News & Analysis

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

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

US dollar on back foot after a broad surge following August’s retail sales release 

The dollar went on the offensive yesterday after continuing claims data fell and August’s retail sales data printed in positive territory despite expectations of a 0.7% contraction. The retail sales data was not only better than the median forecast, but the most optimistic economic forecast submitted, and sent the dollar on the offensive. Read more

Euro weighed down by ugly European car sales 

Car production is being weighed down by the global semiconductor shortage that carmakers have warned will extend well into next year. The declines were broad-based, with Germany, France, Italy and Spain all seeing significant drops over the past months. Read more

Canadian CPI jumps above 4%, but BoC set to look through it

Headline CPI rose to 4.1% YoY in August, the fastest pace since March 2003, while on a sequential basis, inflation rose only 0.2%, down from a 0.6% MoM increase in July. The loonie took the CPI data largely within its stride as it briefly dipped below the 1.2670 handle. Read more

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; CPI rose 0.7% MoM after printing flat in July. Read more

Pound climbs higher as inflation sits at levels not seen since 2012

Today, the pound is back on the offensive, despite the dollar remaining relatively firm against G10 peers, as inflation data saw headline CPI rise to highs not seen since March 2012. Sitting at 3.2%, headline inflation was flattered by favourable base effects as restaurant and retail prices were compared to August 2020 when the Eat Out to Help Out scheme and VAT holiday were in play. Read more

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

All eyes on US CPI before next week’s Fed

For today, all eyes are turned to the US CPI inflation release at 13:30 BST as markets deem this critical for next week’s Federal Reserve decision. As the Fed naturally gets closer to their QE taper decision, their assumption that base effects and bottlenecks are largely to blame for the current price growth and that these are transitory will be tested by markets. Read more

Dollar starts off with mild bid as Covid concerns linger from the weekend

The dollar starts this week with a mild haven bid against the majority of G10 and EM currencies as data over the weekend points towards rising cases in parts of the state of Victoria (Australia), Auckland (New Zealand), and Putian (China). Treasuries open this morning marginally higher at the front-end, but have failed to follow the general move higher across the back-end with eurozone and Asian 10-year yields rising this morning. Read more

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

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 

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

Risk appetite supported after hawkish CBs and promising US-China call

Risk appetite remains supported in today’s session as China’s state TV reported President Xi stating that US-China ties should get back on track when speaking with President Biden on the phone. Today, the dollar looks set to continue its decline with broad market sentiment remaining buoyant. The only data of note to come out of today’s session is August’s producer price index. Read more

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

ECB to put PEPP reduction into dovish disguise 

Markets are all prepped for the European Central Bank’s monetary policy decision today, and expectations are high for it to be a more exciting meeting than any of the previous ones over the last half year. As always, the decision will be announced at 12:45 BST and is followed by a press conference at 13:30 BST. Read more

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

String of central bank decisions begin with Bank of Canada today 

For today, all focus turns to the Bank of Canada who will likely tread carefully given the deterioration in the outlook since July as well as the presence of the election campaign. We expect the Bank to hold off on tapering its QE programme until the October meeting, as today’s meeting won’t be accompanied by a monetary policy report. Read more

Social care plan at the forefront for GBP

Today, PM Johnson will announce his long-awaited social care reform plan, risking major backlash within his own party as it is expected to be financed by a hike in national insurance that will increase revenue by £10bn. The political backlash may weigh on the pound, especially if it magnifies into a scenario where a vote of no confidence becomes a plausible scenario. Read more

Dollar recovers after Friday’s NFP miss as markets focus on earnings

The dollar is trading mildly in the green against G10 peers this morning amid a minor correction off Friday’s lows after the US jobs report showed an underwhelming increase in the Nonfarm Payrolls. US hiring posted the smallest jobs gain in seven months, challenging a potential decision by the Fed to begin tapering their asset purchases by year-end. Read more

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, the Bank of Russia who are expected to hike by 50bps, the National Bank of Poland who will battle with record high inflation, and the European Central Bank. Read more

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 as early as 2022 a distant possibility.  Read more

Nonfarm Payrolls set to be decisive for G10 price action 

Expectations for today’s payrolls data is lower than that for July’s data, however, with downside shocks to the ADP number, risks are building for a negative surprise to the 725k expectation. Given the markets aggressive pricing, especially in the dollar, the retracement should be sizable if either the net employment number or wage growth figure surprise substantially to the upside. Read more

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

Eurozone hawks and US labour market speculation dominates G10 price action

To which, today’s eurozone producer price index data for July may be of interest, especially among the debate of how sustainable the current inflationary overshoot will prove. Released at 10:00 BST, the data is expected to show a rise from 1.4% to 1.8%.  Read more

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 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

G10 market back focusing on yields as European bonds lead charge in yesterday’s session

Both Klaas Knot and Robert Holzmann yesterday called for the ECB to begin phasing out “significantly higher” PEPP purchases ahead of the March 2022 deadline as they deemed the emergency measure as surplus to requirement. With these comments the first of their kind and coupled with rising price pressures, European bond yields spiked higher in yesterday’s session, Read more

Dollar on back foot as risk is supported despite bleak Chinese PMI data

The US dollar continues to decline in today’s session as bond yields fall and risk is supported in markets. This comes despite China’s official composite PMI falling into contractionary territory of 48.9, driven by the non-manufacturing PMI falling to 47.5 as tighter restrictions are imposed due to rising Covid cases. Read more

Markets continue to price the fallout from Powell’s dovish speech 

The US dollar has garnered all of the attention recently as markets digest the latest Fed commentary and shift their expectations of policy normalisation. This was especially the case on Friday when Chair Powell stated that the Delta variant posed increased uncertainty to the economic outlook Read more

Focus shifts from Jackson Hole to US jobs data

In the week beginning Monday 30th August, the market’s emphasis shifts to monitoring the severity of the latest Covid-19 waves driven by the delta variant, the economic impact they are having via timely data points, and August’s Nonfarm Payrolls data next week. Fixed income and money markets will be taking their cues from the latest payroll data in order to price expectations of September’s Fed meeting. Read more

Fed Chair Powell seen avoiding taper announcement due to deteriorating health backdrop

This morning’s session has seen the dollar unwind part of yesterday’s rally as traders become more confident that Jerome Powell won’t announce the formal tapering timeline at today’s speech at 15:00 BST. Read more

Powell pushes back expectations at Jackson Hole

Despite some FOMC members casting hawkish tones to the media over the past 48 hours, Jerome Powell pushed back expectations of policy normalisation in his speech today by not only refraining from announcing the timing of the tapering but also stating that tapering doesn’t signal the timeline for rate hikes. Read more

Covid weighs on risk rally as Jackson Hole begins 

This morning the dollar edged higher after Covid headlines were back on the table with US hospitalisations having reached levels last seen in January. A full agenda of tomorrow’s speakers at Jackson Hole will be released by the Kansas City Fed today, and until then, markets may continue their wait-and-see approach as the Jackson Hole risk event draws closer. Read more

Softer decline in US Durable Goods Orders underpin US dollar

US Durable Goods Orders fell by less than expected in July, with transportation and defense being the main drag on the figure. Transportation equipment, which was down after two consecutive monthly increases, drove the decrease down by $1.7bn to reach $75.3bn. Read more

Risk rally more subdued on Wednesday ahead of Jackson Hole

The risk rally started to run out of steam this morning and the dollar pared back a small part of its losses against commodity currencies and EMFX this morning. Multiple narratives are in play at the moment, with progress on fiscal spending in the US allowing progress on the US$550bn infrastructure package being weighed against the sharp rise in US Covid cases. Read more

G7 meeting in focus while risk rally extends

Prime Minister Boris Johnson will convene G7 leaders today on urgent talks on the situation in Afghanistan. Johnson wants the US-led evacuation from Afghanistan extended beyond August 31, although British defence minister James Heappey admitted that the Taliban had “a vote” on whether to allow the evacuation to continue from Kabul airport into September. Read more

Market sentiment rebounds ahead of Fed Symposium

On Friday, the DXY index reached levels last seen in November 2020 as Covid headlines continued to dominate markets, however this was reversed in the afternoon after a less hawkish tilt from the Fed’s Robert Kaplan pushed back expectations for policy normalisation. Improved risk sentiment has taken the wind out of the USD rally over the weekend, extending Friday’s theme after Kaplan’s comments. Read more

Jackson Hole arrives after a volatile week for macro conditions

With a tentative macroeconomic backdrop, next week’s data is likely to have a larger market impact than usual, especially with the quantity of preliminary PMI releases for August. The Fed’s annual Jackson Hole symposium should provide markets with a bit more clarity as to its tapering timeline. Read more

UK retail sales fall in July due to transitory factors and Covid concerns

The release of this morning’s retail sales data for July, which saw sales volumes contract by 2.5% MoM relative to expectations of 0.2% growth, pushed the pound slightly lower against the dollar as it compounds falling consumer confidence metrics and tentative risk sentiment after Covid and growth concerns reappeared in markets during yesterday’s session. Read more

USD soars as risk sentiment crumbles on vaccine efficacy and hawkish FOMC minutes

It wasn’t just the Fed’s July meeting minutes and hawkish commentary around the building consensus for tapering to begin in 2021, but reports of reduced vaccine efficacy after 6 months and further regulation shifts in China that ultimately crippled the markets risk appetite. Read more

Dollar surging as Fed hints at actual tapering this year

The past few sessions have all been about the broad US dollar, and yesterday wasn’t any different. With the release of the latest FOMC meeting minutes, dollar gyrations drove volatility in FX markets. While Fed officials said in July’s meeting that the conditions for tapering haven’t been met yet, some officials signalled that the tapering of their QE programme could commence as early as this year. Read more

July CPI not enough to move the Bank of Canada

Headline CPI came in hot for July, rising from 3.1% in June to 3.7% YoY, above expectations for a reading of 3.4%. However, despite the headline figure climbing towards the Bank of Canada’s forecasted inflation peak of 3.9%, which they don’t expect to be reached until late Q3, we expect the Bank to maintain its stance that the inflationary overshoot is transitory. Read more

Just a prudent delay by the RBNZ

The main takeaway from the Reserve Bank of New Zealand's policy meeting was the still hawkish tone struck, signalling that today’s decision was not a change of course in the policy path, but a prudent delay. The RBNZ decision today triggered a knee-jerk downside reaction in the currency, but the Kiwi dollar quickly rebounded to sit higher on the day. Read more

EURUSD in focus as it sits just above the 1.17 support level prior to Fed meeting minutes

Traders will continue to focus on EURUSD as it sits near a strong psychological support level as they await a strong enough catalyst for the pair to plump fresh 16-month lows. Should Fed officials strike a hawkish enough tone in tonight’s meeting minutes, that may be enough to push US yields higher and send EURUSD plummeting lower.  Read more

Demand for UK workers remains, but wage pressures moderate

This morning’s headline labour market data for the 3-months heading up to June can be viewed as disappointing, with only 95,000 jobs added in the rolling quarter. Taken on the whole, the labour market data continues to be choppy and show a very murky picture for economists to dissect. Read more

Positive case in New Zealand places pressure on NZD before the RBNZ expected to hike rates

The latest Covid developments in New Zealand occurred just a day before the Reserve Bank of New Zealand were set to hike interest rates 25 basis points to 0.5%. The arrival of a Covid case has put the RBNZ’s interest rate path into question, with Westpac already announcing that it doesn’t see the central bank hiking rates tomorrow. Read more

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

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

Risk sentiment sours further, propping up both dollar and yen 

FX markets have awoken this morning to another bout of USD strength as events over the weekend chipped away at risk sentiment. While Afghanistan took the news headlines, the spillover into market price action is limited, however, it compounds the already weak risk sentiment driven by higher Covid cases in Asia and slowing Chinese economic data. Read more

One week closer to Jackson Hole

Markets are likely to settle somewhat as they await the headlines from the Jackson Hole symposium on August 27th. Next week’s calendar suggests there may be pockets of isolated volatility with policy decisions from both the Reserve Bank of New Zealand and the Norges Bank, while the Reserve Bank of Australia and Federal Reserve both publish meeting minutes. Read more

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

Partial shutdown in Chinese container ports raise fears for further supply chain disruptions

The Meishan Terminal of China’s Ningbo-Zhoushan Port, one of the world’s busiest container ports, shut down yesterday after an employee was tested positive. The closure of the terminal increases concerns that ports around the world may face similar outbreaks going forward, adding pressure to the already disrupted supply chains and leading to a recurrence of last year’s Covid nightmare when restrictions slowed the flows from goods from food to electronics. Read more

CBRT holds rates, emphasis on Erdogan’s response 

By holding rates at 19%, the CBRT has effectively tried to appease both the President and financial markets. The retention of the line in the statement that rates will be held in positive real territory also keeps the status quo for the lira, however, questions remain over how long the central bank can continue treading water Read more

Sterling price action muted after Q2 GDP falls on expectations

This morning, the pound focused on UK GDP from Q2, which hit expectations of 4.8% growth. The UK economy expanded by 1% in June month-on-month, with the expansion driven largely by the reopening of the services sector. The index of services recorded 1.5% growth in July compared with expectations of 0.9%. Read more

Miss in core print sends USD lower

The US dollar rose along with Treasury yields ahead of today’s crucial CPI release as the robust Nonfarms figure from July paved the way for expectations that the Fed may have to take its foot off the gas sooner rather than later. Today’s CPI report showed categories sensitive to reopening moderated, posting their weakest contribution to the MoM gain since March. Read more

