the afternoon session in Europe extended the pound’s recovery, and this morning, the pound resumes trading on the back foot as US yields start the morning trying to push higher yet again. Read more

50 is the new 25 as the RBA joins the larger rate hike crowd

50 is the new 25 as the RBA joins the larger rate hike crowd

With a 50bp hike expected by just 3 economists, today’s move extends the RBA’s recent tendency to shock markets with more aggressive policy tightening. Read more

A vote of no confidence brews within the UK Conservative party

A vote of no confidence brews within the UK Conservative party

After a long weekend, London traders will be returning to their desks asking the same question as the politicians returning to Westminster. Read more

Monex’s June 2022 FX Forecasts

Monex’s June 2022 FX Forecasts

Read Monex's June 2022 FX Forecasts. Find our what our top forecasters expect for currency markets, amid ongoing global growth and inflation concerns. Read more

BoC starts to get aggressive with its fight against inflation

BoC starts to get aggressive with its fight against inflation

While the BoC met market expectations and raised rates by 50bp to 1.5%, the accompanying statement proved more hawkish as the BoC laid the foundations for its own “expeditious” move towards neutral rates. Read more

Dollar fights back as yields consolidate gains on more hawkish Fed commentary

Dollar fights back as yields consolidate gains on more hawkish Fed commentary

The retracement in the dollar came after three consecutive days of USD weakness and a 3% drawdown from the DXY index’s peak in the middle of May. Read more

Dollar rebounds as Treasury markets reopen to hawkish comments by Waller

Dollar rebounds as Treasury markets reopen to hawkish comments by Waller

This morning, as Treasury markets opened, the spike in yields across the curve weighed on European and North American equity futures and gave the dollar a boost. Read more

Dollar dives further as equity markets continue to rebound

Dollar dives further as equity markets continue to rebound

Trading at a one-month high, GBPUSD is struggling to find much more upside as it trades just 0.04% higher this morning despite the broad dollar weakness across the G10 space. Read more

Week Ahead: North American money market rates set to realign lower

Week Ahead: North American money market rates set to realign lower

Next week, economic activity data remains in focus as China's May PMIs are released. Meanwhile, the Bank of Canada is set to hike rates by 50bp again on Wednesday, while Friday's US payrolls report could extend the market's dovish repricing of Fed expectations. Read more

Dollar drops on more dovish Fed pricing and rebound in equities

Dollar drops on more dovish Fed pricing and rebound in equities

Yesterday marked another session where broad risk appetite defined how the dollar traded across the G10 space. While the Antipodean currencies traded relatively flat due to lingering growth concerns in China, other high beta currencies within the G10 received a welcome boost from how US equities traded. Read more

Dollar dips despite hawkish Fed minutes

Dollar dips despite hawkish Fed minutes

The dollar started yesterday’s European session on the front foot, but around the NY open and the release time for durable goods data, the dollar topped out as bond yields hit lows on the day. Read more

Markets readjust to a more hawkish ECB and a lower growth outlook in the US

Markets readjust to a more hawkish ECB and a lower growth outlook in the US

The fourth-largest one-month slip in the preliminary services PMI on record yesterday saw GBPUSD drop like a stone as markets began to price in a more dovish rate outlook in the UK. Read more

US economic output continues to slow as prices rise, but labour demand will keep the Fed hiking

US economic output continues to slow as prices rise, but labour demand will keep the Fed hiking

Today’s reading of US flash purchasing managers’ indices for May showed a decline in all three of the metrics reported by S&P Global, fuelling continued fears that US and global economic growth conditions are souring. Read more

UK service sector activity starts to feel the pinch as consumers tighten their belts

UK service sector activity starts to feel the pinch as consumers tighten their belts

This morning’s release of UK flash purchasing managers indices from May highlight the difficult macroeconomic backdrop currently facing the Bank of England, which in our view gives policymakers bandwidth to conduct one more 25bp hike at June’s meeting this year at a maximum. Read more

The euro is dancing to the ECB’s tune, for now

The euro is dancing to the ECB’s tune, for now

The pound drifted higher against the dollar yesterday as risk currencies broadly rallied, but sterling failed to keep pace with the euro after the single currency was backed by more hawkish ECB commentary. Read more

Dollar drops on potential trade war unwind

Dollar drops on potential trade war unwind

Commodity currencies with strong trade links to China, such as NZD and AUD, are leading gains amid the more supportive risk environment. Read more

Week Ahead: Flash activity indicators will either soothe or stoke growth fears

Week Ahead: Flash activity indicators will either soothe or stoke growth fears

Next week, activity data will be key for markets that were recently roiled by recession concerns in the euro-area, UK and even the US. On top of that, Australia's Federal election, policy decisions from the Reserve Bank of New Zealand and Central Bank of the Republic of Turkey, and the release of the Fed's meeting sit top of mind for traders in the economic calendar. Read more

Dollar drops despite risk-off conditions persisting in the cross-asset space

Dollar drops despite risk-off conditions persisting in the cross-asset space

Broader market conditions are largely driving the pound in our view, despite the deluge of economic data released out of the UK this week. Read more

UK retail sales rise in April, but it’s not all good news

UK retail sales rise in April, but it’s not all good news

Consumer sentiment and spending data this morning rounds off the deluge of UK economic data this week and gives the first flash answer to the question on the lips of every UK economist at the moment: how is the UK consumer faring under the pressure of higher inflation? Read more

CAD Update: Revising our USDCAD forecast to account for external growth pressures

CAD Update: Revising our USDCAD forecast to account for external growth pressures

Volatility has increased across markets, weakening the loonie as risk sentiment overtakes economic fundamentals as the driving force of the day in FX. Read more

Dollar retraces Tuesday’s losses as consumer stocks lead a 4% drawdown in US equities

Dollar retraces Tuesday’s losses as consumer stocks lead a 4% drawdown in US equities

In lieu of any domestic data today, sterling traders will keep an eye on developments in the eurozone and the impact that will have on GBPUSD via GBPEUR. Read more

Strong inflation report out of Canada helps the loonie outperform in the G10

Strong inflation report out of Canada helps the loonie outperform in the G10

April’s CPI report in Canada showed that headline inflation rose from 6.7% in March to 6.8%, largely due to a stronger month-on-month reading of 0.6%. Read more

GBPUSD and EURUSD jump on expectations of more aggressive policy tightening, but Powell hits back for the dollar

GBPUSD and EURUSD jump on expectations of more aggressive policy tightening, but Powell hits back for the dollar

Sterling surged 1.4% against the dollar yesterday following strong headline wage data in March’s labour market report as traders started to factor in a more hawkish Bank of England reaction function once again. Read more

US retail sales keep the Fed on track, but higher prices and tighter financial conditions should start to bite for the consumer

US retail sales keep the Fed on track, but higher prices and tighter financial conditions should start to bite for the consumer

Retail sales data for April showed consumption conditions in the US remained robust amid the first signs of tighter financial conditions and rising prices. Read more

Dollar declines as market risk appetite improves

Dollar declines as market risk appetite improves

Sterling’s gains have extended this morning, with the currency trading 0.7% higher against the dollar at the time of writing. Although part of the GBP move is reflective of the improve risk backdrop in markets, the currency was also boosted by a strong labour market report for March. Read more

Dollar surges again on concerns over global growth following weak Chinese data

Dollar surges again on concerns over global growth following weak Chinese data

GBPUSD opens this morning slightly lower, in line with the broader G10 move as the US dollar goes bid on global growth concerns. Read more

Week Ahead: Cross-asset volatility unlikely to subside as markets feel the pinch from inflation and growth

Week Ahead: Cross-asset volatility unlikely to subside as markets feel the pinch from inflation and growth

This week, CPI figures out of the UK, Canada, and others will provide the clearest signal regarding the way forward for central bank rate paths and FX markets. Read more

Dollar remains dominant as market concerns shift from inflation to growth

Dollar remains dominant as market concerns shift from inflation to growth

This morning, the pound is trading in extremely tight ranges despite a rebound in risk sentiment after negative GDP data out of Q1 in yesterday’s session. Read more

The UK economy has slow momentum heading into the second quarter

The UK economy has slow momentum heading into the second quarter

Data out of the UK this morning highlighted the stresses that rising inflation, on both the producer and consumer sides, is having on economic activity. Read more

Turnaround Tuesday was quickly replaced by whipsaw Wednesday

Turnaround Tuesday was quickly replaced by whipsaw Wednesday

This morning, markets were reminded of the UK’s fragile growth backdrop as Q1’s GDP data undershot expectations by 0.2 percentage points to post quarterly growth of just 0.8%. Read more

Core CPI month-on-month blows expectations out of the water

Core CPI month-on-month blows expectations out of the water

While today’s report highlights that the peak in US inflation is behind us in March, today’s core reading shows the first signs that strong domestic demand conditions could offset upcoming disinflationary base effects. Read more

Dollar weakens in European session ahead of key CPI report

Dollar weakens in European session ahead of key CPI report

Today’s US CPI release could be the first test for sterling, as the dollar is sold against G10 currencies now in anticipation of the inflation report. Read more

Equities lead the way for risk sentiment and the dollar

Equities lead the way for risk sentiment and the dollar

In the early hours of this morning, April’s BRC like-for-like sales showed a 1.7% contraction, a decline from March’s -0.4% YoY reading. Read more

Dominant dollar takes another leg higher on CNY depreciation

Dominant dollar takes another leg higher on CNY depreciation

Weakness in the pound is likely to persist this week, especially as the focus for FX markets continues to rest on global bond markets. Read more

Week Ahead: Conservative Fed to be measured against April CPI

Week Ahead: Conservative Fed to be measured against April CPI

Next week, volatility in global markets should settle as the economic calendar thins. Central bank communications will sit at the forefront for FX traders. Read more

Strong wage growth remains absent in North American labour markets

Strong wage growth remains absent in North American labour markets

April’s Nonfarm payrolls data today saw the US economy add 428,000 jobs in April, exceeding expectations, whereas Canada’s economy added 15,300 jobs. Read more

Don’t discount the dollar just yet

Don’t discount the dollar just yet

The pound is likely to continue to underperform the G10 as a whole, especially in the short term as markets overreact to the latest central bank meetings.  Read more

BoE hikes 25bp to bring Bank Rate to 1% but pause in the tightening cycle imminent

BoE hikes 25bp to bring Bank Rate to 1% but pause in the tightening cycle imminent

The Bank of England today voted 6-3 in favour of raising the Bank Rate by 25 basis points to 1% despite expectations of a tighter labour market. Read more

Conservative Powell sends the Dollar tumbling as 75bp hike off the table

Conservative Powell sends the Dollar tumbling as 75bp hike off the table

After rallying over a percentage point in yesterday’s session post-Fed decision, the pound is one of the early losers in the G10 space this morning. Read more

Federal Reserve hikes rates 50bp for the first time in 22 years, signals more to come

Federal Reserve hikes rates 50bp for the first time in 22 years, signals more to come

The Federal Reserve today voted unanimously to raise the target range for the effective federal funds rate by 50 basis points to 0.75-1% and outlined the first steps to its “phased-in” quantitative tightening programme. The move in interest rates was largely signalled in the Fed’s inter-meeting communications and thus didn’t take markets by surprise. Read more

Federal Reserve set to hike rates by 50bp for the first time since May 2000

Federal Reserve set to hike rates by 50bp for the first time since May 2000

Financial markets eagerly await the Federal Reserve decision as they are set to announce the first 50bp hike since May 2000 at 19:00 BST. However, the change in rates is unlikely to fuel cross-asset volatility. Read more

Monex’s May 2022 FX Forecasts

Monex’s May 2022 FX Forecasts

Read Monex's May 2022 FX Forecasts. Find our what our top forecasters expect for currency markets, amid current geopolitical events and uncertain conditions. Read more

RBA surprises markets with larger-than-expected rate hike

RBA surprises markets with larger-than-expected rate hike

This week, the focus for GBP traders will be firmly on the Bank of England’s latest policy decision on Thursday. Read more

Week Ahead: The race to neutral heats up

Week Ahead: The race to neutral heats up

Next week, price action in bond markets remains in the spotlight as key rate announcements are scheduled for the US, UK, and Australia. Read more

Strong Canadian GDP data consolidates likelihood of 50bp by BoC

Strong Canadian GDP data consolidates likelihood of 50bp by BoC

Canadian GDP beat expectations with a very solid February print at 1.1% MoM, that pulled year-over-year growth up to 4.5%. Read more

China’s growth commitment takes the edge off of the dollar at month-end

China’s growth commitment takes the edge off of the dollar at month-end

This morning, the pound looks to have stabilised somewhat as the US dollar is broadly sold across G10 markets. Read more

Riksbank embarks on first rate hike as inflation fires

Riksbank embarks on first rate hike as inflation fires

Today marks a crucial day in Riksbank history as the central bank, which only moved out of negative interest rate territory in December 2019, embarked on its first interest rate hike since the pandemic. Read more

EUR tumbles on gas concerns, BoJ inaction pushes JPY into intervention territory

EUR tumbles on gas concerns, BoJ inaction pushes JPY into intervention territory

With the Bank of England still expected to hike rates, the pound could start to bounce as it breaks out of the “poor performer” group that largely consists of low-yielding currencies.  Read more

The dollar starts to lose its haven bid, putting emphasis back on Treasury yields

The dollar starts to lose its haven bid, putting emphasis back on Treasury yields

This morning, the pound is trading fairly stable against the dollar as the greenback broadly weakens across the board. Read more

Heightened lockdown concerns in China drive up FX volatility

Heightened lockdown concerns in China drive up FX volatility

With the Bank of England observing a communications blackout ahead of next Thursday’s meeting, and economic data largely absent for the week, the pound trades at the mercy of broader market dynamics today.  Read more

Macron’s victory removes some tail risk, but political risks remain until June

Macron’s victory removes some tail risk, but political risks remain until June

Emmanuel Macron’s victory in the second round of the French elections on Sunday was largely expected as preliminary polls suggested a 90% chance of a win. Read more

Macron’s victory doesn’t mean EUR bulls are in the clear

Macron’s victory doesn’t mean EUR bulls are in the clear

In line with our expectations, EUR traders are ignorant of yesterday’s second round in the French elections: the possibility of a victory by far-right Marine Le Pen had not been priced into EURUSD as Macron’s chance of winning was high. Read more

Bond markets are set to stay in the driving seat for FX markets

Bond markets are set to stay in the driving seat for FX markets

Despite a relatively light economic calendar this week, FX market volatility hasn’t been absent. Instead of interest rate announcements and economic data releases, volatility in currency markets has been driven by the continuous repricing of interest rate, inflation, and growth expectations in global bond markets. Read more

UK retail sales and PMIs highlight how stretched current BoE pricing is

UK retail sales and PMIs highlight how stretched current BoE pricing is

Data out this morning from the UK has shone a light on the fragile state of consumption conditions. Retail sales volumes for March showed a hefty 1.4% month-on-month decline. Read more

Eurozone PMIs support faster normalisation by the ECB

Eurozone PMIs support faster normalisation by the ECB

This morning’s composite PMIs from the eurozone printed well above expectations, with a rise in services activity particularly fuelling the rebound. Read more

Pound plunges on repricing in rates markets

Pound plunges on repricing in rates markets

With recession indicators starting to flash amber across European and US rates markets, rising expectations of policy tightening, especially in the UK, isn’t likely to benefit the pound until there are signs of improving growth conditions. Read more

Dollar declines as the 10-year stalls just shy of 3%

Dollar declines as the 10-year stalls just shy of 3%

This morning, as markets become increasingly more bullish on ECB policymaking, much of the action for the pound is being channelled through GBPEUR, with the pair trading 0.35% down at the time of writing. Read more

Canadian CPI blows past expectations with external and domestic pressures both rising sharply

Canadian CPI blows past expectations with external and domestic pressures both rising sharply

Today’s data confirms that the Bank of Canada took the right decision by hiking rates 50bp last week. Read more

Dollar softens along with Treasury yields as 10Y stalls just shy of 3%

Dollar softens along with Treasury yields as 10Y stalls just shy of 3%

Price action in the pound was muted yesterday in the absence of any domestic economic data. Today could be the same as economic events remain sparse. Read more

Yen extends longest falling streak in over 50 years despite verbal defence

Yen extends longest falling streak in over 50 years despite verbal defence

This morning, price action in GBPUSD should be more representative of underlying fundamentals as UK markets reopen after a four day weekend. Read more

Week Ahead: Rate markets will continue to dominate FX pricing

Week Ahead: Rate markets will continue to dominate FX pricing

March's CPI report from the US prompted a repricing of interest rate expectations this week after the core measure showed a marked slowdown. Read more

European Central Bank: A dove in hawk’s clothes

European Central Bank: A dove in hawk’s clothes

As the ECB maintained a cautious tone even as inflation expectations ramped up further over the last month, markets took this as a slight dovish surprise. Read more

CBRT holds rates despite inflation sitting at record-high

CBRT holds rates despite inflation sitting at record-high

Turkey CPI inflation may have shot through 60% YoY recently, but inflation should still fall to single digits in 2023 despite the CBRT’s ultra-loose policy stance as measured in real terms. At least, that is what today’s rate decision was all about as the CBRT kept rates unchanged at 14.00%, in line with expectations. Read more

ECB set to walk the growth-inflation tightrope

ECB set to walk the growth-inflation tightrope

More concerning for the Bank of England is that inflation is set to rise further in April, likely by another 1.4 percentage points. Read more

BoC takes out an insurance policy in the form of a 50bp hike

BoC takes out an insurance policy in the form of a 50bp hike

The Bank of Canada today decided to raise its overnight policy rate by 50 basis points for the first time since May 2000. In addition to bringing the overnight rate up to 1%, the BoC announced that it would start the process of quantitative tightening on April 25th. Read more

50bp increments doesn’t necessarily mean FX strength

50bp increments doesn’t necessarily mean FX strength

The pound started this morning on a firmer footing, especially after this morning’s March CPI data saw inflation in the UK rise to 7% and outstrip expectations. Read more

UK CPI hits 7% in March, ahead of the April Ofgem energy cap increase

UK CPI hits 7% in March, ahead of the April Ofgem energy cap increase

March’s CPI inflation data out of the UK will be a harrowing message to the Bank of England and one that will likely keep the central bank firmly in tightening mode despite manifesting growth concerns. Read more

March CPI doesn’t settle terminal rate debate

March CPI doesn’t settle terminal rate debate

While price action has somewhat settled at the front-end of the curve, opinions tend to differ to a greater extent on the Fed’s ultimate terminal rate. Read more

Dollar goes bid on hawkish Fed pricing and global growth risks

Dollar goes bid on hawkish Fed pricing and global growth risks

This morning’s jobs data from February showed the ILO unemployment rate dipped to 3.8%, back to pre-Covid levels, while average earnings rose in line with expectations to 5.4% YoY in the last three months. Read more

Rate markets continue to dominate FX while markets await election news

Rate markets continue to dominate FX while markets await election news

The pound tumbled to November 2020 lows against the US dollar on Friday amid a continued rise in US Treasury yields, and is hovering just above those levels this morning after a soft set of UK data from February. Read more

Week Ahead: EURUSD in the spotlight with French elections and the ECB next week

Week Ahead: EURUSD in the spotlight with French elections and the ECB next week

Looking ahead to next week, the European Central Bank meeting may change things as hot inflation prints from March put the ECB in a tight corner. On top of the ECB meeting, focus in Europe will be on the results of the first round of France’s 2022 Presidential election. Additionally, markets will focus on rate decisions from the Bank of Canada, Reserve Bank of New Zealand, Central Bank of Turkey and the Hungarian National Bank. Read more

Canadian unemployment hits new record low, BoC to hike 50bp next week

Canadian unemployment hits new record low, BoC to hike 50bp next week

Despite falling slightly short of analyst targets, the employment gain substantially exceeded the average monthly gain seen over the last 10 years, which is just below 20k jobs per month. Read more

Dollar index climbs to fresh high on rising yields

Dollar index climbs to fresh high on rising yields

Despite losses of 0.3% this morning exacerbating the range and the pound’s losses on the day, sterling’s price action has been notable in the face of a dovish repricing of Bank of England expectations and pricing of a more hawkish Federal Reserve. Read more

CAD Outlook: Loonie strength to continue in Q2 on higher oil and BoC support

CAD Outlook: Loonie strength to continue in Q2 on higher oil and BoC support

The Canadian dollar has been highly sensitive to monetary policy actions and price action in global commodities over the course of Q1. Under our base case for commodities and the Bank of Canada in Q2, which envisages two 50bp hikes, we believe gains in the Canadian dollar are likely to continue. However, our flatter forecast for the BoC policy rate in H2 will likely weigh on the loonie at the margin as the pace of Fed tightening overtakes that of the Bank of Canada. Read more

Dollar starts the day weaker despite hawkish meeting minutes yesterday

Dollar starts the day weaker despite hawkish meeting minutes yesterday

This morning, the pound has retraced this week’s losses against the dollar as US yields show signs of moderating, while against the euro it is sustaining minor losses. Read more

Fed set to pull the plug and drain liquidity, but Brainard muted the market impact

Fed set to pull the plug and drain liquidity, but Brainard muted the market impact

March’s FOMC meeting minutes were set to hold all of the answers for markets over what balance sheet run-off would look like this time around from the Federal Reserve. Read more

National Bank of Poland continues to hike at full throttle

National Bank of Poland continues to hike at full throttle

Today’s hike was twice the size of what the median of forecasts submitted to Bloomberg had foreseen, while it even came in 25bp above the most hawkish submission. Read more

Brainard’s comments on QT sends the dollar higher ahead of March’s meeting minutes

Brainard’s comments on QT sends the dollar higher ahead of March’s meeting minutes

GBP price action was driven by external factors yesterday, despite the final reading of March’s services PMI displaying a substantial upgrade from the flash estimate. Read more

NOK outperformance to die out as central banks play catch-up

NOK outperformance to die out as central banks play catch-up

We expect the Norwegian krone has room to strengthen further in the near-term if risk sentiment improves while energy prices remain high. Read more

European FX may struggle to retrace losses as focus stays on sanctions

European FX may struggle to retrace losses as focus stays on sanctions

This morning, as bond yields reflate from yesterday’s dip and European equity futures point to opening lower, the pound sits slightly higher against the dollar as the greenback is offered across the G10. Read more

Q1 Bank of Canada surveys suggest wage growth is set to rise soon

Q1 Bank of Canada surveys suggest wage growth is set to rise soon

Today’s release of the Q1 Business Outlook Survey (BOS) and Canadian Survey of Consumer Expectations (CSCE) provided robust evidence that the Bank of Canada needs to continue with their current tightening cycle as near-term inflation expectations continue to rise. Read more

Monex’s April 2022 FX Forecasts

Monex’s April 2022 FX Forecasts

While the limited progress in peace talks towards the end of the month blurred the overall dollar dynamics due to a positive boost to regional risk sentiment, we still expect some of the dominant drivers of FX markets from March to remain in play in April. Read more

G10 FX isn’t showing, but risk sentiment is shaky

G10 FX isn’t showing, but risk sentiment is shaky

The pound starts this morning up around 0.15% against the dollar, with greater gains recorded against the euro. Read more

Week Ahead: Stagflation concerns will remain prominent in Europe

Week Ahead: Stagflation concerns will remain prominent in Europe

Looking ahead to next week, Russia-Ukraine headlines will continue to dominate FX markets along with the Reserve Bank of Australia’s policy decision. Read more

Strong payrolls won’t knock the Fed off course for 50bp in May

Strong payrolls won’t knock the Fed off course for 50bp in May

Today’s data, which saw nonfarm payrolls print at +431k in March despite missing expectations for +490k, was nonetheless a strong showing from the US. Read more

Polish inflation nears 11%, supporting argument for 50bp hike in April

Polish inflation nears 11%, supporting argument for 50bp hike in April

This morning’s CPI release from Poland surprised to the upside as the YoY print came in at 10.9% vs 9.8% expected. Read more

Payrolls data to prove pivotal for Fed pricing of 50bp hikes in May and June

Payrolls data to prove pivotal for Fed pricing of 50bp hikes in May and June

Data out today centres on the final manufacturing PMI reading for March, with no change from the preliminary estimate of 55.5 expected. Read more

Canadian GDP growth continues to track above BoC projections for Q1

Canadian GDP growth continues to track above BoC projections for Q1

Canada’s economy grew at a steady pace of 0.2% MoM in January, confirming both StatsCan’s advance estimate from December’s report and the analyst consensus. Read more

Dollar dips as front-end Treasury yields find temporary top

Dollar dips as front-end Treasury yields find temporary top

As yields rose elsewhere within the G10 space, improving rate differentials pushed the dollar lower. Read more

German CPI adds to the ECB’s headaches

German CPI adds to the ECB’s headaches

Energy price growth jumped to 39.5% YoY, up from 22.5% in February, while food inflation rose to 6.2%. Read more

Markets wager geopolitical risk as Moscow’s pledge induces scepticism

Markets wager geopolitical risk as Moscow’s pledge induces scepticism

Market optimism gradually decreased as scepticism of Russia’s pledge to scale back operations crept in. Read more

Light calendar shifts focus back to peace talks

Light calendar shifts focus back to peace talks

GBPUSD price action continued to be driven by external factors yesterday morning as broad USD strength weighed on the pair. Read more

Rising US rates call the shots in FX markets

Rising US rates call the shots in FX markets

Today, wider market pricing continues to dictate GBP price action as the pound starts this morning a fifth of a percentage point lower against the dollar. Read more

Week ahead: Don’t discount the dollar just yet

Week ahead: Don’t discount the dollar just yet

This bifurcation in the dollar is likely to continue next week, with further USD strength against EUR and JPY likely to keep the DXY index elevated. However, broader dollar gains will need a strong US jobs report on Friday. Read more

Dollar downside likely to prove temporary

Dollar downside likely to prove temporary

The pound got dragged slightly lower against the dollar yesterday as concerns over growth conditions in Europe continued to dominate. Read more

SEK Update: Swedish core inflation to guide Riksbank’s rate path

SEK Update: Swedish core inflation to guide Riksbank’s rate path

Looking ahead, we expect Sweden’s inflationary backdrop to force earlier rate hikes by the Riksbank, however, this has only led to a mild revision of our longer-end forecasts as markets are already aware of the possibility of a hawkish announcement and are looking for at least one hike within the next six months. At the same time, we expect a stronger euro to partly offset the move as the ECB will likely signal a rate hike around Q4 this year too. Read more

Norges Bank to steam ahead with rate hikes despite growth concerns

Norges Bank to steam ahead with rate hikes despite growth concerns

Today’s decision by the Norges Bank to hike rates by 25bps to 0.75% was widely expected by markets and came as no surprise, with the decision made unanimously among board members. Instead, the Norwegian krone initially rallied on the Norges bank’s more hawkish rate path projections, which now see the deposit rate at 1.32% by year-end instead of 1.11% previously. Read more

SNB retain strong language around CHF intervention

SNB retain strong language around CHF intervention

The Swiss National Bank today announced that they would keep their ultra-loose monetary policy framework untouched by holding the policy rate at -0.75%. What was more pressing for financial markets, however, was the language around CHF intervention given the EURCHF rate briefly dipped below parity for the first time since 2015 at the start of the month. Read more

Russia’s Putin tightens the screws on Europe’s gas dilemma

Russia’s Putin tightens the screws on Europe’s gas dilemma

Putting the EU in a tight corner given their reliance on Russian gas, it would be far less disruptive for the UK and US due to their smaller import levels. Read more

Sunak outlines prudent budget, reserving firepower for 2024 election

Sunak outlines prudent budget, reserving firepower for 2024 election

Despite calls for the Government to offset the cost of living crisis with further measures to support households against rising energy and fuel costs, the spring budget today outlined a more prudent plan for government spending as the Treasury opted to reserve the fiscal headroom in the wake of a substantial growth downgrade. Read more

Rising US yields prop up the greenback while wrecking the yen

Rising US yields prop up the greenback while wrecking the yen

Sterling rose 0.7% against the dollar yesterday as higher risk currencies within the G10 widely rallied against the dollar. Read more

Headline inflation outstrips expectations in UK, putting pressure on the BoE

Headline inflation outstrips expectations in UK, putting pressure on the BoE

Headline inflation rose by 0.7 percentage points in February to print at 6.2% YoY, a thirty-year high, while the core rate rose 0.8 percentage points to sit at 5.2%. Both measures outstripped expectations by two-tenths of a percent, and by doing so, provided the pound with a limited boost this morning. Read more

Dollar finds support in rising Treasury yields

Dollar finds support in rising Treasury yields

Today, in lieu of domestic economic events, the dollar continues to dictate the pound’s performance. Read more

European power crisis centre of attention amid divided member states

European power crisis centre of attention amid divided member states

Looking ahead, EU heads of government will discuss soaring energy costs at the summit on Thursday, but diplomats reported that states remain divided. Read more

Markets look to add risk, but will Beijing derail this?