Markets remain focused on Fed pricing amid a desolate data calendar

The dollar continues to perform well after Friday’s run of strong US job figures solidified expectations for the Federal Reserve to take their foot off the gas sooner than suggested in the July meeting. Yesterday’s robust job openings data supported this, as the surprising increase of 590k new jobs led to a record total job openings of 10.1 million in June. Read more

To hike or not to hike, that is the question

Markets this week have largely focused on underlying growth conditions, FOMC speakers and Friday’s labour market data, with US bond markets sending conflicting signals to FX traders. Next week (9th – 13th August), the key pieces of data centre around rate decisions from Banxico and the CBRT, both of which have reasons to hike rates due to rising inflation but also have grounds to stay pat.  Read more

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

Dollar on the offensive as bumper jobs number is delivered

The labour force participation rate came in at the expected rate of 61.7%, which is a good sign the drop in unemployment is representative of economic conditions, rather than a consequence of people leaving the labour force. Read more

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

Pivotal Nonfarm Payrolls data set to create sparks for financial markets 

The US dollar is trading moderately stronger ahead of today’s Nonfarm Payrolls report, with the DXY index increasing past yesterday’s peak to weekly highs. Minneapolis Fed Chief Neel Kashkari stated yesterday he is optimistic about the US labour market, although the country hasn’t yet made “substantial progress” on jobs. Read more

Bank of England confirms hawkish disposition

The Bank of England today confirmed to markets that it was leaning on the hawkish side despite interest rates being held at 0.1% and the split on the decision to maintain the current QE programme sitting on the milder side of 7-1. Read more

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

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

Bank of England in focus after inflation overshoots and labour market progress

Next week, the focus will be on the Bank of England to announce its policy decision and comment on the recent inflation overshoots and recovery in the labour market. Read more

Slip in US Q2 growth rate piles pressure on the dollar

With the dollar already under pressure today as the risk environment stabilises and markets embrace the dovish rhetoric from Fed Chair Powell yesterday, the announcement that the GDP release missed expectations by nearly 2 percentage points put the dollar under the pump some more. Read more

Hawkish rate statement is dialled back by Powell, weighing on the dollar

The change to today’s rate statement led to a flurry of USD strength across the board which was driven by a spike in front-end yields as markets position for the likely announcement of the tapering timeline at either September or December’s meeting. Read more

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

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

Q2 GDP data and the Fed are in focus amid a global third wave

Markets will pay close attention to commentary by Chair Powell and the Fed’s assessment of current conditions. A first glance at economic performance in advanced economies in Q2 is also pinned for the week, although growing fears over the coming months might cloud the impact positive GDP figures have on markets. Read more

Retail sales beat fails to excite CAD

The release of May’s retail sales data failed to spark any volatility in the USDCAD pair despite the report highlighting a 0.9% beat relative to expectations and a preliminary reading of 4.4% growth in sales in June. Read more

Inflation fears prompt updated forward guidance by CBR

Going into today’s Central Bank of Russia decision, markets knew to expect a significant rate hike, but the question was how large a hike this would be. The Russian ruble found modest support from today’s rate decision, while the lion’s share of the move occurred prior to the announcement. Read more

Sterling weighed down by July PMIs

Sterling has sat firmly at the bottom of the G10 pile this morning with losses exceeding 0.25% against the dollar. While the rest of the G10 has incrementally recovered against the greenback over the course of the morning, sterling’s price action has been sluggish. Read more

ECB makes policy tightening less achievable

In line with the strategy review, the ECB’s statement is arguably net dovish despite the decision including no actual policy changes. Financial markets took the dovish interpretation from the ECB as a positive, with European stock indices holding near intraday highs while EURUSD breaks fresh ground to the upside. Read more

Markets resort back to yesterday’s playbook and head into the dollar

For G10 FX markets yesterday it was a case of more of the same, with the US dollar firming across the board, even against the Japanese yen this time. This morning, with little scheduled in the data calendar, markets have found comfort in resorting back to yesterday’s playbook with the dollar remaining robust against G10 FX markets.  Read more

Global virus woes and US-China tensions keep safe havens buoyed

The prominence of the third wave of cases internationally stoked concerns that global demand won’t recover as aggressively as previously expected. Geopolitical tensions have been rising after the US accused the Chinese government of sponsoring domestic gangs in their cyberattacks against thousands of organisations including the likes of China. Read more

Renewed risk-off market mood takes DXY to 3-month highs

This morning, a clear risk-off market mood kept the dollar buoyed as the Delta variant continues to spread globally, with cases mostly surging in Asia and Europe while there has been an uptick in the US as well. . As a result, the dollar index climbed to levels not seen since April. Read more

ECB guidance to take centre stage next week, CBR set to hike rates

The ECB takes centre stage next week, with a revamped strategy review setting the tone for a persistently more dovish course of action in the months to come, while the CBR is set to hike rates further amid a light data calendar. Read more

Mixed messages from Fed members keep markets guessing

James Bullard from the St. Louis branch urged for a tapering of asset purchases as the economy is booming, bringing forward expectations for a rate hike just a day after Fed Chair Jerome Powell’s testimony was released and cast a dovish tone. Read more

US dollar hit by Fed Chair Powell’s cautious tone

In his semi-annual monetary policy report, Powell continued to cast a dovish tone and stated the central bank would deliver powerful support until the economic recovery is complete. Read more

BoC: Markets weigh further C$1bn taper against cautious tone

Although today’s decision by the Bank of Canada to taper its QE programme by another C$1bn to reach C$2bn per week was widely expected by markets, the market reaction still was significant as the accompanying monetary policy report provided more cues. Read more

Lira unfazed by widely expected CBRT rate decision

The lira held steady in the build-up to the event with little change after the announcement too, as most market participants expected the CBRT to hold rates steady today. Read more

Strong CPI figures and higher 30Y yields support USD ahead of Powell

For today, all eyes are on Fed Chair Jerome Powell who will testify before the House Financial Services committee today to deliver the semi-annual monetary policy report to Congress at 17:00 BST. Read more

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

All eyes on US CPI data ahead of tomorrow’s testimony by Fed’s Powell

The US CPI inflation data, which is scheduled for release at 13:30 BST, will be in focus for markets ahead of Federal Chair Jerome Powell’s testimony before the House Financial Services Committee on Wednesday, and the Senate Banking panel a day later. Read more

US dollar remains well bid amid delta virus concerns

Risk sentiment turned sour this morning, driving high-beta G10 FX lower and safe haven currencies such as the US dollar higher as virus matters remained front and central. New daily Covid cases jumped by 45% in Sydney while the Netherlands tightened containment measures again. Read more

Central banks in focus next week after Fed’s hawkish shift

Next week will be critical to assessing the way forward as a fresh batch of inflation data is released and several central banks face the press cameras. On the side, political developments might add excitement to markets. Read more

Sterling weighed down by stalling recovery outside of hospitality industry  

Sterling sits under renewed pressure as UK growth data for May undershot expectations. GDP grew just 0.8% MoM, almost half what was expected at 1.5%, while April’s GDP was also revised down from 2.3% MoM to 2.0%. Read more

ECB raises the bar for normalisation in the short-run, flexibility is the key for policy

Thursday's announcement by the European Central Bank can be perceived as net dovish in the short-term by markets, as the shift from an asymmetric target to a new symmetric 2% inflation target gives the central bank ample room to run accommodative monetary policy for longer without having to fight markets.  Read more

All eyes on the ECB’s as it concludes its policy review 

The European Central Bank came out with an announcement last night that they will release a press statement and hold a press conference regarding the strategic review today, suggesting all governing council members found a consensus on key issues and the review has been concluded. Markets will be all over this today to find out how the bank will measure inflation. Read more

Dollar enjoys risk-off market mood ahead of FOMC meeting minutes

Markets now await tonight’s meeting minutes from the Federal Reserve, which will be in greater focus than usual after June’s hawkish twist to the Fed meeting and the market response to last month’s dot plot. The dot plot, which projects interest rate expectations by individual fed members, signalled two rate hikes in 2023. Read more

Improved risk appetite weighs on dollar, Antipodean currencies lead gains within G10

Focus remains on economic recovery stories outside of the US as markets gauge the risks of different virus variants delaying further reopening. With the dollar being gently offered ahead of tomorrow’s Federal Reserve meeting minutes, this trend may continue over the course of the day. Read more

US holiday keeps markets quiet after Friday’s mixed US jobs report

EURUSD opened steady in light trading due to the US independence day holiday this morning. The US dollar is in limbo after Friday’s mixed bag of US labour market data allayed investor fears about a speedy introduction of policy normalisation. Read more

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

Higher unemployment rate mitigates impact of elevated job gains

The lack of movement in the unemployment figures stifled the impact the net employment data had, as it doesn’t map over into emboldening calls for earlier rate hikes and higher US yields. The June employment data thus resulted in a weakening of the US dollar and a moderation in front-end Treasury yields.  Read more

Dollar continues to firm ahead of key payrolls report

Any signs of sharp improvement in today’s data are likely to stoke expectations of earlier lift-off by the Fed and raise calls for announcing the QE tapering timeline in Q3. Expectations currently sit at 720,000 for today’s Nonfarm Payrolls data, which is released at 13:30 BST.  Read more

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

Broad dollar continues to remain in focus as tensions over Taiwan begin to simmer

It was all eyes on the US dollar yesterday as it climbed higher yet again on month-end and quarter-end flows. The greenback surged across the G10 currency board, with the DXY index closing out Q2 well above the 92 handle at 92.448 - its highest level since the 8th of April. Read more

Monex Europe’s Vaccine Distribution Chartbook | June 2021

The risks presented to the European outlook are similar to those in early 2021, when a surge of infections due to the alpha variant called for a new round of restrictions on activity. With that in mind, the balance of risks, remains heavily tilted to the downside. Read more

Quarter-end flows to dominate price action amid quiet data backdrop

While the US dollar has been supported by haven bids over the past few days, generated by fresh concerns Covid-19 variants pose to the global economic recovery, it is expected to slump today on quarter-end and month-end flows. Read more

Dollar bounces back as markets are hit by fresh Delta variant concerns

With concerns centered around the spread of the Delta variant and its resulting impact in parts of Asia, the dollar is likely to remain bid as US Treasuries also receive high demand from risk-off flows. Read more

Sterling leads gains in G10 as Javid signals optimism over easing final restrictions

. This week for the pound the focus will predominantly rest with June’s flash manufacturing Purchasing Managers Index. With the manufacturing PMI released 4 days before the services and composite index, the data should give some indication as to how strong the UK’s economic recovery is heading into June after much of the economy reopened. Read more

First Nonfarm Payrolls since Fed may cause significant volatility

Last week, volatility in FX markets was largely driven by the hawkish shift by the FOMC, as broad dollar moves drove price action in G10 currency pairs. This week, the focus remains largely on the US, with the release of the first Nonfarm Payrolls report since last week’s Fed meeting. Read more

Dollar remains main driver in G10, but Bank of England weighed on sterling

The pound led losses against the dollar in the G10 space after the Bank of England cast a more dovish tone than markets were previously expecting. While the dollar traded mixed within the G10 space, taking losses against high beta currencies like NOK and SEK, it traded stronger against the likes of CAD and GBP. Read more

A more dovish Bank of England reaction function weighs on sterling 

On the whole, the market reaction is telling of today's Bank of England meeting. The FTSE 100 enjoyed the Bank’s more optimistic outlook on the near-term recovery along with the commitment to keep policy accommodative, however, the same can’t be said about the pound. Read more

Fed’s Bostic claims rate hike in 2022 with hawkish commentary lifting USD

Yesterday proved to be another indecisive day for the dollar as it broadly weakened prior to the afternoon of the European session before the latest bout of strength. Comments by Atlanta Fed President Raphael Bostic helped take the dollar higher. The focus will continue to be on Fed speakers today as more clarity around the shifting consensus is forthcoming. Read more

USD pending further cues from FOMC members

Powell’s testimony sent the dollar higher on Tuesday night when he admitted that the spikes in prices were higher than the central bank had anticipated. The tip of the hat by Powell to higher price growth reminded markets that the Fed has incrementally shifted more hawkish, as seen in the last meeting’s economic projections. Read more

GBP trims gains as services PMIs undershoot expectations 

While the manufacturing index moderated from 65.6 to 64.2, which was naturally expected as the manufacturing-led recovery eases globally, the services PMI undershot expectations substantially. Read more

Fed commentary continues to dictate FX price action

While the dollar strengthened ahead of Fed Chair Jerome Powell’s long-awaited testimony before the House of Committee, the DXY index traded weaker overnight and this morning again. The moderation of the dollar strength comes after Powell admitted that although spikes in inflation have been larger than expected. Read more

Powell’s testimony eyed after hawkish tones cast by Fed members on Monday

Comments from Fed Chair Powell ahead of today’s testimony to Congress also seek to temper expectations that the economy is running too hot and stimulus needs to be removed. Today, the dollar is firming once again as markets continue to be uncomfortable with how to trade the latest move by the US central bank. Read more

Markets to tune into FOMC speakers after the Fed’s hawkish shift

The focus next week will now be on US data and whether that can live up to the expectations set by the Federal Reserve, while a few FOMC speakers will provide markets with a bit more clarity on their position on the economic outlook.  Read more

UK retail sales decline from April’s reopening surge

Retail sales data continues to print in a volatile manner as reopening effects distort both April and May’s data, while base effects render the year-on-year figure redundant. After surging 9.2% MoM in April after the reopening of non-essential retail stores on April 12th, headline retail sales contracted by 1.4% MoM in May. Read more