Markets look to add risk, but will Beijing derail this?

Market participants this week have toyed with the idea of adding risk back into their portfolios as geopolitical conditions started to stabilise. Read more

Central Bank of Russia leaves rates steady as war fires up inflation

Central Bank of Russia leaves rates steady as war fires up inflation

The Bank of Russia sees GDP falling in the next few quarters,  while it states higher inflation is inevitable but temporary. Read more

Biden-Xi call awaited after markets rise in risk-on rally yesterday

Biden-Xi call awaited after markets rise in risk-on rally yesterday

This morning, the G10 currency board is evenly split. The pound is currently sitting in the green against both EUR and USD, but the moves are minimal. Read more

Bank of England takes out insurance policy against inflation shock

Bank of England takes out insurance policy against inflation shock

The Bank of England today voted 8-1 in favour of raising Bank Rate by 25bps to 0.75%, marking the third successive rate hike since the December meeting. Read more

CBRT sends USDTRY higher with unchanged mantra on rates despite inflation

CBRT sends USDTRY higher with unchanged mantra on rates despite inflation

The Central Bank of the Republic of Turkey today held the one-week repo rate at 14% for the third time in as many months. Read more

Focus diverts from Fed to BoE as markets brace for another 25bp hike

Focus diverts from Fed to BoE as markets brace for another 25bp hike

The broad improvement in the global growth backdrop has helped the pound rise from recent 16-month lows. Expectations are for the BoE to hike for a third successive meeting today, to bring the bank rate up to 0.75%. Read more

Fed raises 25bps in line with expectations; but dots suggest plenty more to come this year

Fed raises 25bps in line with expectations; but dots suggest plenty more to come this year

The Federal Reserve raised rates today by 25bps, such that the target range now sits between 0.25% and 0.5%. While this was largely anticipated by most Fed watchers, especially after Chair Powell’s semi-annual testimony to the House and Senate in early March, the adjustment to the Fed’s Summary of Economic Projections (SEP) delivered the hawkish punch. Read more

Strong inflation in Canada should help CAD buffer today’s Fed decision

Strong inflation in Canada should help CAD buffer today’s Fed decision

Today's data showed that inflation in Canada continued to tick upwards in February by all counts. Headline inflation rose from 5.1% YoY to 5.7%, largely due to price rises in transportation, shelter and food. At 5.7%, price gains were the largest since August 1991, when headline CPI recorded 6%. Read more

Markets prepared for first Fed rate hike since 2018, focus is on forward guidance

Markets prepared for first Fed rate hike since 2018, focus is on forward guidance

The Federal Reserve will be up for a challenge today as it will have to weigh surging inflation against the uncertain outlook over the war, complicating the case for policy normalisation. Markets and the Fed both seem to agree on the fact that today will mark the first quarter point rate hike since 2018 after Fed Chair Powell downplayed the chances of a 50bp hike to Congress a few weeks ago. Read more

Cautious optimism as Russia-Ukraine talks continue

Cautious optimism as Russia-Ukraine talks continue

Sentiment around the euro is fully driven by Russia-Ukraine headlines and overall risk at the moment, as traders have now digested the European Central Bank decision from last week. Ongoing peace talks between Russia and Ukraine are showing no signs of de-escalation, however, the weakness in European currencies seems to have taken a breather regardless as markets remain cautiously optimistic. Read more

BoE to look past stronger-than-expected UK jobs data on Thursday

BoE to look past stronger-than-expected UK jobs data on Thursday

This morning’s UK labour market data from January and February showed the continued recovery the Bank of England likes to see to continue hiking interest rates, while the higher wages slightly reduce expectations that some members will vote for unchanged policy this week. Read more

Dollar rally broadens ahead of FOMC

Dollar rally broadens ahead of FOMC

The US dollar is trading in the green against G10 peers this morning, with two narratives supporting the currency. Firstly, US Treasury yields are rising across the curve ahead of Wednesday’s FOMC meeting, as the inflationary backdrop globally sparks expectations for the Federal Reserve to hike interest rates both on Wednesday this week and on multiple other occasions this year. Read more

Russia-Ukraine makes central banks think twice about hikes

Russia-Ukraine makes central banks think twice about hikes

Risk sentiment chopped and changed throughout the week as all eyes remained on Russia-Ukraine developments. This week monetary policy decisions by the FOMC and BoE are set to show similar levels of caution to the ECB, although both central banks are still expected to hike interest rates by 25bps. Read more

Huge February jobs report sees CAD reverse losses on the week

Huge February jobs report sees CAD reverse losses on the week

Canadian employment increased by 336.6k in February, more than doubling economist estimates. The net employment gain saw a complete reversal of January’s 200k Omicron-induced job losses, resulting in the unemployment rate falling from 6.5% to 5.5% to sit close to May 2019’s record low of 5.4%. Read more

Euro bogged down by the ECB’s mixed messaging

Euro bogged down by the ECB’s mixed messaging

Despite yesterday’s rather hawkish European Central Bank decision, the euro pared back all post-statement gains following the press conference. Today, all eyes will be on discussions in Versailles as EU leaders seek to gain a consensus on supranational bond issuance to finance investment in energy infrastructure to become more self-sufficient in the future. Read more

Euro jolts above 1.11 as ECB surprises markets with hawkish move despite war in Ukraine

Euro jolts above 1.11 as ECB surprises markets with hawkish move despite war in Ukraine

Today’s European Central Bank decision came as music to the ears of EUR bulls. With the Russian invasion of Ukraine having materially changed the eurozone risk profile in a matter of weeks, the last thing markets expected was for the ECB - which is usually very cautious around its wording - to come out with a definitive announcement of a faster taper to their QE programme. Read more

US inflation highest since January 1982, but markets unfazed

US inflation highest since January 1982, but markets unfazed

US headline inflation today printed at 7.9% YoY for February, up from 7.5% in January, to record the fastest pace of price growth in 40 years. Unlike in previous readings, however, the core reading was much more muted at just 0.5% MoM. Read more

ECB’s hands tied by the war for now

ECB’s hands tied by the war for now

Given the headlines of such policies helped the euro rise from the doldrums earlier this week, markets will focus on the viability of further supranational spending and the likelihood that it will be derailed by political discrepancies. Read more

EUR Update: European currencies battered by latest Russia-Ukraine headlines – is there a floor?

EUR Update: European currencies battered by latest Russia-Ukraine headlines – is there a floor?

Since the publication of our latest FX forecasts at the beginning of the month, significant developments in the Russia-Ukraine war have put increased pressure on European currencies and equities. Over the last month, the respective currencies of these nations have therefore performed even worse than the euro. The question now is; where will price action stabilise? Read more

CHF Update: Consolidation below parity in EURCHF is unlikely

CHF Update: Consolidation below parity in EURCHF is unlikely

While the Swiss franc is considered a global safe haven, we have long argued that its haven attributes are more acute during periods of regional risk. This has been visible over the past weeks, as rising political and economic risks have significantly impacted the European growth outlook. Read more

Euro’s battle moves from Kyiv to Versailles

Euro’s battle moves from Kyiv to Versailles

News that EU leaders are set to meet on March 10-11th in Versailles to outline a common stance on supranational bond issuance in order to invest in defense and energy helped the euro rise from recent multi-year lows yesterday. The single currency’s rally stalled just shy of 0.5% upon closing, as US equity markets took a late nosedive and hampered the slight improvement in the risk backdrop. Read more

Potential ban on Russian crude to keep FX volatility high

Potential ban on Russian crude to keep FX volatility high

This morning, equity futures are relatively stable for US indices but this morning’s trading follows a dramatic drawdown in US equities in the cash market. Volatility in global markets, whether it be in FX, equities or commodities, is causing a liquidity drain in the dollar as markets look to the haven in times of distress. Read more

Euro sinks to 2-year low on prospects of energy sanctions

Euro sinks to 2-year low on prospects of energy sanctions

European currencies and equities continued to get slaughtered this morning following concerns around a potential aggravation of military fallout from Russia-Ukraine, while commodity currencies outside of Europe have been more reactive to the soaring commodity prices. Read more

Stagflation risks due to Russia-Ukraine complicate ECB’s road to normalisation

Stagflation risks due to Russia-Ukraine complicate ECB’s road to normalisation

Geopolitical events will remain at the fore for markets next week, while the next ECB meeting will be key for European assets. President Lagarde, along with the macroeconomic staff projections, will have to carefully navigate the stagflationary risk posed by the war in Ukraine without causing alarm for markets. Read more

Payrolls confirm lift-off from the Fed in March

Payrolls confirm lift-off from the Fed in March

Today’s payrolls data was strong by nearly all metrics and confirms that the Fed will hike rates by 25bps in March. In normal times, the magnitude of today’s net employment beat would likely solidify expectations of a larger interest rate rise in March, however, the Fed is unlikely to raise rates by 50bps given the uncertainty in the global economy and the recent softening in wage growth. Read more

Macklem lays out quantitative tightening policy, expect roll-off in April

Macklem lays out quantitative tightening policy, expect roll-off in April

Despite the announcement of the Bank’s quantitative tightening policy and Macklem’s reluctance to rule out larger rate adjustments in the future coming as new developments from the Bank, the market reaction was fairly muted. USDCAD rises throughout Macklem’s progress report, but largely due to broad USD strength as CAD losses are more contained relative to other G10 currencies. Read more

Russia’s shelling of Ukrainian nuclear plant triggers renewed risk-off

Russia’s shelling of Ukrainian nuclear plant triggers renewed risk-off

The overnight session has been dominated by a fire at Ukraine’s largest nuclear power station. European currencies got battered, while the safe haven dollar found renewed strength as initial headlines flagged the danger posed by damaged reactors and suggested that Russian shelling prevents fire brigades from entering the plants. Read more

Policy divergences widen as central banks weigh Russia-Ukraine risks

Policy divergences widen as central banks weigh Russia-Ukraine risks

Purchasing managers’ indices are expected throughout the morning, while the ECB publishes its minutes of the February meeting at 12:30 GMT. For today, markets will keep an eye on another round of Powell testifying and the release of the ISM services index. Read more

Bank of Canada starts raising rates, QT to occur in April

Bank of Canada starts raising rates, QT to occur in April

Today, the Bank of Canada met our expectations and raised rates by 25bp to bring the target for the overnight rate to 0.5% while maintaining optionality with its balance sheet by refraining from ending the reinvestment phase. Read more

A beat for eurozone inflation, but eyes remain on Russia

A beat for eurozone inflation, but eyes remain on Russia

With inflation already running hot and national inflation prints showing continued pressure on prices, all eyes were on today’s eurozone inflation data for February, which rose to a record of 5.8% YoY up from January's 5.1%, while the MoM number printed at 0.9%. Read more

Intensifying war drags EURUSD to 20-month low ahead of Powell’s testimony

Intensifying war drags EURUSD to 20-month low ahead of Powell’s testimony

Markets saw renewed safe haven flows yesterday and this morning after Russia stepped up its assault on Ukraine. Powell can use his testimony tonight to either confirm or assuage those fears, although the focus is likely to remain on flexibility for now.  Read more

Monex’s March 2022 FX Forecasts

Monex’s March 2022 FX Forecasts

Geopolitical events are likely to continue driving FX markets in the near-term and with no clear end game as things stand, our forecasts remain under review. Our base case scenario at present is that the pace of geopolitical developments slow in March, but recent events result in a material deterioration in Europe’s macroeconomic backdrop and a still tentative risk environment. Read more

Markets cautiously stabilise after initial reaction to sanctions

Markets cautiously stabilise after initial reaction to sanctions

Today’s data calendar for the eurozone is packed with key releases, however most focus will be on the CPI figures from Italy and Germany at 10:00 and 13:00 respectively, especially given that the geopolitical developments make the inflation outlook anything but certain.  Read more

Harsher sanctions from the West sends USDRUB soaring

Harsher sanctions from the West sends USDRUB soaring

The euro was hit hard by the geopolitical developments over the weekend as its regional proximity and procyclical features leave the currency vulnerable to the situation in Eastern Europe. Read more

Inflation pressures blow in from the East

Inflation pressures blow in from the East

Next week (28th Feb - 4th March), the focus of FX markets will remain on developments in Eastern Europe, but some attention will be paid to the RBA and the Bank of Canada given they're the first G10 central banks to announce their latest policy decisions. Plus, Friday's US NFP data. Read more

The West sanctions Russian banks and industries but stays clear of SWIFT

The West sanctions Russian banks and industries but stays clear of SWIFT

EU member states met on Thursday and reached an agreement on a package of sanctions against Russia in an aim to paralyse the Russian economy, but stayed away from a unanimous vote to cut Russia off of the SWIFT global payment system. Read more

Russian invasion sends global markets into risk-off tailspin

Russian invasion sends global markets into risk-off tailspin

Overnight news that Russia has launched a full-scale invasion into Ukraine has sent global markets into a slight risk-off tailspin this morning. After trading in a sanguine manner all week despite the increased sanction pressure, markets are now having to trade the tail risk they’ve been ignoring all of this time. Read more

FX markets look through sanctions as measures are more targeted than initially feared

FX markets look through sanctions as measures are more targeted than initially feared

In the G10 space, the dollar is broadly softer this morning against all currencies, while NZD outperforms following another successive hike from the RBNZ. With the EU still set to announce their tariffs and no response yet from Moscow, incoming geopolitical headlines are likely to still dominate broad market price action today. Read more

Russia’s recognition of separatist forces to lead to imminent sanctions

Russia’s recognition of separatist forces to lead to imminent sanctions

This morning, focus remains directly on the development of sanctions and counter-measures, with the deterioration in the risk backdrop providing support for the broad dollar. Beyond geopolitical developments, focus will be on the release of flash February PMIs out of the US at 14:45 GMT, while commentary by Fed member Bostic at 20:30 GMT may embolden bets for a 50bps rate hike by the Fed in March.  Read more

UK PMIs keeps argument for 50bps hike in March finely poised

UK PMIs keeps argument for 50bps hike in March finely poised

Following a string of positive data out of the UK last week, traders are looking for the next piece of UK data to confirm or deny their prior beliefs as to whether the Bank of England will hike by 50bps in March. Read more