CBRT refrains from laying the groundwork for a rate cut in July or August

The Central Bank of the Republic of Turkey was widely expected to keep rates on hold at 19% today, however, the question was whether the press statement would include language that sets the tone for a rate cut in one of the subsequent two meetings. This wasn’t the case despite the fact that President Erdogan publicly announced his preference for lower rates in either July or August, Read more

Fed eyes exiting stimulus measures via the fire escape as inflation pressure heats up

Very little forward guidance on the Fed’s normalisation cycle was given by the head of the FOMC, which was again another attempt to temper the reaction in financial markets to avoid another “taper tantrum”. The Fed’s slow and well signalled approach to the announcement of QE tapering continues. Read more

Markets position for Fed decision tonight with DXY firmly above 90.0 handle 

The DXY index is trading near one-month highs as markets await the Federal Reserve policy decision tonight at 19:00 BST, which may enlighten investors with a clearer timeline for the tapering of asset purchases. Read more

Currencies struggle to pare back losses against USD as traders weigh Fed decision 

This morning, G10 peers are struggling to pair back losses against the dollar as traders wager that rising inflation will prove temporary and won’t move the needle for the Fed to act on Wednesday evening at the FOMC monetary policy decision. Read more

A week of central bank decisions but the Fed will draw most of the focus

The Federal Reserve, Central Bank of the Republic of Turkey, and the Central Bank of Brazil are likely to be the most exciting on this week's agenda. Over the weekend, events in the UK will focussed on the government’s decision to stick to its June 21st reopening plan as cases of the delta variant rise.  Read more

ECB strikes balance between growth upgrade and dovish rhetoric

Today’s ECB meeting was always a question of how the central bank could communicate an improvement in economic growth forecasts in a fashion that doesn’t move market expectations of policy tightening preemptively. Read more

Bank of Canada maintains message in line with expectations

Wednesday's Bank of Canada policy decision fell broadly in line with both our own and consensus expectations. That is, the Bank balanced a slip in near-term economic data with an improving external backdrop and growth outlook in order to hold policy and maintain the projections generated in April's Monetary Policy Report. Read more

Patience is the aim of the game

The Bank of Canada are set to announce their latest policy decision at 15:00 BST/ 10:00 ET on Wednesday June 9th, with Deputy Governor Timothy Lane scheduled to give an economic progress report on Thursday 10th. Read more

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 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

It is all about PEPP

Looking ahead, central banks will come back to the fore next week with the European Central Bank, the Bank of Canada, and the Bank of Russia releasing their latest policy decisions. The ECB is likely to steal the show as speculation over the next PEPP decision rises. Read more

Both Canada and US labour market reports underwhelm expectations 

After the data print, USDCAD dropped over a tenth of a percentage to reverse gains on the day. This is largely because of yesterday's price action in markets and the higher expectations attached to the US economic recovery in response to the performance of the latest data. Read more

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

Slowing inflation takes weight off Erdogan’s rate cut comment

The reaction was mild in currency markets, with the lira only falling around half a percentage point against the dollar and 0.4% against the euro. With Turkey now curtailing credit growth to improve the current account balance, one major downside risk to the lira subsides. Read more

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

Canadian GDP for March fails to excite loonie

Today's March GDP data from Canada came in broadly as expected, with the economy expanding 1.1% month-on-month vs expectations of 1%  as lockdown conditions continued to ease, while the Q1 annualised data undershot market expectations by 1.2% after printing at 5.6%.  Read more

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

All eyes on US and Canada labour market data after underwhelming April reports

Next week (31st - 4th June), the focus turns to labour market data from the US and Canada after April’s underwhelming reports. Also on the agenda are policy decisions from the RBA and Reserve Bank of India and China’s official manufacturing PMI. Read more

Recovery Fund key for eurozone recovery but risks remain

The ECB’s response to the 2020 pandemic was largely similar to the response rolled out in 2008 during the onset of the global financial crisis. In this analysis piece, we dive into the policy differences between the two crises and take a look at the composition of the recovery fund. Read more

Monex Europe’s Vaccine Distribution Chartbook | May 2021

May has been a decisive month in the global vaccination campaign, as an accelerated delivery in some advanced economies has led to comprehensive reopening plans and brighter economic prospects. Read more

Social spending underwhelms in latest CHAPS data due to hesitant consumer mobility

Taken on the whole, the release bodes well for May’s GDP rebound as consumption remains robust, however, the real-time data continues to underperform as consumers remain hesitant to take public transport in order to spend. Read more

Limited top-tier economic data puts USD dynamics further into focus

Next week (24th - 28th May), the economic calendar is light on major market-moving events. US PCE inflation stands out as the most high profile data point on the calendar along with the latest RBNZ rate decision, while the focus will remain on central bank speakers. Read more

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

UK flash services PMI underperforms expectations but only due to the survey window 

Sterling shrugged off this morning’s strong retail sales data, suggesting there is a high bar for UK economic data to clear before it adds any further upside to the pound. Much of the initial rebound due to lockdown measures easing has been priced into UK financial assets over the course of the last month. Read more

UK retail sales beats expectations, placing recovery on a firm footing

Today’s UK retail sales data gives markets the first piece of hard economic data that pertains to how the consumer reacted to the April 12th reopening. The data print didn’t disappoint, with retail sales climbing above expectations by 4.7 percentage points to 9.2% month-on-month in April, while sales excluding auto fuel climbed 9%. Read more

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

Headline inflation overshoots, but not a concern yet for the BoC

Today’s CPI release saw headline inflation rise from 2.2% in March to 3.4% YoY in April. The print was marginally higher than expectations, which sat at 3.2%, but despite the figure exceeding the Bank of Canada’s 2% target, it won’t cause concern among the Governing Council just yet. Read more

A hot US economy props up the greenback as inflation fears mount

Inflation was the word on everyone's lips this week, with underlying indicators flashing warning signs while US inflation data printed well above expectations. Next week (17th -21st May), the focus will be on the latest FOMC meeting minutes, central bank speakers, eurozone and Canadian CPI and preliminary PMI data for May.  Read more

All eyes on the dollar as retail sales could double down on inflation concerns 

Today’s data dock is centred around the US, with retail sales and industrial output scheduled for release at 13:30 BST. With policy expectations now stable, a large upward surprise is likely needed for the dollar to regain its strength from yesterday.  Read more

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

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

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

US CPI brings volatility to FX markets as real yields yo-yo

April’s US Consumer Price Index figure was set to be the first large inflation print significantly above 2% as a low base from last year and surging commodity prices this year set a high bar. The 4.2% YoY increase in the headline print did not disappoint and comfortably exceeded market expectations which were set at 3.6%. Read more

Central bank speakers are key as speculation on policy normalisation rises

Next week (10th - 14th May), the focus remains on central bank policymakers as market speculation regarding policy normalisation remains elevated. In the week ahead, we take a look at Banxico's upcoming policy decision as well as recent Fed commentary and the upcoming data calendar.  Read more

Nonfarm Payrolls undershoot expectations, prompting USD weakness and a flattening in the Treasuries curve

The bar was set high for today's Nonfarm payrolls figure after March saw the economy add nearly a million jobs and the gradual economic reopening appeared to be pulling people back to work, especially in the hospitality sector. Read more

Canada labour market recovery unwinds due to restrictions being tightened

Canada's net employment gain today was always going to be negative after public health measures tightened in key provinces. The loonie retraced early losses to trade closer to yesterday's multi-year highs upon the release, but arguably this was more to do with the slip in US jobs data than Canada's own release. Read more

Non-farm payrolls to please USD bears unless print exceeds high expectations

Treasury yields and the dollar will react to data surprises to a higher extent. Today’s Non-farm payrolls at 13:30 BST may be too early to put that to the test, offering room for a mild risk-on move and sell-off in the US dollar if the figures surprise to the upside. Read more

Bank of England reactive: Signs of optimism not enough to talk about normalisation

The Bank of England not only upgraded its economic projections but also decided to taper their QE programme from £4.4bn to £3.4bn until August. However, while this would be seen as a hawkish development, BoE members stressed how their QE programme differed from the likes of the Bank of Canada and the Federal Reserve. Read more

CBRT statement and lira price action nothing to write home about

The Turkish lira practically shrugged its shoulders at today’s rate decision by the central bank to leave policy unchanged, as this was widely expected by markets. Meanwhile, the accompanying press statement did little to provide market participants with new information Read more

Norges Bank meeting fails to excite markets as hawk position was already secured

Today’s policy decision by the Norges Bank has done little to change the krone’s course, as the press statement mostly echoed the March meeting: much of the adult population is expected to be vaccinated by the end of the summer, suggesting economic activity picks up through the year and further justifying the rate hike in the latter half of 2021. Read more

NBP leaves policy on hold while turning a blind eye to April’s inflation print

USDPLN rose by just under 1% from low-to-high to touch a three-week high yesterday as the zloty weakened in the buildup to the National bank of Poland’s policy decision, with markets anticipating no policy expectations and continued dovish communications by the NBP. The decision perfectly fulfilled the expectations of a placeholder meeting, making markets wonder why it took the central bank longer than usual to come out with their decision. Read more

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, although we argue that most major catalysts over the next month have now been baked into current pricing, meaning a stabilisation in the US dollar could occur in the near-term. Read more

Central banks to keep cards close to their chest ahead of broader reopening in DM space

Next week (3rd - 7th May), central banks will continue to take centre stage with policy decisions by the CBRT, Norges Bank and the RBA. However, it's the Bank of England who is poised to line up among the more hawkish central banks next week, when revised economic projections firm expectations of “ QE tapering later in the year. Read more

Eurozone GDP prints set to reveal the damage from Q1 restrictions

The euro reached an over two-month high vs the US dollar yesterday morning after crossing through the early-March resistance level but still closed down on the day as the US dollar reversed earlier losses and Treasury yields rose. This morning, the pair continued to trade in the middle of yesterday’s range ahead of the eurozone GDP print releases. Read more

Dollar takes a tumble as Chair Powell pushes it lower 

Despite markets largely anticipating a dull Federal Reserve meeting last night, FX market volatility spiked around the event as the dollar DXY index fell to its lowest level in over a month as Chair Powell signalled an optimistic tone, but not so optimistic that it hinted at monetary policy normalisation anytime soon. Read more

European vaccine rollout takes centre stage while developing countries struggle with a dire Covid situation

We continue to track the evolution of the vaccine rollout in major economies, as a timely gauge of potential reopening and global economic recovery. In this edition, we highlight the European efforts to catch up with front-runners like the UK and US, while stressing the dire picture in some emerging markets. Read more

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

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. However, risks of further sanctions and sustained ruble depreciation remain.  Read more

FOMC and BoJ to stay on hold after significant March meetings, EU recovery fund in focus

Next week (26th - 30th April), policy decisions by the Federal Reserve and Bank of Japan are due, but few surprises are expected. Meanwhile, the soft deadline for the EU recovery fund could see politics drive EURUSD towards the back-end of the week.  Read more

Sterling retraces yesterday’s bizarre losses as it continues to float in the 1.38-1.40 range

Sterling’s price action yesterday had no significant idiosyncratic drivers and caused some speculation across the market. The pound posted a 0.63% drop against the dollar as it led losses in the G10 space, although the broad USD strength wasn’t anything to write home about. Read more

ECB fails to excite markets with placeholder meeting

As expected, Lagarde left everyone in the dark as to when the ECB will scale back PEPP purchase as she wants to make that decision based on updated projections that are coming in June. Instead, she made it clear that any phasing out of PEPP would be premature as of now. Read more

Bank of Canada tapers QE and casts hawkish tone for markets to digest

This hawkish message from the BoC was coupled with the fact that their estimate of potential growth was lifted from an average of 1.4% over 2021-2023 to 1.6%, which in usual times would have been taken as a dovish twist. Read more

German politics catch markets by surprise, but euro takes wait-and-see approach ahead of ECB

Just hours after Christian Democratic Union leader Armin Laschet secured his position as the party’s nomination for September’s elections, the Greens surged ahead to become the most popular party in Germany, taking a seven-point lead over Chancellor Angela Merkel’s conservative bloc. Read more

QE in focus next week with ECB and BoC meetings

Next week (19th – 23rd April) investors will keep an eye out for the overdue FX report from the US Treasury department, while ECB, BoC and CBR meetings sit prominently in the calendar. Prior to the BoC, however, is the Canadian budget, which is due on Monday.   Read more

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

CBRT lays groundwork for lower rates in future as they begin to play a dangerous game

The CBRT met market expectations today and held rates at 19% despite both the new Governor and President Erdogan’s appetite for lower rates. The move was largely expected by markets, with 23/25 economists surveyed by Bloomberg anticipating rates will be held at 19%, as higher rates are deemed intolerable while cutting rates isn’t advisable given the momentum inflationary forces currently have. Read more

Euro traders look through J&J spat while US inflation didn’t provide the fireworks many expected

Recovery prospects remain optimistic as the vaccine roll-out is set to pick up this month, and euro traders chose to shrug off any jitters around the Johnson & Johnson vaccination pause which may delay the vaccination progress. Read more

US Treasury auctions in scope for broad dollar ahead of March CPI release tomorrow

For today, US Treasuries will be watched ahead of auctions in 3Y and 10Y notes later this afternoon while the economic data calendar is sparse for today. The bid-to-cover ratio will be an important factor as Treasury demand will help shape the outlook on US debt prior to the CPI release. Read more

Governor Kavcioglu’s first CBRT decision to grab markets’ attention while the RBNZ should deliver no surprises