Biden-Putin peace summit results in broad risk-on mood in markets

Biden-Putin peace summit results in broad risk-on mood in markets

Despite the news cycle predominantly focusing on the intensification of mortar fire at the Ukrainian border over the weekend, news that Presidents Biden and Putin have agreed in principle to France’s proposal of a peace summit has resulted in markets opening this morning with a fresh risk supportive wind behind their sails. Read more

Geopolitical headlines set to continue dominating market price action

Geopolitical headlines set to continue dominating market price action

This week (21st-25th), headlines regarding the Russia-Ukraine crisis will continue overshadowing the data calendar, however, there are a few important events still scheduled. Firstly, a flurry of Bank of England communications are set to be released over the course of the week. Fresh policy decisions are also expected out of China and New Zealand. Read more

UK retail sales rebound as Omicron fears subdue

UK retail sales rebound as Omicron fears subdue

The pound is trading on the front foot this morning after this morning’s data docket showed an increase in UK January retail sales of 1.9% MoM, well above the consensus of 1.1%, while the figure excluding auto fuel rose by 1.7% after a drop of 3.9% the month before. Read more

EUR Update: Fluid backdrop to keep volatility elevated

EUR Update: Fluid backdrop to keep volatility elevated

The ongoing political risk in Europe means EURUSD is going to remain an easy target within the G10, while rising US Treasury yields the euro’s sensitivity to them will also be a risk. Looking over to H2, an improvement in global growth conditions will be more deterministic for the euro when the monetary outlook and political backdrop has become more stable. Read more

CBRT: Unchanged rates, but risks on the horizon

CBRT: Unchanged rates, but risks on the horizon

Today’s decision by the CBRT to leave its one-week repo unchanged at 14.00% was widely expected, given the downside risks to the economic outlook following heightened geopolitical risks and inflation sitting at 20-year highs - both of which scream for the loosening cycle to be paused to not embolden further short selling of the lira. Read more

Russia-Ukraine headlines chop and change risk sentiment in the FX space

Russia-Ukraine headlines chop and change risk sentiment in the FX space

The US dollar remained offered yesterday as markets continued to trade on news of Russia’s withdrawal of troops from the border and the halting of military exercises. With today’s calendar being virtually blank for the US, the focus remains on developments in broader macro flow and global risk. Read more

Canadian inflation jumps to BoC’s Q1 target in January

Canadian inflation jumps to BoC’s Q1 target in January

Today's CPI data showed headline inflation hit the BoC's Q1 projection, 5.1%, in just the first month of the quarter. Only one out of 15 professional forecasters polled by Bloomberg expected such a hot inflation print coming, with the consensus pointing to no change in the headline rate from December’s 4.8% reading. Read more

Cautious optimism as Russian troops return, but uncertainties remain

Cautious optimism as Russian troops return, but uncertainties remain

The US dollar took on some water yesterday as risk sentiment improved following the headline that some of Russia’s troops are returning to their bases, however the backdrop remains highly uncertain. Today, markets will continue to keep an eye on the Russia-Ukraine situation along with tonight’s release of the FOMC meeting minutes from January. Read more

UK CPI surprises to the upside again, throwing the ball into the Bank of England’s court

UK CPI surprises to the upside again, throwing the ball into the Bank of England’s court

Following a 0.2 percentage point (pp) upwards surprise in December’s headline CPI print, UK inflation continued to tick higher in January. Despite expectations sitting at 5.4% YoY, signalling no change in the headline rate of inflation from December, the data showed a 0.1pp increase that was driven by a smaller MoM dip in prices relative to January 2021. Read more

Russia-Ukraine continues to dominate the market’s focus

Russia-Ukraine continues to dominate the market’s focus

Markets will focus heavily on geopolitical events in eastern Europe when pricing the broad dollar, with German Chancellor Olaf Scholz set to meet Vladimir Putin in Moscow today. The pound is likely to remain sensitive to the broad US dollar moves in markets, which continues to be flung around by headlines over the Russia-Ukraine situation. Read more

Negative UK real wage growth gives BoE a little breathing room

Negative UK real wage growth gives BoE a little breathing room

December’s labour market data out of the UK continued to show the recovery progressing despite the onset of Omicron. UK real wage growth becomes negative in Q4 2021, easing pressure on BoE as inflation ticks higher. That being said, with inflation set to rise in Q1, real wage growth across both total and regular pay measures are set to decline further into negative territory. Read more

Geopolitics take centre stage while ECB officials push back on Q3 rate hikes

Geopolitics take centre stage while ECB officials push back on Q3 rate hikes

Today’s calendar is light on the US front, but markets will keep an eye on any incoming Russia-Ukraine headlines. Looking at today’s calendar, comments from ECB’s Christine Lagarde at 16:15 GMT will be watched for further guidance.  Read more

Managing great expectations

Managing great expectations

The focus in the week ahead will be on a series of UK data after Friday’s UK GDP showed the UK economy performed much better than expected in Q4, along with a slew of releases from Canada. Meanwhile, focus will remain on central bank events as policymakers try to manage the great expectations of policy tightening visible in short-term interest rate instruments.  Read more

CBR hikes rates by 100bps as inflationary pressures broaden

CBR hikes rates by 100bps as inflationary pressures broaden

Today’s decision by the CBR to raise interest rates by 100bps was almost a given as the central bank needed to respond to broadening inflationary pressures resulting from the increased FX passthrough. Both markets and economists largely expected the magnitude of today’s hike given how responsive the CBR has been to inflation throughout the pandemic. Read more

Dollar whipsaws post-CPI as markets adjust to more hawkish Fed pricing

Dollar whipsaws post-CPI as markets adjust to more hawkish Fed pricing

The release of January’s CPI data yesterday didn’t disappoint. After waiting all week for the main event, market volatility picked up after the data showed inflation rising above expectations to post the highest headline inflation rate since February 1982 and the highest core rate since August 1982. Read more

December UK GDP shows first signs of growth shift

December UK GDP shows first signs of growth shift

The UK economy performed much better than expected in Q4 as the slip in growth in December due to Omicron was far more moderate than previous Covid waves. December’s GDP fell by 0.2% MoM, compared with expectations of -0.5%, to keep overall output at pre-pandemic levels (Feb 2020). Read more

US inflation pressures broaden in January despite Omicron

US inflation pressures broaden in January despite Omicron

Updated weightings to January’s US CPI basket posed upside risks to today’s data, which ultimately transpired with headline CPI printing 0.2 percentage points (pp) above expectations at 7.5% YoY and the core measure beating expectations by 0.1pp with a print of 6% YoY. Read more

Lack of guidance by Riksbank sends EURSEK flying

Lack of guidance by Riksbank sends EURSEK flying

Today’s decision by the Riksbank to leave the key rate unchanged at 0.00% came as no surprise to markets. However, with the ECB already having shifted to team hawk and the next Riksbank meeting not for another 11 weeks, market participants had set their eyes on more hawkish guidance from the central bank. In the absence of this, the Swedish krona plunged to fresh session lows across the currency board. Read more

Calm before the storm ahead of US CPI figures

Calm before the storm ahead of US CPI figures

The US dollar took on some water in yesterday’s session as global equities staged a solid rebound and risk sentiment improved. Today, all focus will be on the US CPI report at 13:30 GMT, and whether this will shift market expectations from a 25bps rate hike in March to 50bps. This could spark further volatility in rate markets and FX markets as it may challenge their views. Read more

CHF Outlook: Higher rates and stronger economic backdrop to weigh on CHF

CHF Outlook: Higher rates and stronger economic backdrop to weigh on CHF

Over a longer timeframe, given expectations of a stronger regional and global economic backdrop, we expect the Swiss Franc has room to depreciate against the majority of the G10. Risks to Monex's new EURCHF forecasts are largely balanced. Read more

AUD continues to lead gains due to short squeeze and higher AGB yields

AUD continues to lead gains due to short squeeze and higher AGB yields

Stability in North American and European stock markets meanwhile lifted risk sentiment and saw AUD lead the charge against the dollar yet again. The Aussie dollar, boosted by the recent rise in front-end yields and the stabilisation of risk appetite has benefitted from the short squeeze despite the backdrop of falling oil prices weighing on commodities as a whole. Read more

Lagarde’s words fail to soothe investors as speculation remains high

Lagarde’s words fail to soothe investors as speculation remains high

ECB President Christine Lagarde spoke out to the media yesterday and sounded more dovish than in the meeting last week. Her comments failed to soothe markets, as expectations for higher rates remain largely unchanged after her speech. Read more

Hawkish ECB repricing allows Bund yields to break free

Hawkish ECB repricing allows Bund yields to break free

Today’s comments from ECB President Lagarde will be watched at 15:45 GMT for more insights, while France’s Macron meets Putin in Moscow today and the EU meets to discuss contingency steps should European consumer gas prices rise further. Read more

Rate volatility to extend next week as more hikes are incoming

Rate volatility to extend next week as more hikes are incoming

This week (7th-11th Feb), monetary policy remains in focus with the Riksbank, Central Bank of Russia, National Bank of Poland, and Banxico set to announce their latest decisions while various speakers from the BoE, ECB, BoC, Fed, and Reserve Bank of Australia will comment to media. On the data side, US CPI and UK GDP will be the main prints to look out for. Read more

North American labour market reaction

North American labour market reaction

The impact today’s negative reading had on Canadian assets was only exacerbated by the strong US nonfarm payrolls release for the same time period. Going into today’s data release, the White House had warned not to overinterpret the US labour market report because of seasonal impacts and Omicron. Read more

Hot inflation print marks the end of the ice age for ECB hawks

Hot inflation print marks the end of the ice age for ECB hawks

This morning’s factory orders from Germany which printed to the upside emboldens this view, while markets now turn to US labour market data at 13:30 GMT for further trading impetus. Any negative surprise in the data will only embolden EUR bulls and would likely see fresh year-to-date highs in EURUSD. Read more

ECB shows tolerance to inflation, rate hike in Q4 live

ECB shows tolerance to inflation, rate hike in Q4 live

Today’s ECB rate statement offered markets very little to reprice. The only tweak from December came in the penultimate paragraph, where wording around adjusting policy in “either direction” was removed. This change in tone took markets by surprise. Read more

BoE seen as hawkish on the surface, but expectations are too aggressive

BoE seen as hawkish on the surface, but expectations are too aggressive

The Monetary Policy Committee today voted 5-4 in favour of hiking rates by 25bps to 0.5%. The four dissenting members voted to hike rates by 50bps to 0.75%. For FX markets, the pound’s initial spike following the release of the rate statement proved short-lived as the focus quickly shifted from hawkish near-term rate expectations to the high likelihood that rates will in fact undershoot rates implied by money markets. Read more

Bank of England and ECB double header set to fuel volatility in the G10 FX market

Bank of England and ECB double header set to fuel volatility in the G10 FX market

The pound started this morning slightly weaker against the dollar but is back up near recent highs against the euro ahead of key announcements from the Bank of England, the European Central Bank, and the UK energy regulator. GBPEUR is likely to remain the currency cross under the most attention today given the monetary policy releases in both the UK and Europe. Read more

The dollar remains under pressure as Fed pricing eases

The dollar remains under pressure as Fed pricing eases

With the dollar sustaining substantial losses and the DXY index trading back below last week’s cycle highs, the relative calm in the US 2-year may have played out in determining FX price action for now. Focus today is on employment in the US with the ADP private nonfarm employment data set for release today at 13:30 GMT. Read more

Monex’s February 2022 FX Forecasts

Monex’s February 2022 FX Forecasts

Looking ahead, our FX analysts expect the dollar’s strength to be more nuanced in February and for it to be isolated against currencies where rates are likely to lag the rise in US rates. In our forecasts, this largely pertains to EUR, JPY and CNY. Read more

Aussie dollar briefly declines as RBA pushes back rate expectations

Aussie dollar briefly declines as RBA pushes back rate expectations

Expectations leading into today’s Reserve Bank of Australia meeting were high given recent labour market and inflation data came in much stronger than expected. The RBA met our expectations by ending its A$4bn per week QE programme while also pushing back on market expectations of a rate hike. Read more

Confidence in Italian bonds returns as Mattarella extends term

Confidence in Italian bonds returns as Mattarella extends term

While moves in the euro are nothing to write home about this morning, the BTP-Bund spread sharply declined from recent yearly highs to lows last seen in November following the outcome of the Italian elections. The Russia-Ukraine situation - arguably the bigger area of concern - will be watched heavily by markets this week as it may become clear what form the sanctions on Russia will take.  Read more

Keeping pace with market expectations of the Fed

Keeping pace with market expectations of the Fed

This weel (31st Jan -4th Feb), the emphasis will remain on rates markets with the Bank of England and the European Central Bank set to announce their latest policy decision. Additionally, jobs data out of the US and Canada will show the impact of Omicron on employment. Read more

Dollar rampage continues as rates adjust post-Fed

Dollar rampage continues as rates adjust post-Fed

Market bets on rate hikes by the Federal Reserve have increased since Wednesday evening’s meeting, even as market pricing was aggressive ahead of the meeting already and risks were therefore tilted to the Fed underdelivering. Read more

BoC hands hawk feathers over to Fed as Powell signals “plenty” room for rate hikes

BoC hands hawk feathers over to Fed as Powell signals “plenty” room for rate hikes

Following the BoC’s announcement that rates are set to remain at 0.25%, the loonie reversed all of its daily gains to sit flat despite the Bank teeing up a rate hike at March’s meeting. While the Canadian dollar flirted with trading higher, such that half of its lost gains were recovered, during the press conference, the loonie’s bullish bias was soon to be crushed come the Fed meeting. Read more

Dollar climbs after Powell stresses the strength of the labour market

Dollar climbs after Powell stresses the strength of the labour market

The Federal Reserve today took the final steps needed to signal a 25bps rate hike at March’s meeting. However, with markets expecting such a policy move and 3 more subsequent rate hikes by the US central bank in 2022. Read more

Bank of Canada shocks by holding rates at 0.25%

Bank of Canada shocks by holding rates at 0.25%

The Bank of Canada today decided to hold rates at 0.25% despite acknowledging that economic slack, the precondition for raising rates, has now been absorbed. While sell-side analysts favoured this outcome, financial markets largely disagreed that this was the likeliest option. Read more

The Fed is set to steal the spotlight from Ukraine-Russia developments today

The Fed is set to steal the spotlight from Ukraine-Russia developments today

Today’s Bank of Canada and Federal Reserve announcements may act as a distraction to the geopolitical developments, however, as volatility is likely to pick up again in the rates space. Expectations are for the Fed to hike rates to 1% this year. Read more

Dollar goes bid in a wild ride for global markets

Dollar goes bid in a wild ride for global markets

“Breathtaking” has been the operative word to describe yesterday’s equity market volatility as North American indices fell over 4% after opening before closing marginally higher on the day. The dollar benefited in this environment as volatility in equity markets coupled with geopolitical events resulted in soured risk sentiment. Read more

Sentiment turns bearish on GBP as calls for Johnson’s resignation are set to reach a crescendo this week

Sentiment turns bearish on GBP as calls for Johnson’s resignation are set to reach a crescendo this week

With last week’s data setting the stage for another rate hike by the BoE next week, markets are likely to turn a blind eye to the UK’s economic releases this week. Read more

Hawkish hints eyed at next week’s FOMC and BoC meeting for guidance on lift-off

Hawkish hints eyed at next week’s FOMC and BoC meeting for guidance on lift-off

Policy expectations will continue to drive markets with the Federal Reserve and the Bank of Canada set to release their latest policy decisions. Both central banks are on the more hawkish side of the spectrum given their robust economic outlook. Read more

UK retail sales plunge in December, but overall UK data picture is GBP-supportive

UK retail sales plunge in December, but overall UK data picture is GBP-supportive

After a mixed run in yesterday’s session, with the pound losing ground against the strengthening dollar while also posting a fresh high in GBPEUR,  the pound lost some of its shine this morning after UK retail sales posted a decline six times larger than what economists had expected. Read more

Turkish lira rises after mention of FX rate in CBRT statement

Turkish lira rises after mention of FX rate in CBRT statement

The Central bank of Turkey adhered to its pledge at its last meeting and held the policy rate on hold at 14.00% today, as expected. While the decision had been well-signalled in advance, the Turkish lira still reacted positively to the announcement. Read more

DXY index closes negative as surge in yields comes to a stop

DXY index closes negative as surge in yields comes to a stop

Today’s calendar is rather light, with US Q4 earnings being the main release of note. Developments in Ukraine and Russia will also be watched by investors after President Biden commented on the situation and stated he thinks Russia will move in on Ukraine. Read more

BRL Outlook: Hawkish BCB to offset depreciation, but political risks may tip the balance

BRL Outlook: Hawkish BCB to offset depreciation, but political risks may tip the balance

As the year progresses, the Brazilian general elections that are set to be held in October will become increasingly relevant for FX markets given the real’s reputation of weakening in times of political uncertainty and upcoming elections. Read more

UK inflation surprises to the upside, but pound’s reaction remains muted

UK inflation surprises to the upside, but pound’s reaction remains muted

The UK’s CPI inflation figures came in stronger than expected on Tuesday, with the YoY headline figure printing at 5.4% vs the 5.2% estimated, while the MoM print dropped to 0.5% from last month’s 0.7% - albeit above the 0.3% expected. Read more

UK CPI further increases chances of a February rate hike by the BoE

UK CPI further increases chances of a February rate hike by the BoE

This morning’s inflation data from the UK failed to push GBP another leg higher despite the decent upside surprise, given yesterday’s price action already saw GBPEUR moving back to fresh highs last seen in May 2021, while the rally extended through this morning ahead of the CPI release. Read more

UK jobs report bolsters further tightening by the Bank of England

UK jobs report bolsters further tightening by the Bank of England

On balance, the UK labour market is looking similar to pre-pandemic levels, which bodes well for further tightening by the BoE. Until tomorrow’s CPI reading, the calendar remains empty for the UK and much of the price action for sterling is set to result from US Treasury moves. Read more

USD Outlook: Factoring in the stall in hawkish Fed pricing

USD Outlook: Factoring in the stall in hawkish Fed pricing

Since the Federal Reserve’s December meeting, the DXY index has fallen by 1.5% despite data released over the same timeframe for December showing the unemployment rate falling below 4% and inflation data rising to a near 40-year high. Read more

PBOC cuts key rate for the first time since April 2020

PBOC cuts key rate for the first time since April 2020

This morning, China’s Q4 GDP figure showed a slowdown in growth from 4.9% to 4.0% YoY, well above the consensus of a 3.3% YoY increase, however the PBOC still cut the 1-year medium term lending facility rate from 2.95% to 2.85%. Read more

Central banks coming back into focus after slow January start

Central banks coming back into focus after slow January start

the theme of monetary policy extends with the Bank of Japan, Norges Bank and the CBRT set to announce their latest decisions. All three are expected to keep policy on hold, however language from policymakers will be key to any potential volatility in the marketplace. Read more

Dollar downside viewed ahead of expected contraction in US retail sales

Dollar downside viewed ahead of expected contraction in US retail sales

For today’s calendar, markets turn to US retail sales for December at 13:30 GMT, where a contraction of 0.1% MoM is expected. A negative print in the data will likely spark further dollar downside as the hawkish Fed pricing looks to have run its course so far in markets. Read more

UK economy finally recovers to above pre-pandemic levels of output

UK economy finally recovers to above pre-pandemic levels of output

This morning’s release of UK GDP data for November saw economic activity more than double the consensus estimate with a print of 0.9% MoM. In addition to this, October’s monthly GDP reading was revised upwards from 0.1% to 0.2%. Read more

Dollar declines following December CPI, Brainard’s hearing up next

Dollar declines following December CPI, Brainard’s hearing up next

If you were to predict the market reaction to a near 40-year high US CPI print of 7% ahead of time, chances are you wouldn’t have guessed yesterday’s outcome correctly across all markets. Read more

Monex’s 12 key market themes for 2022

Monex’s 12 key market themes for 2022

Trade ideas tend to have a short shelflife in today's market, so instead of issuing trade suggestions for 2022, we have opted to outline the main themes we think will dominate market price action in the coming 12 months. Read more

US inflation near 40-year high, but financial markets are underwhelmed

US inflation near 40-year high, but financial markets are underwhelmed

Despite the US CPI release showed that headline inflation is sitting at its highest point since June 1982, the reaction in the Treasury market was counterintuitive and the dollar sold-off against its G10 peers. Read more

Dollar dampened by Powell’s reluctance to turn more explicitly hawkish

Dollar dampened by Powell’s reluctance to turn more explicitly hawkish

Selling pressure hit the greenback following Powell’s appearance in front of the Senate banking committee and continued overnight ahead of today’s release of December’s CPI data for the US, pushing the DXY index down to its lowest point since November 30th. Read more

Dollar bid fades as equity markets stabilise, Powell could reignite bond market turmoil

Dollar bid fades as equity markets stabilise, Powell could reignite bond market turmoil

Beyond tackling inflation and discussing the speed of the labour market recovery, Powell is expected to speak on climate change, banking regulation, and the trading scandal that saw Vice Chair Clarida resign yesterday a fortnight before his term was due to expire. Read more

Dollar starts to fightback following Friday’s payrolls induced slip

Dollar starts to fightback following Friday’s payrolls induced slip

Outside of economic events, the start of US-Russia discussions in Geneva today will be closely watched as any breakdown in talks could result in harsher economic sanctions and shift the risk environment. Read more

Inflation is back in focus after a week of rising bond yields

Inflation is back in focus after a week of rising bond yields

Next week (10th - 14th January), inflation data will be the focus and key for market pricing of rates, but it isn’t a given that this will bring about volatility in the FX space. Read more

US and Canadian labour market reactive

US and Canadian labour market reactive

Expectations for today’s US payrolls data were high after multiple sell-side forecasters revised their projections for the net employment figure upwards following the higher ADP and Homebase data from earlier in the week. Read more

FOMC meeting minutes strike hawkish tone, but it’s one for the fixed income traders

FOMC meeting minutes strike hawkish tone, but it’s one for the fixed income traders

It seems today's FOMC meeting minutes is one for the fixed income traders as opposed to the FX space. For FX markets, the impact of today’s meeting minutes will likely play out over the course of the week, especially as December’s jobs data is released on Friday following bumper ADP and Homebase indicators earlier in the week. Read more

US Payrolls data to define the next leg for the dollar after hawkish Fed minutes

US Payrolls data to define the next leg for the dollar after hawkish Fed minutes

The US dollar has been hovering within recent ranges since yesterday as markets await December’s payrolls data which is scheduled for release this afternoon at 13:30 GMT. The data comes after a strong ADP print which beat even the highest forecast, and minutes of the FOMC which showed that maximum employment is within reach while the strong economic recovery and higher inflation could mean interest rate hikes would come earlier and faster. Read more

G10 FX markets finally wake up to the hawkish Fed minutes

G10 FX markets finally wake up to the hawkish Fed minutes

US Treasury yields had been rising for the majority of the week as market participants developed higher expectations for inflation and policy normalisation ahead of yesterday’s release of the FOMC meeting minutes. The release of the meeting minutes did not disappoint and caused more carnage in equity and fixed income markets as the hawkish expectations were confirmed. Read more

All eyes on FOMC minutes as Treasuries rebound

All eyes on FOMC minutes as Treasuries rebound

The US dollar rallied in yesterday’s session following surging US Treasury bond yields on Tuesday but retraced some of its gains after mixed Omicron headlines and ahead of tonight’s release of the FOMC meeting minutes. Read more

EUR and JPY take on water as US Treasury yields look to return to pre-pandemic levels

EUR and JPY take on water as US Treasury yields look to return to pre-pandemic levels

The fall in the euro can most likely be attributed to jumps in the US 2Y and 10Y yield more so than domestic headlines given the euro’s sensitivity to yield differentials. For the same reason, JPY dropped to a 4-year low against the US dollar in yesterday’s session. Read more

Liquidity conditions normalise while markets get ready for US Nonfarms

Liquidity conditions normalise while markets get ready for US Nonfarms

Virus conditions will be watched throughout the first half of the week while on Friday, markets turn to the Nonfarm Payrolls report which could support the dollar further if the release reflects stronger underlying growth momentum domestically amid global worries around Covid.  Read more

Monex January 2022 FX Forecasts

Monex January 2022 FX Forecasts

Looking ahead to 2022, our forecasts have been adjusted to take into account the new sensitivities of central banks to inflation, continuing virus risks and the likely slowdown in growth in Q1. Omicron risk continues to dominate as policymakers conduct a balancing act in order to mitigate the health and economic impacts. Read more

Dollar declines as liquidity disappears with Christmas rapidly approaching

Dollar declines as liquidity disappears with Christmas rapidly approaching

The dollar weakened further across the board in yesterday’s session as the risk on mood in markets extended following more optimistic Covid headlines while equities surged, with the S&P 500 hitting another all-time high. Read more

FX markets look past second-tier data amid holiday-thinned trading

FX markets look past second-tier data amid holiday-thinned trading

The pound was one of the main beneficiaries of the broad USD weakness in yesterday’s session as the currency rose 0.65% open-to-close against the dollar and 0.31% against the euro. Read more

Markets start to dull down as data calendar dries up

Markets start to dull down as data calendar dries up

The broad dollar sat under pressure for the first time this week in yesterday’s trading session as market risk sentiment was better supported, however, the DXY index is yet to show a material step down due to the greenback’s rally against the Japanese yen yesterday. Read more

Turkish lira captivates markets after rallying over 28% from its lows

Turkish lira captivates markets after rallying over 28% from its lows

Events in Turkey yesterday had esteemed EM currency traders gobsmacked as the lira went from 12% down on the day against the dollar to rallying over 28% from its trough upon closing. Read more

Dollar bid reignites amid health concerns despite Biden’s spending package going up in smoke

Dollar bid reignites amid health concerns despite Biden’s spending package going up in smoke

The dollar starts this week bid across most G10 pairs as risk-off conditions dominate yet again amid concerns over economically damaging containment conditions being rolled out in response to the rise in cases brought about by the Omicron variant. Read more

Winding down for Christmas, yeah

Winding down for Christmas, yeah

Next week (20th - 24th December), despite the odd pieces of data set for release, economic events are unlikely to be too market moving with liquidity set to dry up as traders trim positions heading into year-end. Read more

CBR continues hiking as planned, ruble remains unfazed

CBR continues hiking as planned, ruble remains unfazed

The CBR's decision to go ahead with the 100bps hike to increase the key rate to 8.50% provided some upside to the ruble, but gains were limited as this was largely expected by markets and risks around stricter sanctions linger.  Read more

Euro takes joy in ECB decision despite the modest bridge between PEPP and APP

Euro takes joy in ECB decision despite the modest bridge between PEPP and APP

The ECB decided on a monthly net purchase pace of €40bn in Q2 and €30bn in Q3 under APP before the more traditional QE vehicle resets at a pace of €20bn from Q4 onwards. Read more

Bank of England gives way to inflationary pressure and hikes rates by 15bps

Bank of England gives way to inflationary pressure and hikes rates by 15bps

The Bank of England surprised market participants today by voting 8-1 to raise rates by 15bps to 0.25%, and has effectively announced the start of their hiking cycle in spite of the growth risks. Read more

Troubled times for the Turkish lira heading into 2022

Troubled times for the Turkish lira heading into 2022

The CBRT cut the one-week repo rate by a further 100bps this morning, bringing the policy rate down to 14%, which was largely expected by market participants. Read more

Norges Bank goes ahead with second rate hike despite emergence of Omicron

Norges Bank goes ahead with second rate hike despite emergence of Omicron

The Norges Bank upheld its hawkish reputation within the DM space today by going ahead with a second 25bps rate hike to bring the deposit rate to 0.50%. Read more

Fed’s sensitivity to inflation overshoot begins to show as 3 rate hikes signalled next year

Fed’s sensitivity to inflation overshoot begins to show as 3 rate hikes signalled next year

The shock delivered by today’s Federal Reserve decision came in the form of the dot plot, which now foresees 3 rate hikes in 2022, up from just half a rate hike signalled in September’s projections. Read more

UK labour market shows limited impact of furlough expiry but data does little for markets as BoE hamstrung by Omicron 

UK labour market shows limited impact of furlough expiry but data does little for markets as BoE hamstrung by Omicron 

Despite concerns of a disruptive removal of fiscal support, today’s UK employment data shows a fairly smooth impact of the end of the furlough scheme. The unemployment rate declined from 4.3% to 4.2% in the 3-months up until October. Read more

Bank of Canada formalises its implicit employment goal in new inflation mandate

Bank of Canada formalises its implicit employment goal in new inflation mandate

While today’s announcement falls in line with what economists were largely expecting and is merely a formalisation of the mandate that has been in practice since the onset of the pandemic, it is being viewed as a marginal dovish development by markets. Read more