Next week (12th - 16th April), Covid developments will stay top of mind, while rate announcements from the Reserve Bank of New Zealand and Central Bank of the Republic of Turkey are scheduled. Both banks are set to hold rates next week, with the CBRT decision proving more salient given recent political interference and lira weakness. Read more

Lane leads decision to increase PEPP as ECB combats reflationary dynamics

The ECB meeting minutes made it abundantly clear that the March decision to significantly increase PEPP purchases wasn’t implicit yield curve control, but the main area of concern was the rise in longer-dated yields and the risk free rate and the impact it could have on broader financial conditions. Read more

NBP remains dovish as third virus wave undermines recovery despite elevated inflation

he National Bank of Poland (NBP) kept a wait-and-see approach today and left its key policy rate unchanged at 0.10% while remaining tolerant of the above-target inflation.The Polish zloty barely reacted to the news as most market participants were expecting no policy changes. Read more

USD pares back Q1 gains as yields shrug off good data

With US yields stalling and equities pushing higher since the beginning of the week, the dollar returned some of its Q1 gains as rising risk-on sentiment weighed on the currency. The US reported a strong rebound in jobs and services sector activity for March as Friday’s Nonfarm Payrolls and ISM  services index continued to climb higher. Read more

FOMC and ECB meeting minutes to guide markets after Easter

Looking ahead to next week’s calendar for the 5th to 9th of April, it looks to be another where thin liquidity in markets could exacerbate marginal moves on the back of light economic data and events. Turkey’s CPI data on Monday and the release of central bank meeting minutes stand out.  Read more

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

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

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

Light events calendar vs thinning liquidity conditions

Events are light from the 29th March – 2nd April 2021 in FX markets. However, key headlines from the OPEC+ meeting and February’s Nonfarm Payroll data may induce FX volatility as liquidity conditions thin. Read more

Political interference in Turkey spills over to sour broader market sentiment 

The Central Bank of the Republic of Turkey’s decision to hike rates was welcomed by markets, with the lira regaining ground against the dollar as the central bank evidenced its commitment to lowering the trajectory of inflation. However, the move looked to have been too politically sensitive for Ankara. Read more

Diverging central bank policies call the tune for FX markets

This week’s pivotal FOMC decision set the tone for FX markets when the Fed kept up its dovish stance despite the markets’ fear of the economy overheating which was reflected in rising yields across the whole curve. Read more

Bank of England looks to hold the ship steady with placeholder announcement

While developments have been positive since the February meeting, the Bank of England decided to marginally push back against market expectations of an earlier normalisation by maintaining the current pace of quantitative easing (£4.4bn weekly) and requiring visible progress in inflation data towards the target. Read more

Turkey overdelivers with rate hike to boost lira and reduce inflation impact

Not one to be outshone by the central bank of Brazil, the CBRT doubled expectations by increasing rates by 200bps today as its commitment to reducing the inflationary channel and meeting its end-2021 target was clear. Read more

NOK gains after NB vows to hike rates in 2021 H2

The Norwegian krone enjoyed the decision by the Norges Bank to raise its projected interest rate curve to price in a rate hike in the latter half of 2021. Having already projected take-off in the first half of 2022 back in January, the decision turned the already hawkish central bank even more hawkish. Read more

Fed underdelivers with dovish dot plot weighing on dollar

Market pricing leading into tonight’s FOMC decision was tilted towards the hawkish side. Not only were money markets pricing in numerous interest rate hikes from the Fed, but yields were higher and the dollar firmer across the board. Read more

Confidence issues challenge improved vaccination prospects

Vaccine rollout continues in March for its third month now, but significant obstacles still stand in its way. Since our February chartbook, increased supply plans by the single-shot drug of Johnson & Johnson have improved prospects for the global campaign, with the pharmaceutical company expanding delivery plans by 0.6 billion doses. Read more

Federal Reserve preview: Look to the projections for guidance as Powell may keep lips tight

The March 17th FOMC meeting is likely to be one of the most important for Chair Powell in his tenure at the helm of the central bank, with many drawing comparisons with the task presented to his predecessor Bernanke back in 2013. Read more

Suite of central bank decisions in focus as US 10-year breaks 1.6%: Fed and BoJ set to take the lion’s share of attention

The Fed will grab the lion’s share of markets’ attention this week given the recent bear steepening of the USTs curve, the SLR and the passing of the fiscal stimulus bill, while the Bank of Japan will follow closely behind as the results of their policy review are due to be released. Read more

UK economy weathers storm better than expected with January’s growth hit just 2.9%

With growth contracting 2.9% MoM as the UK entered stricter nationwide lockdown measures in January, a smaller hit to the service sector (-3.5% vs exp -5.5%) and positive growth in construction output (0.9% vs exp -1.0%) meant the data printed a full 2% higher than the median expectation supplied to Bloomberg. Read more

ECB meets expectations and ramps up near-term PEPP purchases

The big question for the ECB heading into today’s meeting is whether the Governing Council was going to rally behind a common message in relation to the recent rise in euro-area yields. That question has been answered with the ECB coming straight out of the block with the announcement that PEPP purchases will be “significantly” ramped up in the coming quarter. Read more

Bank of Canada offsets hawkish message with downside risks

The Bank of Canada outlined the slew of negative risks that remain to the outlook despite incoming data beating expectations. The biggest risk beyond that directly related to the virus is the level of slack that remains in the labour market. Read more

Central banks vs bond markets: BoC and ECB in question

After a volatile end to last month, the focus of FX markets continues to be on developments in the fixed income space. This week, the dollar has reigned supreme yet again despite mixed messages coming from the Federal Reserve over bond yields. Read more

Dollar weakens as yields calm, with China’s “two sessions” and OPEC+ in scope for today

GBP Despite a bumper budget announced by Chancellor Rishi Sunak yesterday, sterling struggled to fend off the broadly stronger dollar, with GBPUSD closing the day out flat after a brief flurry higher. Against the euro, sterling’s fortunes were better displayed as the pound rose 0.21% over the course of the day. In the budget, Chancellor Sunak outlined £65bn in additional spending as he extended pandemic related programmes - such as furlough and business tax breaks. While the overall deficit number was actually downgraded, largely due to an improved growth outlook as nominal spending exceeded expectations, fixed income markets still priced in higher yields across the UK’s Gilt curve. This is normal as the government will have to issue more debt to pay off the increased deficit. The increase in supply pushes the price down and correspondingly increases the yield on that debt due to the inverse price-yield relationship. The Debt Management Office announced that gilt issuance for 2021/22 will be £295.9bn - £50bn more than most had expected (full budget review can be viewed here). Today, the pound looks pinned against the dollar again, while it makes additional inroads against the euro as the single currency trades lower across the board. In fixed income markets, gilt yields have stabilised somewhat this morning, etching lower along with the rest of developed markets, but previously traded higher against the general pattern. How fixed income markets digest the budget and expectations of the recovery will be key for the pound, especially with debt financing so in focus. EUR With risk sentiment held back yesterday, the euro traded softer against USD, CHF, JPY and pound sterling while gaining vs petro currencies NOK and CAD and the Antipodeans AUD and NZD. On the whole, the virus narrative and vaccine rollout continues to weigh on the euro as the currency is waiting for that green light from major eurozone economies on when to reopen. Germany has already laid out some plans to open up, with hairdressers resuming work this week and book stores, flower shops and gardening centres opening next week. Although this is relatively good news, it has little impact on the euro in the grand scheme of things and euro traders await more impactful easing of measures, such as the reopening of the hospitality sector. On the monetary front, ECB policymakers have been sending confusing signals around their yield-watch. Previously, the ECB had repeatedly stated it will carefully monitor the increase in yields to ensure favourable financing conditions. This led markets to believe they would increase the pace of their Pandemic QE programme, however, weekly data showed that the pace decreased last week. The ECB responded to this by saying it was due to redemptions, signalling that an increase in purchases would still be on the table for the week after, however, yesterday’s commentary had markets muddled. The ECB communicated yesterday it sees “no need for drastic action to curb bond yields”, undermining any effect of the verbal intervention. The big question now is whether or not the ECB will increase the pace of bond-buying this week, which will show up in next week’s data, however, markets do know that the ECB has enough firepower to do so and refraining from accelerating the pace sends a signal to markets that the ECB is not willing to keep borrowing costs low. On the data calendar today are eurozone employment figures and retail sales at 10:00 GMT, but euro traders are likely to focus more on underlying market themes today. USD The dollar spot index continued to push higher overnight, grinding past yesterday’s highs as the US bond market continues to react strongly to the prospects of a faster US recovery based on the fiscal stimulus package. Risk sentiment improved on Tuesday when the Fed’s Lael Brainard stated the bond sell-off had “caught her eye”, right before ECB policymakers stepped back their concerns around the European bond rout. Today’s Q&A session between Federal Reserve Chair Jerome Powell and the Wall Street Journal at 17:05 GMT will be the last occasion before the Federal Reserve Holiday to hear from the Fed, meaning that today’s comments can shape the market mood for the next two weeks. So far, Powell has refrained from voicing concerns around the yield rise, so any comments that he is monitoring the bond sell-off may be enough to calm down bond markets and lay the foundations for a softer dollar. On the other hand, if he sticks to his previously shared stance, this could trigger another spike in US Treasury yields and more dollar strength in the near-term. In the background, markets will focus on headlines around the Senate debate on the fiscal package. Today’s data calendar includes Initial Jobless Claims at 13:30 GMT which provides the final indicator of the job market before tomorrow’s Nonfarm Payrolls. The jobless claims are followed by January’s Durable Goods Orders and Factory Orders at 15:00 GMT, with risks tilted to the upside for these figures as the jump in retail sales in January signalled the large fiscal multiplier of the $600 individual checks that consumers received that month. CAD The loonie struggled to stem losses against a broadly stronger US dollar yesterday, despite oil markets jumping back above the $60 threshold ahead of today’s OPEC+ meeting. Oil rallied after yesterday’s Department of Energy inventory data saw a record decline in fuel inventories, with gasoline stockpiles witnessing a 13.62m drawdown. The data showed that demand pressures are picking back up, which offset the news that crude oil inventories began to rise again last week by 21.56m barrels. Meanwhile, on the fiscal front, Finance Minister Chrystia Freeland stressed the government will do “whatever it takes” to support the Canadian economic recovery, echoing sentiment struck in the UK budget yesterday and tones evident in the US fiscal package. Speaking at a press conference yesterday, Freeland said “our government will continue to do whatever it takes, for as long as it takes, to help Canadians through this time”. Her sentiment echoed into fixed income markets, where Canadian bond yields try to play catch-up with the US yield curve on hopes of a similarly aggressive rebound in growth and inflation. The move in the 10-year CGB comes at a time when vaccine distribution in Canada severely lags that of the US. There is little scheduled in the calendar for the loonie today beyond the OPEC+ meeting, which will likely see oil output increased in the region of 0.5-1.5m barrels per day. APAC China’s “Two Sessions” begins today, with the Chinese People’s Political Consultative Committee kickstarting events before the National People’s Congress begins tomorrow. The Two Sessions typically last around 10 days, with the first day of the NPC session tomorrow normally outlining the government’s targets for GDP, employment, CPI and the fiscal deficit. However, after last year’s pandemic induced uncertainty, the NPC did not set a growth target for 2020. Many expect this year’s growth target to either be omitted again or set in a range. Most provincial government’s released their growth targets for 2021 using minimum thresholds. The NPC draws international focus, especially at a time when global growth is so dependent on China’s output. Given the fact that the economy has fully recovered from the economic downturn in early 2020, fiscal and monetary support is set to be tapered. However, the soft patch of economic data at the start of the year, and slowing PMI data, is likely to see policy support gradually tapered instead of withdrawn. The headlines will dominate CNY price action over the coming days, and likely into next week, as authorities outline the projected path for the Chinese economy alongside the five-year plan.     DISCLAIMER: This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. Read more

NBP upwardly revises forecasts but remains dovish

Hawkish forecasts revisions for growth and inflation were not enough for the National Bank of Poland to change its dovish stance today. The NBP kept its rates unchanged at 0.10% as expected, while risks to economic growth from PLN appreciation was reiterated in the policy statement. Read more

Sunak unveils bumper budget, but markets weary that someone has to foot the bill

Sterling has been relatively stable throughout today’s budget, while front-end gilt yields have risen the most in the developed market space today - up 3.9bps on the 2-year. While the moves are minor, they come at a time when the dollar trades stronger against the G10 and front-end yields sit flat. Read more

Budget in focus for sterling as it trades just shy of $1.40 this morning

Sterling trades higher against the dollar and euro this morning, although the move is relatively contained considering the March budget is released later today - roughly around 12:30 GMT. Late last night, media outlets broke the news that Chancellor Sunak will extend the Coronavirus Job Retention Scheme this afternoon. Read more

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

Rising yields place pressure on fiscal plans and central banks

Rising yields captured the focus of FX markets last week, as the dollar bounced back into action with US equities also feeling the pain. The question for markets now is where do we go from here? Many have already suggested that central banks will start to intervene further in bond markets to keep borrowing costs low and aid the economic recovery Read more

SEK rally to continue although headwinds from Riksbank’s FX plan may emerge

As our previous EURSEK forecasts already envisaged moderate declines over the course of the next 12-months, the announcement by the Riksbank hasn’t resulted in any changes to our SEK forecasts against the euro while triangulations from our EURUSD forecasts have slightly altered USDSEK. Read more

Powerful rebound in Norway’s economy means rate hike is on the agenda

We anticipate a continued appreciation in NOK over the coming twelve months as the currency benefits from increased global growth expectations, a continued recovery in crude oil markets and a powerful domestic economic rebound. Read more

Sterling unmoved by Johnson’s roadmap as path out of lockdown is still mired with uncertainty

Sterling was unmoved by today’s release of the roadmap to the recovery, with much of the announcement leaked prior to the Prime Minister’s formal statement. It was widely signalled this morning that schools are set to reopen on March 8th, and outdoor gathering limits eased along with outdoor sports facilities opened on March 29th. Read more

GBP in focus next week as PM Boris Johnson carefully outlines exit plan 

With limited top tier data releases in next week’s calendar, we take a look at next week’s announcements in the UK and what they mean for the pound, while also preparing for the upcoming Reserve Bank of New Zealand policy decision due to be released on Wednesday. Read more

Dollar decline resumes as reflationary trade is dampened by labour market data 

Treasury Secretary Janet Yellen told CNBC yesterday the actual jobless rate is around 10% - not January’s official 6.7% - as many have stopped looking for jobs. She reiterated the need for the $1.9tn stimulus package and said the recent strength in retail sales and stock values do not change her view. Read more

UK retail sales data shows toll of January lockdown, but markets look ahead to Johnson’s roadmap to recovery

Sterling has dipped from session highs after headline and core retail sales figures for January undershot expectations substantially this morning, evidencing the toll January’s lockdown has had on the UK economy. Read more

Vaccine distribution remains in focus as many challenges lie ahead

As markets focus on the distribution of vaccines, both on a country and global level, in order to gauge the timeline for the scaling back of lockdown measures and the resumption of economic recoveries, our monthly vaccine distribution chart book will log developments in vaccine distribution and the viability of government targets in major economies. Read more

CBRT hold rates at 17% as expected but outlines inflation risks going forward

The Central Bank of the Republic of Turkey met both the market and our expectations today in holding rates steady at 17%. With headline inflation sitting below the one-week repo rate at 15%, real rates remain in positive territory. Read more

Dollar dynamics still drive markets as current economic conditions remain stagnant 

Markets are set to be quiet next week, especially on Monday with the combination of Lunar New Year celebrations in Asia and a federal holiday in North America. However, the European session could open quite choppy given the limited liquidity in markets and expectations that Italy could approve Mario Draghi as the next Prime Minister over the weekend. Read more

CAD to continue structural rally but near-term headwinds remain

Since our last CAD outlook, data released from Canada has been mixed. Sentiment gauges, PMIs and other soft data points have remained robust. Meanwhile, more timely hard data such as January’s labor force survey visibly highlight the pressure the Canadian economy remains under during the latest lockdown measures. Read more

UK economy contracts by 9.9% in 2020, largest decline since 1709, but sterling isn’t moved on the announcement

Today’s data release saw December’s preliminary GDP print at 1.2%, slightly higher than expectations of 1.0%. This brought the overall Q4 reading into positive territory, with the economy expanding by 1% QoQ in the final quarter of the year. Read more

Riksbank holds fire while acknowledging inflation won’t reach target for years

The Riksbank’s decision this morning came out very much in line with expectations. The central bank left the repo rate unchanged at zero per cent while asset purchases will continue within the envelope of SEK700bn. Read more

Staying long AUD but wary of the RBA’s focus on FX markets

While we remain structurally bullish on the Australian dollar, largely due to positive growth differentials, headwinds from the RBA are likely to persist over the coming twelve-months as loose monetary policy continues to aid the economic recovery. Read more

Dollar dominates G10 FX again as DXY rises to trade near 2-month high

Central bank meetings in Sweden and Mexico are set to be less dramatic than that from the Bank of England on Thursday. Meanwhile, political developments in Italy and the US will remain in scope. Former ECB President Mario Draghi will continue talks over the weekend with party leaders. Read more

Loonie looks to break-even this week despite labour market slip

The labour force survey highlighted that the sizably negative print in today's data was due to the effects of December's reference period occurring so early in the month (6th-12th December). After which, a number of provinces extended lockdown measures in response to increasing Covid-19 cases. Read more

Bank of England stretches its hawkish wings, giving sterling a tailwind in the process

Sterling traded heavy in the early part of yesterday’s session, sustaining nearly half a percentage point of losses against the dollar. However, hawkish undertones from the Bank of England reversed sentiment around the pound, resulting in it climbing into the green despite a broad bid in the dollar within the G10 space. Read more

NBP to continue weakening the zloty until an economic recovery kickstarts

Our view on the Polish zloty has remained generally bullish, although some tweaks to our short-term view have been made to adjust for the National Bank of Poland’s decision to intervene in FX markets in December. Read more

Get ready for negative rates, but that doesn’t mean they’re coming!

While many anticipated the BoE would maintain its current policy stance in light of the recent economic headwinds posed by the national lockdown measures, which the central bank expects to cause a 4% drop in GDP in 2021 Q1, the MPC gave long-awaited clarity over the operational viability of negative rates in the UK financial system. Read more

National Bank of Poland warns for FX intervention as EURPLN reaches key levels

The rather limited EURPLN reaction after today's central bank decision was perhaps not what the National Bank of Poland hoped for when they released their statement today, as the NBP has explicitly stated their preference over a weak zloty before and EURPLN had fallen by almost 2% since last Friday.  Read more

USDSGD to continue downtrend as broad dollar eyed for 2021

Since our last SGD outlook, developments globally and in Asia have resulted in a stabilisation of the S$NEER – a trade weighted nominal exchange rate index used to control the value of the Singapore dollar by the Monetary Authority of Singapore. Read more

Monex Europe February 2021 FX Forecasts

January has proven to be an indecisive month for FX markets. After looking through most of the near-term risks in December and the first week of January, tighter lockdown measures and concerns over vaccine efficacy and distribution thrust the previous risk environment into a bit of a tailspin. Read more

Bank of England’s discussion around negative rates will draw the focus of FX markets next week

Next week, the focus remains on central banks with the Bank of England, Reserve Bank of Australia and National Bank of Poland due to release fresh policy decisions. Meanwhile, focus will remain on the distribution of vaccines globally as key providers struggle with supply constraints. Read more

Fed fireworks don’t go off as QE tapering not in question

No fireworks were expected and none were delivered in tonight’s FOMC press statement. The Federal Reserve left its monetary policy instruments unchanged but indicated the central bank will do everything they can to promote economic recovery and thereby the Fed’s maximum employment and price stability goals. Read more

BRL to remain volatile amid a challenging recovery and weak fiscal outlook

Looking ahead, the currency outlook remains mixed and is poised to face yet more periods of severe volatility amid a challenging panorama. With ample losses to pare back to return to pre-pandemic levels, the real might gain attention due to an early hiking cycle from the BCB this year as inflation expectations grow. Read more

A post Brexit Britain leaves sterling at the mercy of Covid-19 developments

The stale nature of Brexit developments over the course of Q4 means it has been some time since our last GDP outlook. In the latter stage of 2020, despite Covid-19 developments, the pound continued to trade based off no-deal Brexit risk as the clock wound down and negotiations stalled. Read more

FOMC in scope next week as QE tapering dominates investor focus

Markets have focused on the wedge of central bank announcements this week, with notable meetings from the Bank of Canada, the Bank of Japan and the European Central Bank. In Canada, Governor Macklem’s optimistic tone resonated with markets and led the loonie to notch a fresh 33-month high against the dollar. Read more

Lagarde deflects questions on PEPP, leaving little impression on the euro

The European Central Bank left monetary policy unchanged today, in line with market expectations, as virus developments and the extension and tightening of lockdown measures didn’t prove dramatic enough to prompt any change of course. Read more

Lira extends gains after CBRT shows commitment to keep high rates

The Turkish lira extended gains today after the CBRT's decision to keep the one-week repo rate unchanged at 17%, in line with market expectations. This is the third day of gains against the greenback as improved risk appetite led to a weaker dollar earlier in the week. Read more

Norwegian krone shrugs its shoulders at uneventful Norges Bank meeting

While markets were not expecting fireworks at today's meeting, the Norges Bank failed to address the rising case count in the accompanying press statement and only discussed that "economic developments have so far been broadly in line with the projections in the December Report". Read more

Loonie gets green light to hit fresh highs as mini rate cuts pushed out of scope

Today's Bank of Canada rate announcement saw the central bank maintain their current policy stance despite the near-term deterioration in the economic outlook, highlighted by the Bank's expectation of negative growth in Q1 this year. Read more

Deluge of central banks and political events will give markets plenty of fodder 

The European Central Bank is set to stand pat on Thursday at 12:45 GMT despite the recent risks to its economic projections due to the deteriorating virus situation and recently tightened/ extended lockdown measures throughout the eurozone. Read more

Dollar bounces back as risk sentiment remains tentative while US observe federal holiday

The latest rebound in the dollar continues in this morning’s session despite the US observing a federal holiday today to remember Martin Luther King Jr. Elevated case counts in major economies and the near-term economic headwinds have kept market risk sentiment tentative over the last few weeks. Read more

UK GDP slips in November as national lockdown measures bite

This morning’s UK GDP release saw the economy contract by 2.6% in November as the government imposed a four-week national lockdown on November 4th, with other devolved governments tightening measures at the margin also. Read more

NBP leaves rates unchanged but hints at more FX intervention to come

The Polish central bank (NBP) lived up to market expectations today and left interest rates unchanged while it will continue to purchase government securities and government-guaranteed debt securities in the secondary market as part of the structural open market operations (QE).  Read more

Market sentiment collapses as Covid-19 cases rise and vaccine plans don’t live up to expectations

UK Chief Medical Adviser Chriss Whitty stated this morning that once the vaccine is rolled out in months, the UK will be able to lift some of the restrictions. Today, health secretary Matt Hancock will unveil the new vaccine delivery plan while GBP will likely also take cues from Bank of England MPC member Silvana Tenreyro. Read more

2021 starts with a bang for FX markets despite muted economic calendar 

Despite a relaxed start to the year in terms of economic data, FX volatility was still plentiful. US political events provided much of the impetus for movements in the dollar, as the Democrats win in both Georgia run-offs resulted in the resumption of the reflationary trade. Read more

NFP slip leads to marginal USD weakness, while USDCAD sits stable on similarly poor Canadian data

Private payrolls fell by 95,000, below expectations of a 25,000 increase, while manufacturing payrolls increased by 38,000. With the slip in the net employment data offset by November's revision, the US unemployment rate holds steady at 6.7%. Read more

USDZAR update as Covid-19 cases spike in South Africa

The covid-19 situation in South Africa has deteriorated substantially since the turn of the year, resulting in substantial sell-off in the rand and reversing the gains generated over the last six weeks. At 15.5, the rand sits close to 5% lower against the dollar year-to-date with only 5 trading sessions elapsed so far. Read more

Protests in DC don’t rock markets, Biden confirmed next US President by Congress

Despite last night’s events in Washington DC, FX markets remained relatively calm as the dollar weakened marginally. Notable risk gauges such as USDJPY, gold and the VIX index showed very little in terms of a reaction to the Capitol building being breached. Read more

EURUSD reaches fresh highs as Democratic Senate Control looks more likely

The euro is riding on the coattails of the Senate run-off in Georgia today as a weak dollar helped EURUSD reach fresh highs last seen in April 2018. During today’s early trading session, the pair rallied by a similar amount as throughout the entire trading session yesterday. Read more

Monex Europe January 2021 FX Forecasts

While our medium-term forecast of sustained USD depreciation remains intact, the decline in the dollar in December has led us to revise our near-term forecasts to factor in a weaker dollar heading into January 2021. Read more

Firework displays may be cancelled, but Georgia may provide some on the 5th

Many of the 2020 dynamics are set to spill over into 2021. Despite a Brexit deal being agreed prior to the end of the transition period on December 31st, teething problems to the new trading arrangement are likely to persist into early 2021, while an expansion in the narrow trade agreement could draw attention in the New Year. Read more

USDCHF stability to be a theme of the coming year as authorities enjoy franc depreciation vs the euro

We have brought forward the previous EURCHF forecasts to also represent our expectations of a more aggressive euro rally in the first half of the year than previously expected – the previous 3-month forecast is now the 1-month forecast etc. Read more

EURUSD rally goes beyond general broad dollar weakness

Having surged 5% since the November's lows, we anticipate the EURUSD rally to extend into 2021, with a large proportion of the move to occur in the first half of the year on vaccine optimism and plans to re-open economies. Read more

JPY to continue its smooth rally against the dollar as economic recovery progresses

Despite rallying against the greenback, the yen has underperformed against other G10 currencies in the aftermath of the pandemic to date, with the trade-weighted exchange rate having weakened since the May surge. Read more

Economic dividends from successful elimination strategy boost Kiwi dollar outlook

With Q3 GDP data showing a roaring economy and the RBNZ under increasing public and political scrutiny for its role in surging house prices, the central bank is now far less likely to need to resort to negative rates. Read more

Deal or No Deal: a Christmas special

Volatility in the pound over the coming week is likely to provide a bang before any crackers are pulled. Secondly, fiscal stimulus talks in the US are year to bear fruit. With an estimated 12 million workers facing an unemployment cliff on December 26th according to The Century Foundation, markets will keep a close eye on developments in Washington up until Christmas. Read more

Ruble to benefit from renewed risk appetite and the hunt for yield

Improved global growth conditions will result in a positive demand outlook for oil and gas exports, while elevated real yields in Russia will result in positive carry conditions for the ruble. Domestically, a substantial vaccine programme will allow the domestic economy to reopen at a similar rate to most DM economies. Read more

Brexit, US Stimulus and Central Banks set to deliver volatile last week before Christmas