Omicroncerns clouding the monetary outlook ahead of year end

Omicroncerns clouding the monetary outlook ahead of year end

Next week’s (13th - 17th December) calendar includes nine central banks scheduled to announce their policy decisions, which means FX volatility is likely to pick up. All of which are likely to be clouded by concerns over the impact of the Omicron variant.  Read more

National Bank of Poland continues hiking cycle despite virus uncertainties

National Bank of Poland continues hiking cycle despite virus uncertainties

The National Bank of Poland’s decision to hike interest rates by another 50bps today came as no surprise to markets as the central bank had been very clear in its messaging that inflation will be at the top of the agenda in the near-term. Read more

Bank of Canada flags desire to hike rates, but growth risks keep them noncommittal

Bank of Canada flags desire to hike rates, but growth risks keep them noncommittal

CAD mildly weakend on the back of the release as there was no material upgrade to the Bank’s October projections in the statement. However, the brief spike in USDCAD after the announcement was quickly retraced. Read more

BoC and NBP to keep markets busy ahead of US CPI

BoC and NBP to keep markets busy ahead of US CPI

Next week’s (6th - 10th December) calendar includes a BoC meeting and an NBP meeting, along with several CPI releases including the US. While the BoC is expected to hold fire on Wednesday, Thursday’s speech from BoC Deputy Governor Gravelle will be heavily watched. Read more

Diverging labour market progress in US and Canada brings back volatility in FX markets

Diverging labour market progress in US and Canada brings back volatility in FX markets

Volatility in FX markets after the US and Canada jobs reports made up for the lack of price action in the first part of the day. CAD strengthened to session highs on the back of the data, while USD saw opposite moves. Read more

Monex December 2021 FX Forecasts

Monex December 2021 FX Forecasts

The Omicron variant has certainly thrown another spanner in the works for our currency forecasts. With little information known about the efficacy rate of vaccines against the Omicron variant and therefore the impact it will have on global growth, we project our near-term forecasts based on the scenario of no substantial deterioration in Covid conditions towards year-end. Read more

Omicron arrival in the US spooks markets to reignite haven bid

Omicron arrival in the US spooks markets to reignite haven bid

The dollar split the G10 currency board in half again for the most part of yesterday’s session, as risk assets enjoyed an overdue boost given that no news on the Omicron variant was seen as good news. Read more

Upside in Canadian GDP unlikely to change Bank of Canada’s course

Upside in Canadian GDP unlikely to change Bank of Canada’s course

With growth still printing closer to the BoC’s expectations in Q3 than initially thought following August’s preliminary reading, and the preliminary reading for October showing a pick-up in sequential activity to 0.8% MoM, the report was positive on the whole. Read more

Covid concerns re-emerge, payrolls data pivotal for December Fed

Covid concerns re-emerge, payrolls data pivotal for December Fed

Next week's focus largely sits on Friday’s Nonfarm payrolls data. Outside of economic data, news about the spread, transmissibility and reduced vaccine efficacy of the new Covid strain from South Africa will prove highly influential for market risk appetite. Read more

Lower growth profile and rising US yields call for downgraded EUR calls

Lower growth profile and rising US yields call for downgraded EUR calls

In November, significant downside risks to our November forecasts materialised, with growth concerns and rising US yields pushing EURUSD down from 1.16 to the 1.12 level. Growth concerns arose as some eurozone countries went into light lockdowns. Read more

Krona rallies as Riksbank flags earlier rate hike

Krona rallies as Riksbank flags earlier rate hike

The sole focus of today’s Riksbank decision was on the rate projections and QE purchases going forward, as markets had widely expected the central bank to keep policy unchanged in today’s meeting. Read more

Dollar drives higher ahead of Thanksgiving break

Dollar drives higher ahead of Thanksgiving break

The dollar was on a surge again in yesterday’s session as markets received a deluge of US data before today’s Thanksgiving holiday, where US markets are closed for the day. Data out from yesterday saw US initial jobless claims fall to their lowest level since 1969. Read more

November flash PMI beat fails to invigorate pound like it did the euro 

November flash PMI beat fails to invigorate pound like it did the euro 

Following on from this morning’s eurozone PMI beat and the subsequent EURUSD rally, all eyes rested on the UK flash November PMI data and whether the pound would find a similar tailwind. Read more

Euro continues to fall as further lockdowns eyed

Euro continues to fall as further lockdowns eyed

The single currency remains in what can only be described as freefall against the dollar and other G10 currencies this morning following last week’s slump. Markets await news from Germany and France about how they will counter the latest rise in Covid cases.  Read more

Projected rate paths are key for NZD and SEK

Projected rate paths are key for NZD and SEK

Next week (22nd - 26th November), focus remains on how markets price central bank tolerances to inflation and global growth conditions as Covid cases begin to rise and force major nations to impose tighter containment measures. Read more

CBRT throws market a bone but pressure remains on the lira 

CBRT throws market a bone but pressure remains on the lira 

The renewed pressure on the lira was due to the terminology around the December forward guidance, which presented a much looser commitment to halting the cutting cycle than headlines suggested. Read more

Canadian CPI meets expectations at a record 4.7% YoY 

Canadian CPI meets expectations at a record 4.7% YoY 

Today’s CPI release for October saw headline print at 4.7% YoY in October, up from 4.4% in September and in line with the consensus expectation. This marks a 0.7% MoM NSA growth in prices in October, while the average of the core measures held steady at 2.67%. Read more

UK CPI, labour market data keep BoE on track for December hike

UK CPI, labour market data keep BoE on track for December hike

UK CPI massively outstriped expectations to print at its highest 12-month rate since December 2011, and the month-on-month change saw the pace of price increases reach a high not seen since April 1993. While today’s data exceeded the consensus estimate from economists, it is broadly in line with the BoE’s projections, which envisage CPI peaking at 5% in April 2022 when Ofgem adjusts its price cap again. Read more

DXY takes another leg higher as EUR and JPY sell-off from higher rates 

DXY takes another leg higher as EUR and JPY sell-off from higher rates 

While the dollar saw modest broad-based strength yesterday afternoon, losses among the G10 were most prominent in the euro given the currency’s sensitivity to the steepening of the US Treasury curve. This led to EURUSD falling to fresh 16-month lows while losses among other G10 peers were much more limited. Read more

GBP Outlook: Waiting for the break in the clouds

GBP Outlook: Waiting for the break in the clouds

With GBPUSD trading some distance from our 1-month target of 1.38, we have downgraded our end of month call to 1.3550 while maintaining our end of year call at 1.38. Our bullish medium-term GBP view remains on track despite the near-term hurdles for a number of reasons. Read more

Renewed restrictions in Europe cloud near-term outlook

Renewed restrictions in Europe cloud near-term outlook

EURUSD has been trading in tight ranges since Friday but remains on the weak side following the wave of USD strength since the US CPI inflation release. In the bloc itself, the near-term growth outlook may also be dampened by renewed Covid restrictions despite the European Commission having upgraded 2021 growth just last week. Read more

US CPI keeps markets volatile following the central bank bonanza

US CPI keeps markets volatile following the central bank bonanza

Next week (15th - 19th November), CPI remains top of mind as a number of nations are set to release reports highlighting above target price growth, however, we believe these releases will have less of an impact on broader markets relative to the US release this week. Additionally, central banks from South Africa and Turkey are expected to deliver fresh rate decisions.  Read more

US bond markets in focus as they reopen following Veterans Day 

US bond markets in focus as they reopen following Veterans Day 

Yesterday’s dollar action was relatively muted with the US equity and bond markets among others enjoying a bank holiday after Wednesday’s tumultuous session. The DXY index continued to strengthen this morning and reached a fresh 15-month high as policy expectations from the Fed remain high. Read more

RUB: Positive outlook riddled with risk

RUB: Positive outlook riddled with risk

While most arrows point in favour of a RUB rally, a major downside risk to the currency outlook has emerged as the Covid case count, along with related deaths and hospitalisations, stand at record-highs and first steps have been taken to slow the surge. Read more

Markets shaken by strong US CPI print while policy expectations grow

Markets shaken by strong US CPI print while policy expectations grow

Markets were hit by a bout of USD strength in yesterday’s session after CPI inflation printed to the upside, igniting further inflation fears globally and expectations of policy tightening by the Fed. October’s core CPI rose by 0.60% MoM, 0.2pp above expectations, while the YoY rate jumped to 4.6%. The annual headline figure rose to 6.3% YoY, the highest inflation reading since November 1990. Read more

US inflation tracks back above 6%, placing pressure on transitory messaging 

US inflation tracks back above 6%, placing pressure on transitory messaging 

With expectations for October’s CPI print to rise from 5.4% to 5.9% YoY already in play, today’s inflation release had to be big to disrupt markets beyond what had already been priced into the Treasury curve and in the FX space during the morning session. Read more

All eyes are on US rate pricing on CPI day

All eyes are on US rate pricing on CPI day

With this week’s economic calendar being rather sparse for most of the G10 countries, all focus will be on today’s US consumer price data which will likely show an acceleration in October. CPI is expected to rise 5.9% YoY and 0.6% MoM, while core inflation is set to climb 0.4% MoM. Read more

Fed events keep the headlines rolling in a light data day 

Fed events keep the headlines rolling in a light data day 

The dollar continued to pare back gains in yesterday’s session after Friday’s strong jobs report from the US. An empty data calendar was offset by several Fed speeches, although no new information was shared. Fed President Charles Evans, who is a voting member, does not think a rate hike is appropriate until 2023 and stated officials have time to be patient. Read more

Flurry of central bank speakers to lead markets today

Flurry of central bank speakers to lead markets today

This week, the focus is going to be very much on central bank commentary following the string of exciting central bank meetings, with Governor Bailey first up at the BoE at 17:00 GMT today. The Governor is set to speak at a citizens’ forum Q&A, where questioning is likely to focus on the Bank’s recent communication and its credibility. Read more

ECB and Fed speakers in scope after dovish retaliation

ECB and Fed speakers in scope after dovish retaliation

Next week (8th - 12th November), despite the absence of any major central bank meetings, the focus will remain on monetary policy pricing, especially as the Fed’s media blackout period ends. Notable speeches from Chicago Fed Evans and San Francisco’s Daly will be in scope for US rate traders, while opening remarks from the ECB’s Chief Economist Lane will be top of mind for euro money markets. Read more

Strong payrolls keep US front-end yields firm, boosting the dollar

Strong payrolls keep US front-end yields firm, boosting the dollar

Amid the dovish pushback from G10 central banks this week and the broad rally in bond markets, front-end US Treasury yields have remained fairly resilient. This theme was extended in early trading today, helping the dollar gain ground ahead of October’s payroll data. While Canada’s net employment change undershot expectations by 10.4k with a print of 31.2k, today's LFS largely met our expectations. Read more

Sterling tumbles as BoE pushes back on market expectations 

Sterling tumbles as BoE pushes back on market expectations 

It was a big day for sterling traders yesterday as GBPUSD fell 1.37% over the course of the session as hawkish Bank of England bets were unwound after the central bank held rates at 0.1% by a wide margin of 7-2. The decision to hold rates wasn’t the only dovish aspect of yesterday’s announcement, as the Bank also pushed back on market pricing of the Bank Rate hitting 1% by the end of 2022 via its forecasts Read more

Bank of England bats back market expectations, sends sterling plummeting 

Bank of England bats back market expectations, sends sterling plummeting 

The Bank of England today shocked markets by voting 7-2 to hold rates at 0.1% while voting 6-3 to maintain the current stock of assets at £875bn. While we largely expected the Bank to hit back against aggressive market pricing of rate hikes by holding rates, we anticipated a tighter split in the vote in order to signal to markets that tighter policy was imminent at December’s meeting.  Read more

Markets turn a blind eye to Fed and ECB guidance, BoE up next

Markets turn a blind eye to Fed and ECB guidance, BoE up next

To hike, or not to hike, that is the question. While money markets favour a 15bp interest rate hike from the Bank of England today at 12:00 GMT, we tend to disagree and believe the latest commentary by policymakers has done the dirty work of anchoring inflation expectations for the time being. Bloomberg Economics expects policy makers to hold rates with a 5-4 vote, shifting the onus to the December meeting for the first hike. Read more

Time to taper, but that is all from the Fed for now

Time to taper, but that is all from the Fed for now

The Federal Reserve largely met the market consensus today by announcing plans to taper its QE programme by a maximum of $15bn per month until year-end. Powell opened the door further to give policymakers greater optionality going forward. Read more

NBP: Hawkish déjà vu following inflation spike

NBP: Hawkish déjà vu following inflation spike

The Polish zloty found support in today’s decision by the National Bank of Poland to increase its policy rate by 75bps to reach a level of 1.25%, slightly below its pre-covid rate of 1.50%, as this caught markets off guard again after October’s unexpected 40bp hike. Read more

NOK and SEK to rise further before rally tops out

NOK and SEK to rise further before rally tops out

Looking ahead, we expect both NOK and SEK to remain strong until year-end, but next year could see more limited gains as the procyclical rally is expected to be less pronounced than previously thought given downgrades to global growth. Read more

It’s time to taper, but could more be in store? 

It’s time to taper, but could more be in store? 

Today, it will be much the same in regards to the dollar calling the markets' tune as investors prepare for tonight’s Federal Reserve meeting at the earlier time of 18:00 GMT due to clock changes. While the focus of the meeting is largely known, that is QE tapering, there remains some ambiguities around the Fed’s pace of tapering and the sequencing of normalisation. Read more

Monex November 2021 FX Forecasts

Monex November 2021 FX Forecasts

Concerns over Europe’s stagflationary environment in September reverberated through global markets last month, albeit on an inflationary front as opposed to stagnant growth This resulted in money markets continually pushing back against G10 central bank communications to price in aggressive tightening cycles across the space as a whole, while bear flattening occurred in most sovereign yield curves. Read more

Bond markets continue to call the tune for FX markets with key rate decisions due

Bond markets continue to call the tune for FX markets with key rate decisions due

It has all been about bond yields again in FX markets, with the dollar initially trading on the front foot in yesterday’s trading session before retracing early gains as Treasury yields moderated across the entirety of the curve. The greenback’s losses were largest against risk currencies within the G10 space, while ground was still claimed against GBP and JPY. Today, the dollar looks to have bounced. Read more

Friday’s robust reversal puts markets on edge ahead of central bank meetings

Friday’s robust reversal puts markets on edge ahead of central bank meetings

All eyes within the FX space sit on sterling this week as a pivotal Bank of England meeting is scheduled for Thursday. Following hawkish commentary from Governor Bailey over the past month or so, money markets have upped the ante on the likelihood of the Bank raising rates this month. Read more

The central bank magic trick: turning a dove into a hawk in plain sight

The central bank magic trick: turning a dove into a hawk in plain sight

Price action in G10 FX markets this week has been driven predominantly by pricing in bond markets and the actions of central banks. This dynamic is set to continue next week (1st - 5th November) as the battle against rising inflation migrates from the Bank of Canada and the ECB  to the Reserve Bank of Australia, the Federal Reserve, and the Bank of England. Read more

EURUSD rallies close to 1.17 mark as front-end yield spreads narrow

EURUSD rallies close to 1.17 mark as front-end yield spreads narrow

It was all about the euro in FX markets yesterday as President Lagarde failed to push back expectations of rate hikes in 2022, something her predecessor would have seemingly done. When asked about the 20bp rate hike baked into swaps that expire at the end of next year and whether it was reflective of the ECB’s policy stance, Lagarde stated that it wasn’t in line with the ECB’s view but that it was also not for her to say whether this should be adjusted or not. Read more

ECB meeting: Inflation, inflation, inflation

ECB meeting: Inflation, inflation, inflation

Despite the suppressed expectations, the ECB managed to dull the event down even further by adjusting their opening statement such that it indicates the decision would not include an assessment of the economic outlook. The lack of excitement was visible across markets, as EURUSD remained unfazed after the release of the initial rate statement. Read more

ECB takes to the stage after blockbuster Bank of Canada meeting yesterday

ECB takes to the stage after blockbuster Bank of Canada meeting yesterday

Ahead of today’s European Central Bank meeting, EURUSD traders have been positioning themselves within tight ranges despite our expectation that the monetary policy meeting is unlikely to be too instrumental for the pair. Read more

Bank of Canada ends QE and emboldens hawkish market pricing

Bank of Canada ends QE and emboldens hawkish market pricing

The Bank of Canada today announced that it would taper its QE programme by a further C$1bn a week, therefore entering the reinvestment stage, while it also brought forward its forecast for the output gap closing from H2 2022 to “the middle quarters” of next year. Read more

UK budget: Sunak saves part of the fiscal windfall with 2024 election in mind

UK budget: Sunak saves part of the fiscal windfall with 2024 election in mind

Today’s long awaited Autumn budget was a damp squib for FX markets given that the majority of the fiscal pledges were announced in advance of the formal unveiling. The net impact of today’s budget is lower bond issuance going forward, with the OBR now projecting £154bn less in borrowing over the following 5-years. Read more

Fiscal windfall unlikely to unlock an expansionary budget in the UK

Fiscal windfall unlikely to unlock an expansionary budget in the UK

Today, the pound remains trading in tight ranges as a key fiscal event, the Autumn budget, is on the horizon. Shortly after midday, Rishi Sunak, the Chancellor of the Exchequer, is expected to outline a more conservative fiscal package with much of the recently reported spending paid for by the recent fiscal windfall. Read more

Rate differentials shine through a light data calendar

Rate differentials shine through a light data calendar

In what was a limited data calendar yesterday, the pound trod water against the dollar while making further inroads against the single currency. All eyes remain on Wednesday’s budget, with headlines yesterday suggesting that an increase in the national living wage to £9.50 per hour and £6bn in extra funding for the NHS were in store. Read more

GDP and inflation data set to test stagflation fears

GDP and inflation data set to test stagflation fears

This week, the focus for the eurozone will remain on supply disruptions and access to energy, but will also be shared with the latest monetary policy update from the European Central Bank and the advanced readings for Q3 GDP and October’s inflation. The combination of the three economic events and the current economic backdrop will likely increase volatility in EURUSD this week. Read more

Central banks to take centre stage ahead of crucial GDP readings

Central banks to take centre stage ahead of crucial GDP readings

A flurry of central bank meetings take will place across the globe next week (25th - 29th October), while Q3 GDP prints from the US and eurozone will take centre stage on Friday. Several countries will also release inflation readings. Among the central bank meetings are the Bank of Canada, the Bank of Japan and the European Central Bank - in order of importance. Read more

Big miss in UK retail sales adds to signs of slowing recovery 

Big miss in UK retail sales adds to signs of slowing recovery 

This morning’s price action is more muted despite the big miss in September retail sales. YoY sales including auto fuel dropped by 1.3% vs the consensus of a 0.4% contraction, while excluding fuel, the figure decreased 2.6% vs -1.6% expected. Monthly sales including auto fuel was set to rise with 0.6% but instead fell by 0.2%. Read more

Pain felt across Turkish assets as CBRT throws in 200bp rate cut

Pain felt across Turkish assets as CBRT throws in 200bp rate cut

When the CBRT announced another 200bp rate cut on top of that today, while inflation is near 20%, the lira lost it and USDTRY spiked to 9.48 up from 9.25. Going into the event, risks to the consensus of a 50bp rate cut were always tilted to the upside as some sell-side analysts were anticipating a 100bp cut. Read more

All eyes on EU summit and CBRT decision 

All eyes on EU summit and CBRT decision 

The euro is in wait-and-see mode, broadly following US dollar moves while markets await the two-day EU summit in Brussels that starts today. EU leaders will discuss their response to the recent surges in energy prices as they stated Brussels would look into longer-term options to address the price shocks. Read more

Inflation on markets’ lips ahead of CPI releases

Inflation on markets’ lips ahead of CPI releases

While the pound broadly followed USD moves overnight and this morning, the UK CPI inflation release which printed just below expectations, both MoM and YoY, led to additional weakness in the pound to reach fresh daily lows. The data was the last reading before the Bank of England’s November decision on policy rates. Read more

15bp hike not enough for a happy HUF

15bp hike not enough for a happy HUF

The National Bank of Hungary raised its base rate by another 15bps today to reach 1.80%, as expected, but the Hungarian Forint still weakened against the US dollar following the announcement. Going into the event, odds for a more aggressive hike than the consensus of 15bps were elevated given the board’s sensitivity to rising inflationary pressures, arguably explaining the move in HUF upon the announcement. Read more

Risk-on currencies leading the way as dollar weakens

Risk-on currencies leading the way as dollar weakens

Firmer risk sentiment reduced demand for the dollar overnight and led to the DXY index retreating to its lowest levels in two weeks while yields also moderated. Yesterday’s data docket included a contraction of industrial production by 1.3% in September, though the press release that accompanied the report indicated this was mostly due to Hurricane Ida and the sharp decline in auto production. Read more

EUR Update: Euro weighed down by near-term factors, medium-term outlook rosier

EUR Update: Euro weighed down by near-term factors, medium-term outlook rosier

While September’s losses were significant at over 2%, we expect the pressure on the euro to ease over the coming months as supply pressures mitigate, which should help to cool inflation and aid growth conditions. We expect the combination of these developments to be supportive for EURUSD. Read more

China growth miss and inflation fears keep USD bid 

China growth miss and inflation fears keep USD bid 

News that China’s Q3 GDP undershot expectations as the country hit its slowest pace of growth in a year helped safe havens stay buoyant this morning while continued concerns around cost pressures and supply chain disruptions kept risk sentiment down. Chinese GDP expanded 4.9% from a year earlier, slowing from 7.9% in the previous quarter. Read more

Economic activity and inflation data put stagflation fears to the test 

Economic activity and inflation data put stagflation fears to the test 

Next week (18th - 22nd October), the data calendar revolves around October’s preliminary PMI prints, while China’s Q3 GDP data also scans as one of the more interesting releases. The focus on activity data is likely to be heightened given growth concerns over previous weeks and the impact higher input costs are having. This is especially the case in the eurozone, UK, and China, where rising energy costs are the most pronounced. Read more

USD Update: Defiant dollar in Q4

USD Update: Defiant dollar in Q4

Our latest forecasts now see the DXY index trading a percentage point lower than current spot levels and back towards highs of its previous trading range as the aggressive repricing in FX markets overextended in early October given our views on back-end US rates this year. Read more

Dollar downside is the driving dynamic towards the end of the week 

Dollar downside is the driving dynamic towards the end of the week 

A beat in reported US company earnings and a flattening of the yield curve helped boost risk sentiment in yesterday’s market, leaving the dollar nearly a tenth of a percentage point lower as measured by the DXY index. Read more

TRY reaches another record low as Erdogan adds CBRT firings to the flame

TRY reaches another record low as Erdogan adds CBRT firings to the flame

The Turkish lira continues to get its teeth kicked in after a series of events over the last weeks pushed USDTRY above the 9.00 handle. The lira’s losses continued this morning as markets awoke to the news of three CBRT members being fired by President Erdogan. Among the three, Deputy governors Semih Tumen and Ugur Namik Kucuk were removed from their positions, along with MPC member Abdullah Yavas. Read more

Big miss in ZEW fails to dent EURUSD as G10 yields moderate

Big miss in ZEW fails to dent EURUSD as G10 yields moderate

Today’s miss in the German ZEW data highlights how German activity is struggling to expand at the start of Q4 as current conditions are no longer improving. The current situation gauge tumbled from 31.9 in September to 21.6 in October, well below expectations of 28.5. EURUSD escaped the lack of optimism spilling into FX markets despite the big miss in today’s ZEW data, as at the same time yields in G10 markets have been moderating today after yesterday’s dramatic climb higher. Read more

Macro backdrop of slower growth and rising inflation set to dominate FX markets

Macro backdrop of slower growth and rising inflation set to dominate FX markets

Next week (11th - 15th October), with a limited data calendar, markets are likely to continue focusing on the inflation backdrop and the impact it will have on growth conditions. We take a brief look at the environment in Europe this week and what it means for ECB and BoE pricing. Read more

Diverging labour reports play out in North America

Diverging labour reports play out in North America

It was our expectation that today’s Canadian and US labour market reports would show a stark divergence, not only in net employment but also in underlying metrics. This ultimately played out, with the US jobs market adding 194k jobs in September compared with expectations of a 500k increase, while Canada added 157.1k jobs relative to expectations of just a 60k net employment gain. Read more

National Bank of Poland’s unexpected rate hike takes markets by surprise

National Bank of Poland’s unexpected rate hike takes markets by surprise

Out of the 29 estimates submitted to Bloomberg, none expected today’s National Bank of Poland meeting to include any changes in policy. The same goes for markets, with implied interest rates envisaging no change in today’s interest rate. Read more

Grappling with the stagflationary backdrop

Grappling with the stagflationary backdrop

Next week (4th - 8th October), the central banks’ assessments of the stagflationary environment will be in focus for markets, especially as traders adjust positions following this week’s aggressive price adjustments. Read more

Monex October 2021 FX Forecasts

Monex October 2021 FX Forecasts

In October, global macro conditions are set to maintain a trepid tone in markets over the short-term, especially with key events such as the US debt ceiling penciled in. We expect this to keep the dollar on a firm footing over the 1-month horizon, but deem the current adjustment by FX markets to be too aggressive to be sustainable. Read more

KRW Update: Further won weakness to be limited

KRW Update: Further won weakness to be limited

A combination of slowing semiconductor exports, higher yields in the DM space, and a resurgence of Covid-19, have all contributed to the unwind in aggressive USDKRW short positioning this year. Read more

From policy announcements to central bank speakers

From policy announcements to central bank speakers

Next week (27th September - 1st October), the focus quickly shifts from policy announcements to individual central bankers as a swathe of speakers fill the economic calendar, largely due to the ECB’s forum on central banking taking place between the 28th and 29th of September. Rather than being in Sintra (Portugal) as has been customary, the event will take place online. Read more

Bank of England delivers hawkish surprise, even by the markets standard 

Bank of England delivers hawkish surprise, even by the markets standard 

The Bank of England today voted unanimously to keep the Bank Rate at 0.1%, while members voted 7-2 in favour of continuing with its existing QE programme. The shift in the QE vote, from 7-1 to 7-2 due to Ramsden joining Saunders in dissenting, set the tone for what was to be a hawkish set of meeting minutes despite their Q3 GDP projection being downgraded by around a percentage point. Read more

Lira falls to record lows after concerning CBRT decision

Lira falls to record lows after concerning CBRT decision

Today’s decision is a large concern for the CBRT’s credibility, and the lira’s price action is telling of this. The currency tumbled to record lows against the US dollar while keeping just under the 9.00 handle, although the pair looks vulnerable with the 9 level being the next breakthrough in the coming weeks. Read more

Liftoff from the Norges Bank comes in a package deal with revised rate path 

Liftoff from the Norges Bank comes in a package deal with revised rate path 

The krone advanced to its strongest level since the Norges Bank’s June meeting, although the bulk of the EURNOK move occurred prior to the meeting as markets were pricing in a hawkish decision to start with. Read more

Fed signals faster tapering in 2023 but under-delivers on next year’s dot plot

Fed signals faster tapering in 2023 but under-delivers on next year’s dot plot

For those looking for an explosive Fed meeting, they may have initially been disappointed by the alterations in the dot plot. However, Powell’s comments meant volatility wasn’t absent in the FX space, with the likes of EURUSD swinging within a 0.55% range and USDJPY climbing over half a per cent higher on the day.  Read more

Canada 2021 election: staying the course

Canada 2021 election: staying the course

Leading media outlets, such as CBC News, have called the 2021 election in favour of the incumbent Liberal Party. However, against his best wishes, Justin Trudeau's election gambit didn't pay off, with the Liberals expected to remain the largest party in Parliament but with a minority government. Current projections have the Liberals elected and leading in 158 seats, just 12 seats shy of an outright majority. Read more

CE3 Update: Inflation is running hot, but the NBP appears fireproof

CE3 Update: Inflation is running hot, but the NBP appears fireproof

As inflation concerns intensified over the course of the last two quarters, many central banks in the EM space were forced to hike their interest rates in order to prevent their currencies from selling off and to mitigate further price pressures. The effects were visible in the currencies of Hungary and the Czech Republic, which managed to steer away from weakening against the euro and dollar since March this year. Read more

UK inflation jumps to highs not seen since 2012, putting floor underneath GBP 

UK inflation jumps to highs not seen since 2012, putting floor underneath GBP 

This morning’s CPI data saw headline inflation rise from 2% in July to 3.2% in August, above expectations of an increase to 2.9%, while the core measure also rose substantially from 1.8% to 3.1%. On a monthly basis, which removes favourable base effects, inflation showed rapid sequential growth. Read more