FX markets have been dominated this week by the return of no-deal Brexit risk and substantial volatility in GBPUSD. With another “final” deadline set for Sunday for negotiations to end, Monday is set to be another explosive day for the pound with many leaders stating that a no-deal outcome is the likeliest option now. Read more

EURUSD reaches 4-day highs after ECB policy announcement

The ECB did not disappoint today, and delivered a whopping 500bn of additional stimulus to the PEPP envelope, bringing the total amount to 1.85tn. As icing on the cake, the central bank extended the program by 9 months, which is 3 months more than what median expectations foresaw. Read more

Bank of Canada unchanged, putting emphasis on Beaudry’s speech tomorrow

The Bank of Canada today left its policy rate unchanged at 0.25%, while reiterating that rates will be held at the effective lower bound until 2023 and the QE programme will continue to be in effect at C$4bn a week until the recovery is well underway.  Read more

Dollar retreat threatens to become a rout

It’s been a terrible week for the US dollar, which has fallen to fresh multi-month or multi-year lows against many major currencies, most notably the euro. The narrative that many observers have fit to this price move as a driver has been the progress of a new bipartisan proposal for $908 billion in fiscal stimulus. Read more

Another lap of the Brexit headline merry-go-round

Sterling remains firmly on the Brexit headline merry-go-round, and this morning is selling off after assorted anonymously sourced reports indicating that the threat of no-deal Brexit is looming large in the market’s mind for the umpteenth time. Read more

Global recovery to aid Swedish krona rally in 2021

The Swedish krona remains the best performing G10 currency year-to-date, trading 9.99% up against the US dollar at the 8.5 level. While the krona hit decade lows in the aftermath of the outbreak, its recovery benefitted from the fact that the economy experienced a relatively benign first wave. Read more

CAD rally to resume in 2021 but BoC and economic headwinds may stall the rally towards year-end

We have maintained a constructive view on the loonie for some time now. In our previous round of forecasts back in October, we adjusted our near-term view to factor in US election risks and our view that the dollar would bounce on the basis of a swift result providing constitutional clarity. Read more

EURUSD reaches 32-month high before PMIs spoil the party

The euro started today’s session in the green to mark an extension of the previous two-day rally, allowing EURUSD to set a new 32-month high. The currency shrugged off the extension of the German lockdown into mid-January as hopes for an upcoming vaccine are dominating markets. Read more

Markets eye a structural break lower for the dollar

Looking ahead, the outlook for the dollar will continue to be driven by these factors, as well as the newly emerging picture of a global economic recovery in 2021 as vaccination allows wide scale re-opening of major economies. Read more

Monex Europe December FX Forecasts

As the dust from the US election clears and the outline of Joe Biden’s presidency becomes clear, we take the opportunity to update our FX forecast to reflect this dissipation of risk. Our forecasts also reflect new information, notably the positive vaccine news and not-so-positive developments in virus case counts across many major economies. Read more

RBA and Canada’s budget in focus as dollar decline continues

Tweaks to monetary policy have been the theme of what was a quiet week for markets. Both the Fed and European Central Bank minutes alluded to changes in their monetary policy stance at the upcoming meetings, with the ECB likely to alter PEPP and the Fed likely to attach forward guidance to its QE programme. Read more

Markets caught between dismal near-term virus situation and encouraging medium-term vaccine development

Broad risk appetite appears stuck between poor short-term news, with rising Covid-19 cases in Europe and the US, and encouraging vaccine data. Next week’s calendar offers a number of points of interest, including the UK Treasury facing up to this exact trade-off in its latest spending review, and FOMC meeting minutes set for release. Read more

Dollar recedes on renewed fiscal stimulus hopes

While rising cases from the second wave in the US remain concerning, the double whammy of fiscal stimulus and vaccine hopes is helping support the 2021 growth outlook, which markets are repeatedly looking to trade-off instead of the near-term risks of further lockdown measures. Read more

CBRT: The return of the one-week repo rate

The recent lira rally below the 8.00 handle caused by the changing of the guard at the CBRT and Finance Ministry, along with conducive comments for higher rates in the short-run by President Erdogan, would prove to be fickle if the CBRT didn’t meet expectations today. Read more

Polish zloty recovers from record-lows while political risks and extended lockdown measures loom

While most renewed lockdown measures globally have led to smaller economic losses and less of a shock in financial markets than the initial outbreak in Q1, the Polish zloty still plunged to record-lows against the euro after the government outlined renewed containment measures at the end of October. Read more

Vaccine optimism appears to be no game-changer for ECB’s Lagarde

The euro traded with a mixed tone across the G10 currencies yesterday and remained flat on the day vs USD. Currency markets are running hot and cold between rising Covid cases and vaccine optimism, but European Central Bank President Christine Lagarde played down the recent vaccine headlines. Read more

Vaccine euphoria in markets ignores material questions about timelines and distribution

Although the US election remains contested by Donald Trump, this week’s main news was the release of positive data from Pfizer’s Covid-19 trials. Price action in G10 and EM FX has been indecisive, with the US dollar mounting a modest rally against several currencies that has come under threat of reversing on Friday. Read more

Rising virus cases support the dollar while havens go bid

It was another day of broad dollar strength against the G10 yesterday with only the New Zealand dollar making inroads against the greenback. In the US, the election still hasn’t come to a conclusion as incumbent Donald Trump remains reluctant to concede to Vice President Bident. Read more

Risk appetite enjoys Pfizer boost but the dollar bounced back in late trading

The dollar has had a chaotic 24 hours, at first tentatively weakening yesterday morning as an extension of last week’s price action. However, the news that Pfizer’s Covid-19 vaccine trial had gone better than expected gave risk appetite a boost and caused a sharp rally in the greenback that was particularly acute against the euro and yen. Read more

Pfizer results buoy risk appetite in markets

News that a vaccine developed by Pfizer Inc and partner BioNTech proved 90% effective in the first 94 subjects who were infected by the new coronavirus has helped buoy market risk appetite today, prompting big moves in USDJPY, higher-beta G10 currencies such as NOK and NZD, WTI and EM FX. Read more

Don’t look beyond today’s TRY rally, the market may be setting itself up for disappointment

The lira enjoyed the biggest one-day jump in two years and is trading over 5.5% higher in today’s session, CDS pricing - insurance against Turkish government debt default - has also dropped, while the Borsa 100 index is 2.6% higher also. Read more

Biden all but moved into the White House in markets’ eyes, Brexit back in focus

This morning’s price action has been mostly consistent with this theme, after all major news networks called the election for Biden over the weekend. Current President Donald Trump has not conceded defeat, and launched a number of legal challenges, which currently seem to have little chance of changing the apparent outcome. Read more

Nervous tone in markets as US election heads goes down to the wire and into the courts

One possible interpretation of this price action is that the possibility of a comfortable win for Democrats in the White House and Senate would lead to large fiscal stimulus, and therefore reflation – the close race undid this trade and caused a dollar bid throughout Wednesday night. Read more

CAD labour market gains excel, but markets focus on Pennsylvania result

Today’s labour market report was always going to be difficult to unpack. Was the slowdown in the labour market recovery a product of the 28-day lockdown in Quebec and Ontario, or is this part of the natural slowdown in the recovery expected in this phase of the recovery. Read more

Greenback on the back foot with Joe Biden taking Wisconsin and Michigan

The US dollar is well and truly on the back foot this morning and is weaker against most major currencies, while the US Presidential election results remain outstanding and a possible legal battle is commencing. Major news outlets such as the Associated Press have “called” a total of 264 electoral college votes for Democratic candidate Joe Biden. Read more

Head of Market Analysis at Monex Europe discusses contested election consequences with Bloomberg

Head of Market Analysis Ranko Berich discusses the consequences of a contested election with Bloomberg as the votes are counted and the outcome remains unclear. Read more

US dollar claws back losses as Trump unexpectedly takes key swing states overnight

The dollar saw wild swings along with other macro markets last night after Donald Trump’s unexpectedly strong performance in key swing states in yesterday’s Presidential election. Prior to the first results becoming available, markets were happily assuming that a clear Biden and Democrat win would lead to large stimulus spending, a higher path for inflation, and a weaker dollar. Read more

The Risk of a Disputed Election Looms Over Markets

The US election is set to eclipse all other events in terms of significance for financial markets next week, despite the calendar featuring otherwise important events such as Fed and Bank of England meetings, as well as non-farm payrolls.  Read more

US election primer

With markets having mostly digested the Federal Reserve’s change in reaction function, and the rout in risk assets of Q1 and Q2 now comfortably in the past, the US election stands out as the second biggest source of uncertainty for global macro markets, after the ongoing Covid-19 pandemic. This is not an ordinary situation. US elections rarely offer such drastic prospects for policy change that they significantly alter the global macro outlook. Read more

No surprises at today’s European Central Bank meeting

Today's statement is almost identical to the one released after the September meeting, apart from the first paragraph. In this paragraph, the ECB stated that it will release its new macroeconomic projections with a thorough reassessment of the outlook and the balance of risks in December. Read more

BoC and ECB to take center stage before US elections

This week’s major theme has been the ongoing US fiscal stimulus talks between House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin. Headlines around the fiscal funding talks contributed to chopping and changing risk sentiment all week, flinging the US dollar with it. Read more

Domestic outbreak eases and economy starts to rebound but investors aren’t convinced

Since our last ZAR update, conditions in South Africa have improved markedly. Over the last two months, the number of new cases and the positive test rate have fallen dramatically, allowing the South African economy to lower its lockdown from level 3 to level 1 over the course of two stages. Read more

Bank of Canada Business Outlook Survey falls to the wayside

The Overal Business Outlook Survey improved from -7.0 (revised to -6.9) in Q2 to -2.2, but this likely underreports the current situation as it doesn’t include the effects of the latest lockdown measures imposed in Canada’s two largest provinces; Quebec and Ontario. Read more

Risk appetite sours as markets eye a winter of restrictions

This week’s major theme has been a deterioration in broad market optimism about growth and reflation, with the US dollar and back-end sovereign bonds the main beneficiaries of the move. Considering rising coronavirus case counts and the resulting increases in restrictions on economic activity being seen across many western economies, the deterioration in overall risk appetite makes sense. Read more

Sterling slides back below 1.30 as no-deal risk rises ahead of key EU summit

Yesterday, concerns around Brexit negotiations continued to drive the pound lower as Boris Johnson’s self-imposed Brexit deadline, Thursday the 15th October, rapidly approaches with no deal in sight. Areas of contention such as state aid and fishing rights are yet to be bridged, meaning a narrow trade deal ahead of tomorrow’s EU summit is unlikely. Read more

Markets await fresh lockdown measures in Europe as the dollar goes bid

After climbing for four days on the bounce, the pound is struggling to hold its recent highs this morning as the market’s appetite for risk starts to unwind. The announcements that major economies will continue to tighten lockdown measures, albeit in a localised manner for now, continues to weigh on risk appetite as downside risks to the global economic recovery start to materialise. Read more

EURPLN testing day’s high after negative rate comment

EURPLN popped upwards today as the zloty weakened following an article by National Bank of Poland Monetary Policy Council member Eryk Lon, who wrote that Poland could move into negative rates if consumer sentiment worsens. Read more

Counting the cost of the ongoing second wave of Covid-19

It’s been an indecisive week for G10 FX, with the major pairs remaining within recent trading ranges as hopes for US fiscal stimulus faded and several regions continued to report worsening Covid-19 pandemics. Sterling will be in focus next week, with plenty of MPC member speeches and labour market data scheduled ahead of Thursday’s potentially fateful EU summit. Read more

Loonie enjoys employment gains to extend rally

In September, Canada's economy added 378,200 jobs compared with 245,800 in August, bringing the unemployment rate down from 10.2% to 9.0%. Much of the gains were a by-product of loosening containment policies in Canada as the survey was conducted between the 13th and 19th of September. However, this isn't to last. Read more

Czech data may spur short-lived optimism as virus risks loom

From August to September, CZK had weakened over 4.5% against the euro, while the Polish zloty fell by almost 5% against the euro and the Hungarian forint even saw a 6.5% decrease vs the euro. However, since yesterday the Czech Republic has become the EU’s worst hotspot with the most cases per capita over the last two weeks. Read more

Dollar back in the dumps as fiscal stimulus optimism plummets

The news that further fiscal stimulus measures won’t be enacted prior to the November election ring through markets today, shortly after Fed chair Powell reiterated the need for active fiscal policy in response to this crisis yesterday. Read more

Trump covid-19 infection presents a wild card for markets as sterling goes on Brexit merry-go-round

This week’s calendar offers several important looks at both Fed and ECB policy, while Brexit negotiations will likely continue after a high-stakes call between Boris Johnson and Ursula von der Leyden. Read more

Polish zloty hops on October’s EM rally train

While other Eastern European currencies like the Czech krona and the Hungarian forint are also performing well amid general EM currency gains this week, the zloty got an additional boost after a Polish central banker signalled that having near-zero rates after 2020 would be harmful to the Polish economy. Read more

Reality bites sterling as EU remain firm on state aid and and withdrawal agreement

The pound has been hammered this morning by the twin revelations that trade talks have failed to produce a breakthrough on the crucial issue of state aid, and that the EU has prepared a legal response to the Government’s Internal Markets Bill. Sterling is now facing up to the harsh reality of an uncompromising EU stance on state aid and last year’s withdrawal agreement. Read more

Canada’s economy expands by 3% in July

Statistic’s Canada may have just won this month’s forecasting prize as July’s GDP comes in at 3.0% MoM, smack bang on their provisional estimate released along with the Q2 GDP report last month. Given that economists’ expectations centred around this preliminary estimate quite heavily, today’s GDP release caused little market reaction for the loonie. Read more

Dollar on back foot after contentious Presidential debate

Last night’s first Presidential debate was highly contentious, with incumbent Donald Trump and challenger Joe Biden trading barns on a variety of domestic topics such as the economy, law and order, and the coronavirus pandemic. Read more

USDTRY hurtles towards the 8.00 level, which may force the TCMB into further aggressive hikes

Even though the lira continues to carve fresh all-time lows on what seems a daily basis, progress has been made in an attempt to stop the haemorrhaging. Last week, the central bank (TCMB) opted to raise interest rates by 200 basis points, with the signal of an interest rate hike more important for markets than the actual hike itself. Read more

Global risk sentiment weighs on Kiwi dollar

The New Zealand dollar strengthened over 2% against the Australian dollar in September but failed to escape the wave of US dollar strength that developed, as weak risk appetite continued to dominate FX markets. Read more

Covid cases rise and the November election creeps back into the frame as markets begin to favour the dollar again

The week ahead offers a moderately eventful calendar that will be capped off by non-farm payrolls. However, other themes are likely to provide plenty of impetus for further volatility in risk appetite, especially as Covid cases start to rise again in Europe and North America. Read more

UK outlines Kurzarbeit spin-off, but the holes in the safety net are visible

Sterling exhibited a minor flurry of strength in yesterday’s session as Chancellor of the Exchequer, Rishi Sunak, announced a new wage subsidy scheme to help ease the labour market off of the more expensive furlough scheme and aid companies retention of their workforce. Read more

No change in the Norges Bank’s rate path means no good for NOK in the short term

The Norges Bank took a cautious tone today when it announced no change in interest rates over the next couple of years. This is not a total surprise, as the Bank already flagged higher rates from the end of 2022 during its July meeting following a less severe economic shock in Norway than in most other economies. Read more

Loonie feels the blow sustained by Trudeau’s fiscal outlay

Yesterday’s throne speech saw these political and credit risks rise to the fore. In combination with the general risk-off tone in markets this week, the speech resulted in the loonie feeling the pressure, extending its slide back towards the 1.34 level – USDCAD is now trading 1.60% higher on the week. Read more

Swiss franc weakens vs euro after SNB sticks with FX interventions and announces to publish data quarterly

The Swiss franc fell to new lows against the euro and dollar this morning after the Swiss National Bank announced to keep rates unchanged and FX intervention at a high pace if necessary, considering the strengthening of CHF. In the short term, the central bank upwardly revised its inflation outlook since June, mainly due to a rise in oil prices. Read more

Lower than expected PMIs flag that winter is coming

This morning’s Purchasing Managers’ Index releases from September confirmed the bleak picture of the eurozone current state, with the bloc’s services PMI dropping to 47.6 down from August’s  50.5, and the composite PMI falling to 50.1 down from 51.9. In Germany. Read more

Riksbank upgrades GDP outlook but kept interest rate projection flat

QE is the way to go, according to Sweden's Riksbank which kept rates at zero today and stuck with a flat interest rate projection over the coming years. The central bank pledged to continue its asset purchase programme as it navigates its way through the pandemic, which is exactly what markets expected. Read more

JPY gradually advances on the closing gap between the Fed and the BoJ

The BoJ brought no policy moves forward, but took an upbeat tone on the economic outlook. In contrast, the Fed's move towards strengthened forward guidance moved it a step closer to the BoJ's ultra-accommodative policy stance, raising the prospect of a structurally smaller difference between US and Japanese yields.  Read more

Dollar bounces back as Europe sets for a second wave

GBP Sterling has weakened further against the US dollar and the euro this morning, extending yesterday’s general trends. Both GBPEUR and GBPUSD took a further dive this morning during a speech from Bank of England Governor Andrew Bailey. Speaking at a webinar for the British Chamber of Commerce, Bailey said that the BoE needs to know how to implement negative rates, and that they should be in the toolbox, but that discussion of the topic did not imply that they would be used. Bailey also added, helpfully, that negative rates would “right puzzle” the public without clear communication on the topic. Covid and Brexit remain the two major themes for sterling, although little material new information has developed this morning. The Government has announced a slew of new measures aimed at controlling the spread of coronavirus through leaks and anonymous briefings to the media, with some expected to be formally reiterated today. Prime Minister Boris Johnson will give a speech in Parliament today at 12:30 BST. Pubs seem set to be given a 10pm closing time, while Downing Street did not deny reports that Johnson would be reversing his recent encouragement for workers to head back into the office. EUR The euro seems to be bearing the brunt of the pick-up in risk aversion sentiment in markets as fears of renewed lockdowns globally give rise to risk-off flows into the US dollar. Adding to the downside pressure on EURUSD, European Central Bank President Christine Lagarde stated on Monday that the central bank is paying close attention to the euro’s appreciation and its knock-on effect on inflation, with inflation being at its lowest level in four years. “We take it into account in the determination of our monetary policy and it’s via prices of course, via inflation, that we take it into account to define this monetary policy” Lagarde stated. Her comments sound a little watered down compared to her earlier statement during the ECB press conference of September, where she stated that the ECB does not target the exchange rate. ECB’s economist Fabio Panetta will speak at 13:00 BST today ahead of the Euro-area September Consumer Confidence and may provide further comments on the exchange rate. The Consumer Confidence Index is scheduled for release at 15:00 BST. USD Yesterday’s session was reminiscent of a Rocky Balboa film for the dollar. After weakening to multi-year lows as measured by the dollar DXY index, the greenback has been trading like the underdog in G10 FX markets but showed a flurry of strength in yesterday’s session. This was a stark message of “down but not out” to markets as news of tightening lockdown measures in Europe opened the risk-off channel back to the dollar. Today and until Thursday, Fed Chairman Jerome Powell will testify in front of lawmakers, with today’s event taking place in front of the House Financial Services Committee. While the speech is scheduled to focus around the use of the CARES act, the piece of legislation releasing $2.2trn in fiscal stimulus back in March to protect against the pandemic fallout, his pre-released text shows the Fed Chair will continue to call for more fiscal support as the recovery remains uncertain. Additional fiscal stimulus has struggled to find bipartisan support in Congress and is increasingly unlikely to be passed prior to the Federal election as the clock ticks down to the end of the Congressional session at the end of September. Today, the dollar remains supported by continuing risk-off tones being struck in Europe, with the Chicago Fed President Evans the most notable monetary policy speaker scheduled in the calendar outside of Powell’s appearance. Evans is set to speak on the US economy and monetary policy at 13:00 BST. CAD The Canadian dollar felt the brunt of yesterday’s risk-off tone, falling some 0.78% against the dollar as WTI slipped back below $40 a barrel. While little was released for Canada specific, the loonie was trampled by the general G10 FX move which saw the dollar receive a boost as European equities were routed on news of further lockdown measures. The only major news out of Canada came from the federal housing agency, which stuck with its pessimistic forecast of Canada’s housing market. Chief Economist at Canada Mortgage and Housing Corp, Bob Dugan, reiterated his confidence in the agency’s forecasts yesterday that house prices will fall between 9% and 18%. Dugan claimed that while the timing of this drop is less certain, with the agency expecting the housing market to start recovering in 21H1, the dynamics in play are more certain and are likely to lead to a drop in Canada’s housing market in the coming quarters. We believe the housing market is one of the Bank of Canada’s primary concerns heading into the recuperation phase. We expect house prices to drop with the flushing through of pent up demand set to coincide with the tailing off of mortgage deferrals, a rise in delinquencies and the removal of fiscal support measures to the labour market. Today, the loonie continues to trade at the mercy of the broad G10 move, which continues to favour flows into the US dollar, ahead of tomorrow’s resumption of parliament and the most pivotal speech from the throne from the Liberals in some time.   This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. Read more

G10 central banks and markets mull implications of a new era in Federal Reserve policy

Central banks will continue to weigh the implications of the Fed’s dovish turn and recent dollar weakness on domestic inflation outlooks, with a number of meetings this week across the globe from Scandinavia to New Zealand. Read more

Loonie to extend rally on monetary policy divergence but risks are plentiful as the economy enters “recuperation” phase

While the risks outlined in our Q2 report meant that the Canadian dollar lagged the wider G10 rally, with the loonie’s move more concentrated in the month of August as opposed to July like the rest of the G10, the period of USD weakness meant that our previous point forecasts are now overly bearish. Read more

MPC vindicates market bets on increasing likelihood of negative rates

The UK economy is enjoying a fairly solid economic upswing at the moment, but increasing anticipation of negative rates in financial markets, and now increasing discussion of the issue at the MPC, highlight the extent to which everyone knows the economy is not out of the woods just yet. Read more

SEK enjoys a prolonged boost as Sweden escapes a deep economic contraction

Of the G10 group of currencies, the Swedish krone has seen the highest gains against EUR and USD over the year to date, surging a whopping 7% against the US dollar and almost 1% against the continuously strengthening euro. The surge came after the currency hit rock bottom in March as Covid-19 spread across the globe. Read more

Markets get ready for BoE as they digest dovish FOMC announcement

Today at 12:00 the Bank of England’s latest rate decision will be announced, alongside a policy statement and meeting minutes. The Bank is not likely to change any policy settings, but has a number of issues to address. Firstly, UK economic data has been fairly buoyant of late, but the end of the Government’s furlough scheme presents a likely shock to incomes as unemployment creeps up. Read more

Slow mean-reversion amid a concerning fiscal outlook

The Brazilian real has been the worst performing currency this year, with losses currently sitting over 22% and 26% against the USD and the EUR respectively. In addition to this, the BRL is the most volatile currency in the world when considering calculation periods from 1-month up to 1-year. Read more

A Fed decision that could head to the history books is only hours away

It's Fed day! That is right, the day for the history books, a day to get excited for. After announcing the shift towards an average inflation targeting framework, the Federal Reserve’s long awaited framework review is likely to have concluded, with the results expected to be released as early as today. Read more

EM debt aversion and political risks likely to weigh down the Russian ruble until next year

The Russian ruble is one of the worst performers in the EM space this year, even as oil rebounded by almost 30% after its initial crash at the early stages of the pandemic. Since June, the ruble saw the largest drop among EM currencies apart from the Turkish lira, plunging over 11% against the dollar and over 16% against the euro. Read more

UK labour market shows early signs of impact as internal markets bill passes Commons

The Government’s internal markets bill passed its second reading in Parliament by 77 votes last night, despite 20 abstentions from Conservative MPs. More may join a rebellion in amending the bill next week, but for now, it seems the Government continues to command an effective majority on the issue. Read more

Markets face Brexit endgame and packed central bank calendar

With the Fed potentially announcing the conclusion of its framework review on Wednesday, a suite of central bank policy decisions throughout the week, and the internal markets bill remaining in focus, the themes of this week are likely to spill over to the week ahead. Read more

Euro surges as ECB press conference is trumped by anonymous Bloomberg story reporting on….the ECB

Today’s ECB presser should have been a predictable affair, but instead, an anonymously sourced story released as the press conference began sent the euro on a tear. This begs the question: should we listen to official ECB communications, or will market-moving information about ECB discussions be released to select media on an ad-hoc and privileged basis? Read more

USDTRY hits fresh all time highs amid geopolitical tensions

The Turkish Lira has been at the forefront of losses in higher-risk EM currencies this quarter, with the recent recovery in the US dollar driving USDTRY to fresh all-time highs amid worsening geopolitical tensions between Turkey and Greece, as well as ongoing concerns about Turkey's economy. Read more

No-deal risk and second wave concerns send pound plummeting below $1.30

Sterling slumped for a fifth consecutive day against the dollar yesterday, its longest losing streak since May, as confidence in the pound is falling amid increased fears of a no-deal Brexit and a recall of coronavirus containment measures. Read more

Slow road to the peso recovery

We believe the MXN should continue to gradually strengthen against both the USD and EUR, although less so against the latter as the single currency should also extend its current rally against the dollar in the following months. Read more

Greenback finally catches a break

Two major macro trends were seriously challenged this week, with the US dollar finally managing to stem its losses after weeks of broad declines, and US equities seeing their first major setback since March’s carnage. Read more

Dollar on track for only second weekly loss since June

The US dollar continued to rally against many major partners yesterday, and the weighted dollar index DXY is on track for only its second weekly gain since June despite the greenback paring back some of its gains overnight. Read more

Markets digest major changes to Fed strategy

So far, the upshot of the week’s price action in FX has been more dollar weakness. Developments in fixed income markets were mixed, with the treasury yield curve steepening, while there was a notably sharp rise in breakeven inflation rates, particularly over the widely followed 5 year forward horizon. Read more

Markets digest the implications of a structurally more dovish Fed

Jerome Powell used his speech at this year’s virtual Federal Reserve Symposium to announce a historic change in the central bank’s monetary policy strategy, causing volatility in the dollar during the speech that turned into another wave of weakness overnight and this morning. Read more

Powell ushers in a structurally more dovish Fed

Jerome Powell has announced sweeping changes to the Federal Reserve's Statement on Longer-Run Goals and Monetary Policy Strategy, encompassing a significantly more dovish reaction function for the world's most important central bank. Read more

Singapore dollar reaches six-month high on fiscal stimulus and broad USD weakness

As of March 30th, the MAS adopted a 0% per annum rate of appreciation of the policy band to ensure monetary and financial stability throughout the Covid-19 pandemic, and re-centred the policy band downward to the then prevailing level of the S$NEER. Read more

Risk sentiment boosted amid progress on phase one talks

The euro is trading flat against the dollar this morning, remaining relatively steady over the last week of August as risk appetite got a boost from progress in US-Sino trade developments, while headlines on a virus vaccine likely also squashed the dollar down. Read more

Dollar stabilises at the end of the week, but fireworks may be in store next week with the Jackson Hole symposium scheduled

In the G10 space, sterling was the top performer despite the negative Brexit outlook for the UK, and the Japanese Yen came in at a close second, owing its rally to renewed US-China tensions and lingering virus concerns about the US and global outlook. Read more

TCMB hold rates and opt to continue behind the scenes tightening

Today the TCMB opted to hold the policy one-week repo rate at 8.25%. This decision came as no surprise to both market spectators and economists due to how politically sensitive higher rates are but exposes the central bank to a more aggressive hiking cycle in the future if the gamble doesn't pay off. Read more

Dollar puts up more resistance today against G10 ahead of FOMC minutes

The greenback was once again on the back foot yesterday, incurring losses to most major currencies and reaching significant lows against sterling and the euro. The narrative as to why the dollar is weakening hasn’t changed too much over the last few weeks and continues to be centred around political deadlock and a slower growth outlook. Read more

Morneau leaves but loonie continues to rally

Morneau stated that he wasn’t asked by the Prime Minister to resign, but instead tendered his resignation as he no longer believed he was the appropriate person for the role. He will instead make a bid for the position of secretary general of the OECD. Read more

Dollar falls as phase-one review delayed and Pelosi looks to recall House

The dollar remained under pressure at this week’s open and is trading in the red against all G10 currencies except NZD this morning after uncertainties around fiscal measures had the upper hand in headlines. Congress suspended talks for the Covid-19 stimulus package on Thursday already before it left for a month-long recess. Read more

TCMB walks the tightrope, will the dollar’s retreat slow?