Antipodean update: light at the end of the tunnel, but risks remain elevated

Antipodean update: light at the end of the tunnel, but risks remain elevated

Our Monex analysts expect NZD to outperform in the short-run due to diverging monetary policy with Australia, however, a more stable macro backdrop in February 2022 should enable the RBA to start ramping up its normalisation cycle and thus AUD should benefit from a delayed tailwind. Read more

Inflation to sit top of mind next week

Inflation to sit top of mind next week

Next week’s data calendar focuses heavily on inflation data in major developed market economies, while core CPI readings from Poland and inflation expectations data in Turkey will be viewed amid historically high CPI readings. Read more

Another bumper jobs figure for Canada

Another bumper jobs figure for Canada

Canada’s economy added another 90,200 jobs in August after posting a similarly elevated 94,000 net employment gain in July. This now leaves the overall employment just 0.8% below February 2020 levels, the closest it has been since the pandemic began. The data has compounded positive sentiment around the loonie. Read more

UK economic recovery stalls in July 

UK economic recovery stalls in July 

Data this morning showed that the UK economy expanded at just 0.1% MoM in July, undershooting expectations of a 0.5% expansion and slowing from June’s 1% growth rate. The data not only undershot market economists’ expectations, but also those of the Bank of England. The central bank expects the economy to expand 3% in Q3, but with third quarter growth starting on such a weak base, it looks unlikely that their forecast will be met. Read more

EURUSD mildly ticks up after statement confirms slowdown in PEPP 

EURUSD mildly ticks up after statement confirms slowdown in PEPP 

The euro enjoyed today’s decision by the European Central Bank to reverse engines and moderately slow down net purchases under the Pandemic Emergency Purchase Programme (PEPP), even though this was widely expected by markets as all signs were pointing to slower purchases. Read more

Bank of Canada holds fire but maintains positive outlook

Bank of Canada holds fire but maintains positive outlook

With today’s BoC statement completely following our expectations, our expectations of the normalisation timeline remains intact. We still see the Bank tapering their QE programme by a further C$1bn at October’s meeting, where the idea of delayed growth is likely to be formalised within their latest forecasts, with a final taper pencilled in for December. Read more

Central banks set to stretch hawkish wings 

Central banks set to stretch hawkish wings 

Next week, price action in US fixed income markets will continue to garner a lot of market attention, while increasingly hawkish central bank developments will also be in scope. Of note is the Reserve Bank of Australia, who we expect to press on with tapering their QE programme. Read more

Nonfarms undershoots expectations, confirming previous market pricing

Nonfarms undershoots expectations, confirming previous market pricing

With a total of 235,000 jobs added in August, compared with 1.053m in July, the employment gain undershot expectations by 500,000. While some of the edge was taken off by the July figure being revised up from 943,000 to 1,053m, the lacklustre job growth in August now makes the prospect of the Fed’s median dot signalling a 25bps hike. Read more

Hot hand rand

Hot hand rand

The South African rand has remained a rollercoaster currency over the past few weeks. Having broken above the 15.00 handle for the first time since March to hit a high of 15.39 in late August, the rand is now grabbing market participants’ attention due to its aggressive retracement. Read more

Monex Europe September 2021 FX Forecasts

Monex Europe September 2021 FX Forecasts

We continue to envisage mild US dollar weakness across the G10 but expect volatility to remain abundant as liquidity conditions improve. In September alone, markets will have to contend with elections in both Canada and Germany, a rate hike from Norway, and pivotal central bank meetings in the US and Europe. Read more

Canada’s economy contracts in Q2 as third wave takes its toll

Canada’s economy contracts in Q2 as third wave takes its toll

Canada’s GDP data for June showed the economy expanded 0.7% MoM as provincial lockdown measures were scaled back, but a downward revision for May (-0.3% revised to -0.5%) resulted in the economy contracting in Q2 by 0.3% QoQ. With the economy weathering the tightening of measures relatively well during the third wave and sitting just 1.5% below pre-pandemic levels, today's data is unlikely to unsettle the Bank of Canada. Read more

Trudeau calls snap election, loonie unfazed at present

Trudeau calls snap election, loonie unfazed at present

The worst kept secret was finally confirmed over the weekend as Prime Minister Justin Trudeau met with Governor General Mary Simon to dissolve Parliament and set a snap election for September 20th. The announcement of a firm election date over the weekend had a limited impact on financial markets this morning. Read more

Hungarian forint to be anchored by MNB hiking cycle

Hungarian forint to be anchored by MNB hiking cycle

With the external backdrop stabilising somewhat in early August, the July rate hike did cause a reversal in the bearish HUF trend as markets had expected the MNB to hike rates by only 20bps. Given our expectation for inflation to rise further towards year-end, a sustained hiking cycle is set to remain in place from the MNB, which we see as a key driver for a further recovery in the forint. Read more

CHF Outlook: Renewed Swiss Franc overvaluation is put to the test

CHF Outlook: Renewed Swiss Franc overvaluation is put to the test

The Swiss Franc appreciated sharply over the last five months, with the EURCHF cross sitting near the 1.07 handle in early August, a far cry from the 1.11 handle it was trading at in March. The CHF appreciation resembled the dynamics in 2020, when markets tested the Swiss National Bank's tolerance for a strong currency, with the central bank finally drawing the line at the 1.05 level. Read more

Canadian employment underperforms, but it isn’t all bad

Canadian employment underperforms, but it isn’t all bad

July’s employment data out of Canada saw the economy add 94,000 jobs. While on the surface, the slip looks seismic, the nature of the job additions and the stage in which the Canadian labour market recovery is at means the underperformance of the net employment data isn’t as concerning as the headline suggests. Read more

NOK Outlook: NOK rally more subdued with upside now priced in

NOK Outlook: NOK rally more subdued with upside now priced in

The krone has underperformed since as the global economic backdrop deteriorated with the rise of the delta variant, offsetting the impact of the hawkish central bank. This meant NOK became an underperformer of the last couple of months. Read more

GBP Outlook: Staying bullish on the pound over the medium-term

GBP Outlook: Staying bullish on the pound over the medium-term

Headwinds are likely to persist over the coming month as Covid conditions remain volatile. Over the more medium-term, we expect GBPUSD to rally above the 1.40 handle on the basis of a more structural improvement in the growth outlook. Read more

Monex Europe August 2021 FX Forecasts

Monex Europe August 2021 FX Forecasts

With the economic backdrop stabilising somewhat towards the end of July as markets have finally priced in the latest wave of Covid-19 globally, August could arguably be plainer sailing for FX markets, although risks remain. Given the amount of uncertainties that still remain, we expect the dollar to remain broadly firm over the coming month before our expectation of further dollar depreciation plays out over the medium term. Read more

Slip in headline CPI trims CAD gains

Slip in headline CPI trims CAD gains

The Canadian dollar has spent much of today’s European session retracing yesterday’s losses as events in China begin to stabilise. However, the release of June’s CPI data has trimmed the loonie’s rally as inflation data begins to moderate and embolden claims that the overshoot is in fact transitory. Read more

EUR Outlook: EURUSD in range bound over summer

EUR Outlook: EURUSD in range bound over summer

The recovery in the euro may hit a hurdle in the next six months as headwinds from policy intensify with both the ECB and Fed decisions set to thrust diverging policy stances back into focus for markets. Read more

Weathering the storm

Weathering the storm

We have maintained our view of a mild depreciation in the broad dollar over the coming 12-month period, but single out currencies that are likely to buck this broad trend as they are exposed to rising US real yields over this horizon. Read more

Monetary policy in scope with FOMC minutes and ECB strategy review

Monetary policy in scope with FOMC minutes and ECB strategy review

This week (5th - 9th July), the meeting minutes from the Fed’s June meeting will be scoured by market participants as they try to gain a clearer view on future US interest rates, and the ECB’s Governing Council is set to also meet next week in Frankfurt to discuss the ongoing policy review. Read more

Monex Europe July 2021 FX Forecasts

Monex Europe July 2021 FX Forecasts

The dollar defied our expectations in June after the Federal Reserve surprised with a hawkish outlook on the US economy, signalling two rate hikes as early as 2023. We have adjusted our July forecasts to account for the more sensitive Fed reaction function, but broadly we expect the trend of mild dollar depreciation to continue. Read more

Riksbank stands firm with dovish tone

Riksbank stands firm with dovish tone

The Swedish krona has hovered in narrower ranges in Q2 compared to Q1 2021 as much of the positive incoming data was offset by a clear message from the Riksbank that it will maintain loose monetary policy over the 3-year horizon. Sweden’s resilience to the recent Covid-19 measures and quick recovery prospects should support the Swedish krona going forward. Read more

The rand’s return back to 2019 highs

The rand’s return back to 2019 highs

The improvement in South Africa's economic fundamentals over the course of the last month means we now expect a continuation in the ZAR rally over the 12-month horizon, as opposed to our previous view of mean reversion. We expect USDZAR to continue trading at the current 13.5 levels this month before driving down to levels not seen since January 2019 over the one-year horizon. Read more

Brazilian real leads the EM race against USD

Brazilian real leads the EM race against USD

The Brazilian real has seen a significant rally against the US dollar in Q2, with gains over 13% recorded since the March bottom. The real's surge has taken place despite a grim backdrop of Covid infections throughout the country and a slow pace of vaccinations. Read more

Monex Europe June 2021 FX Forecasts

Monex Europe June 2021 FX Forecasts

Over the course of May, the dollar downturn exceeded our expectations, while for certain currencies, market participants preemptively priced in the economic reopening as vaccine optimism picked up. Looking ahead, June is likely to prove pivotal for major currency pairs. Read more

Fading stimulus suggests fading rally, USDCNY to hit inflection point over medium-term

Fading stimulus suggests fading rally, USDCNY to hit inflection point over medium-term

We anticipate the yuan to continue rallying, albeit at a slower pace than before, over the short run as the broad dollar continues to weaken. However, over the 6-to-12-month horizon, we expect USDCNY to reach an inflection point in which the yuan starts to weaken again due to narrowing yield differentials. Read more

Swiss National Bank to relax with EURCHF upside narrative

Swiss National Bank to relax with EURCHF upside narrative

The Swiss franc depreciation against the euro in the pandemic aftermath has been primarily due to strong efforts by the Swiss National bank to water down upside pressures on the currency amid a rapid capital inflow. Read more

PLN well-positioned to continue rallying despite divergences in CEE monetary policy

PLN well-positioned to continue rallying despite divergences in CEE monetary policy

Our view on PLN remains bullish for the remainder of the year, however, we have adjusted our forecasts since the last outlook to reflect the recent divergence in central bank policies in the CEE region and Poland’s recovery from the third Covid-19 peak. Read more

INR to rely on RBI’s support while uncontrolled second wave of pandemic unfolds

INR to rely on RBI’s support while uncontrolled second wave of pandemic unfolds

The chaotic health situation puts the country in a horrendous position while also threatening the pace of the global economic recovery as a whole. Looking forward, we believe the INR outlook is poised to remain stable with a slight appreciation bias against the US dollar, but risks to this view remain strongly tilted to the downside. Read more

Hawkish Czech National Bank to support CZK rally

Hawkish Czech National Bank to support CZK rally

We anticipate the recovery in the Czech koruna to extend below the 25.00 handle against the euro over the coming twelve months as the Czech National Bank begins its hiking cycle with inflation above target. Read more

Reopening reignites sterling’s rally

Reopening reignites sterling’s rally

Following the Bank of England's latest projections, which we are inclined to agree with, we anticipate GBPUSD to rally to 1.46 in the coming twelve months, although the level of uncertainty around our medium-term forecasts remains high. Read more

Monex Europe May 2021 FX Forecasts

Monex Europe May 2021 FX Forecasts

The anticipated US dollar downturn materialised over the course of April, with the greenback sustaining losses across the board. Looking ahead, we expect the dollar downturn to continue over the course of Q2. Read more

Loonie to continue gaining but progress to slow

Loonie to continue gaining but progress to slow

Looking ahead, we maintain our view of a cyclical and structural rally in the Canadian dollar. However, we expect the speed of the rally to start to fade as the loonie carves fresh multi-year highs over the course of the coming months. Read more

Ruble to recover as CBR hikes rates, but sanctions risk remains

Ruble to recover as CBR hikes rates, but sanctions risk remains

Sustained support from the CBR, in conjunction with subduing geopolitical tensions and a robust domestic economic recovery, leads us to believe USDRUB will recover back to the 70 handle over the next 12-months. Read more

Euro rally hinges on improved vaccine rollout in Q2

Euro rally hinges on improved vaccine rollout in Q2

With the European Commission setting an optimistic target for the number of vaccines administered in Q2, and supply contracts set to confirm this goal, we anticipate EURUSD to rally on a cyclical basis as the region catches up with the likes of the US and UK. Read more

Monex Europe April 2021 FX Forecasts

Monex Europe April 2021 FX Forecasts

Dollar strength wasn’t just a theme over the course of the last month, but for Q1 as a whole. Reflationary dynamics in the US, brought about by a strong vaccination roll-out and additional fiscal stimulus packages, caused FX markets to price in US economic outperformance. Read more

Flat Japanese yields on the back of YCC sets the ground for a weak yen recovery

Flat Japanese yields on the back of YCC sets the ground for a weak yen recovery

Contrary to our expectations of a smooth rally throughout the year, the Japanese yen broadly weakened against the US dollar over the first quarter of 2021. Most of the yen’s underperformance is attributable to a stronger dollar as markets aggressively priced in a faster economic recovery and sooner-than-signalled monetary policy normalisation from the Federal Reserve. Read more

Remaining mildly bearish, but finding pockets of deeper depreciation

Remaining mildly bearish, but finding pockets of deeper depreciation

Together, both Biden's fiscal stimulus package and more aggressive vaccine rollout in the US have increased the likelihood that the US economy will substantially outperform peers in 2021, reflected in both the increase and steepening of the US yield curve. Read more

Monex Europe March 2021 FX Forecasts

Monex Europe March 2021 FX Forecasts

FX market price action focused heavily on vaccine developments and reflationary dynamics in February. Given the important role vaccine distribution plays in FX price action, we launched a monthly vaccine distribution chartbook as a means to monitor major vaccine developments around the globe. Read more

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The analysis team provide timely insight and commentary on developments in currency movements and their drivers.

Simon Harvey

Head of FX Analysis


Jay Zhao-Murray

FX Market Analyst