FX traded with a tentative risk-on tone this week, with the dollar seeing losses to most of the G10. Euro periphery currencies such as NOK, SEK, CZK and PLN all saw noteworthy performances, consistent with improving sentiment about the region’s growth prospects. Read more

EURCHF to rally as European outlook improves

With regards to the Swiss franc, we predominantly forecast EURCHF and then triangulate out our USDCHF calls with the aid of our EURUSD forecasts. We do this for two reasons. First, the Swiss National Bank practically drew a line under the 1.05 level on EURCHF during the height of the pandemic with a series of FX interventions. Read more

Rapid euro rally adds note of caution to optimistic outlook

The euro has surged over 9% against the dollar since mid-May, when Angela Merkel and Em-manuel Macron first signaled a desire for a joint response to the pandemic-driven recession. Compared to its G10 peers against the dollar over the last three months, the euro ranks in the middle of the currency board. Read more

Dollar continues to trade mixed vs G10 as fiscal stimulus sits at an impasse

Measured by the DXY index, the dollar has made marginal gains over the last two days, but this is predominantly due to weakness in the Japanese yen and doesn’t fully describe the manner in which the greenback has been trading. Read more

Battered dollar stumbles through August as Turkish authorities face tough choices

A quiet start to the trading week, but things are set to pick up on the data front with UK GDP and labour market figures, RBNZ and Banxico rate decisions to name a few. Here's a closer look at the week ahead in FX. Read more

PLN trades flat despite Hawkish comments from NBP policy makers

The Polish zloty is trading within its recent ranges this morning against USD and EUR, after comments from the National Bank of Poland’s Monetary Policy Member Eugeniusz Gatnar failed to stir volatility. Read more

Dollar smile becomes a dollar smirk… 

The dollar has weakened in recent weeks and months, due to a potent confluence of factors including a uniquely bad COVID pandemic, a febrile political landscape, and anticipation of the FOMC delivering a lower US yield curve for well into the future. Read more

EURNOK unmoved by oil recovery, dollar weakness and EU recovery fund

The Norwegian krone was the worst performing G10 currency in the year to date, reaching 11.7 per USD in Q1 before rallying to current levels of around 9.02. While the oil crash and strong dollar demand in March were the main drivers for the krone’s initial crash, it is the same factors that are now spurring its recovery. Read more

EURCHF latest forecasts

We've recently updated our EURCHF and USDCHF forecasts, an outlook will be scheduled for sometime next week. Discussion of EUR and USD dynamics will also be outlined in their respective outlooks due imminently. We predominantly forecast EURCHF and then triangulate out our USDCHF calls with the aid of our EURUSD forecasts. Read more

EUR longs hit record high as traders question how much further can the greenback fall

The euro rose the most in a decade in July thanks to the dollar’s largest retreat since 2010. The euro’s largest rally in July is arguably due to expectations of a stronger economic recovery in Europe now the virus situation has stabilised. The divergence in growth expectations has also led to a build-up in EUR longs by speculative investors. Read more

Non-Farms cap busy week of data

Covid cases rising in parts of Europe, Tokyo and Victoria could prompt the dollar to find support from the risk environment deteriorating in a broader sense as opposed to risks being isolated to the US economy. While the progression of Covid is monitored closely, key data points such as Nonfarm payrolls, central bank meetings in Australia, Brazil, the UK and India and eurozone retail sales are in focus. Read more

Rand recovery to stall in new range with rally tilted towards H121

Amid capital outflows reminiscent of the 2008-09 financial crisis in early Q2 due to the outbreak of Covid-19, the South African rand hit a record low of 19.3540 against the dollar in early April. While the rand has recovered over 13% from its April low, it still remains over 5% weaker than the pre-virus levels seen in February. Read more

Attention turns to a stalled US recovery in Q3

Higher-frequency official and unofficial data suggest that the economy followed a path similar to an unfinished letter “V” in the second quarter. Output plummeted in March and April before growing in May and perhaps some of June. Read more

The euro feels the pain of the German economic collapse in Q2

The German economy shrank by 10.1% in Q2 on a quarterly basis, one percentage point deeper than the consensus forecast supplied to Bloomberg. The slump depicted the damage inflicted by lockdown measures imposed for most of the second quarter. Read more

No action from FOMC – but they may not have the luxury of inaction for much longer

The FOMC kept rates unchanged, extended its swap facility, and added language to its statement emphasising that the path of the US economy depended heavily on the path of the virus. Read more

EURUSD reaches two-year high ahead of FOMC meeting

The euro is ranked as the best performing G10 currency against the US dollar over the course of the last two weeks after it broke through the 1.14 level on July 14 for the first time in over four weeks. Read more

USD calendar in focus after greenback takes battering

This week’s dollar weakness was a tale of two halves. The week started off with fresh fiscal stimulus announced by the EU in the form of the €750bn recovery fund, which buoyed market sentiment and led to a risk rally. Read more

Dollar rout continues with tensions ramping up between the US and China 

Sentiment towards the dollar continues to deteriorate this morning as US-Sino tensions and concerning Covid developments dominate headlines yet again, causing the Bloomberg dollar index to trade near its lowest level since March. Read more


The Canadian dollar has just broken out of its post-Fed range, where the currency pair traded for 27 consecutive working days. The impetus behind such a move isn’t as clean cut as one would like, but comes from general dollar weakness over the last two days. Read more

Euro shrugs as European leaders reach historic deal for recovery package

After a marathon negotiation session, EU leaders have finally unanimously approved a fund consisting of €390bn of grants and €360bn of low-interest loans. The total size of the seven-year EU budget is €1047bn, as proposed by EU Council Presdient Charles Muchael. Read more

PMI reality check looms for major economies

Familiar themes were the focus of attention for FX and macro markets this week, as the dollar continued to lose ground at a modest pace, US-China tensions escalated further, and China Q2 GDP handily beat expectations. Risk appetite on the whole has remained intact, despite a curious midweek fall in Chinese equities that did not result in a global rout.  Read more

Dollar drifts lower after another indecisive week

It’s been another indecisive week for the dollar, with the Bloomberg dollar index set to fall for a third consecutive week, while roughly half of the G10 currencies are up against the greenback. Some mild but fairly broad dollar strength was seen overnight that has not dented these overall dynamics. Read more

ECB’s supportive message underpins gradual euro strength amid the recovery from the pandemic

The single currency is slightly trending upwards from the policy signal provided by the central bank, while it also awaits the joint recovery fund and MFF to be agreed by EU leaders at some point this summer. Read more

China GDP bounces back but does little to help CNY rebuff risk-off move and equity slump

China's Q2 GDP release surprised to the upside posting a 3.2% rebound from the historic 6.8% contraction in Q1. The pace of economic growth exceeded expectations by 0.8 percentage points, with industrial production continuing to lead the rebound in the second quarter, rising 4.8% in June. Read more

AUD gains limited as euro also rallies

This is evident in the currency market, with AUDUSD trading up to the 0.7 level in June – an 11-month high. The Aussie dollar also rallied close to its 2020 high against the euro, with gains more contained against the single currency as the euro also rallied from broad USD weakness. As a result, the AUD rally against the EUR wasn’t as dramatic as seen in AUDUSD. Read more

Moderna’s results send USD lower, but will all of this change with today’s Covid data from the US? 

After spending most of yesterday’s session relatively well supported by a deteriorating risk climate in markets, the dollar’s strength tailed off in the back-end of yesterday’s session as the results of Moderna’s testing hit the wires. Read more

BoC reactive: How long is a piece of string

Tiff Macklem's first press conference and Monetary Policy Report as Bank of Canada Governor went without a hitch today, mainly because nothing was really announced. Forward guidance was what the market wanted coming into this monetary policy meeting and with the MPR shifting from two illustrative scenarios to a central scenario more akin to point forecasts. Read more

Shadow cast over global recovery as UK GDP undershoots, Florida closes bars and restaurants and dollar goes bid

A stark reminder to markets that the US economy is still embattled with the outbreak of Covid-19 and equity indices saw a marked turnaround to dive into negative territory. Read more

China Q2 GDP marks blockbuster calendar

This week’s busy data and event calendar offers multiple opportunities for both idiosyncratic moves in individual currencies, as well as broad thematic changes in risk appetite, which will be influenced by the trajectory of the global coronavirus pandemic itself, especially in the US. Read more

Florida case count rips through markets and sends USD lower

The dollar has started the week on the back foot in both G10 and EM spaces this morning after news from Florida ripped through markets. The numbers from the sunshine state are staggering and put Florida in fourth place internationally for the largest daily increase in cases, behind the US, Brazil and India. Read more

DKK taken for a ride on the dollarcoaster

The Danish krone bounced back from its 3-day low against the dollar this morning after tumbling by over 0.90 percentage points following a fall in general risk appetite, with equities in the US falling and treasuries rising. Read more

Measuring China’s rebound: Q2 GDP due on Thursday 16th

Since the economic shock in Q1, the road to recovery has been relatively smooth by current standards, although a minor outbreak in Beijing is likely to have shaken consumer sentiment, while flooding in southern China hampered agricultural output. Read more

CAD labour market data

While expectations sit at a 700K rise in employment and a reduction in the unemployment rate from 13.7% to 12.1%, it must be noted that last month’s employment gain still resulted in a rise in the unemployment rate due to the number of workers re-entering the workforce. Read more

Fiscal snapshot gives transparency to markets

Finance Minister Bill Morneau's fiscal snapshot this afternoon has helped extend the loonie rally as the dollar broadly weakens towards the back-end of today's session. Additionally, the Canadian government bond curve bear steepened as issuance numbers are set to rise at unprecedented rates; the 30Y yield rose 7.68bps vs the 1.5bp rally in the 2-year yield. Read more

Sunak delivers crowd-pleasing trifecta, but reduces the pace of fiscal stimulus from “warp speed”

Rishi Sunak has delivered a trifecta of crowd-pleasing measures in the summer statement, but has nonetheless dialed the pace of stimulus down from its previous “warp speed” setting. Read more

Loonie not impressed by BoC Business Outlook Survey

The loonie steadied near a two-week high against the dollar ahead of the Bank of Canada Q2 business outlook survey and was little changed after the survey was released. The quarterly business outlook survey helps guide monetary policy decisions as it provides a good anecdotal account of conditions in the real economy. Read more

Eurozone data releases

The euro's rally from earlier this morning ran out of steam after the morning’s data releases included a sharp expansion in German factory orders and a lower-than-expected improvement in investor confidence in the eurozone.  Read more

Confusing data, Yield Curve Control and Canada’s fiscal “snapshot”

The confusing subtleties of data releases during lockdown and the shift to alternative data, the Fed’s reluctance to begin yield curve controls, Canada’s upcoming fiscal deficit projections and labour market release, and finally inflation data in the EM space. Read more

Empty-handed BoJ to set the tone for a mildly strengthened JPY

Looking forward, our FX market analysts expect the Japanese yen to continue trending to the upside against the US dollar, while the trading ranges remain tight. Read more

Labour day in US could reduce volumes, but Covid cases will still be watched globally

The dollar is trading mixed against the G10 this morning, but that could all change should the Covid data deteriorate further.  Read more

Sterling is not an EM currency – But pre-Brexit exchange rates remain a distant dream

The pound is likely to rally with the rest of the G10 against the US dollar as the global economy undergoes a gradual and inconsistent re-opening. Read more

Canada GDP: The worst economic monthly contraction on record

The relative accuracy of the median forecast and the positive advanced Canadian May GDP reading, meant that the currency market passed the release by in a risk-off session that would have lapped up a negative surprise. Read more

US Covid curve steepens, dollar to rise or fall?

If the US economy underperforms its global peers in Q3 due to a severe domestic second wave, will the dollar continue to strengthen on haven demand? With FOMC minutes and US jobs data out this week markets will have plenty of impetus to ponder the question. Read more

Dollar opens on back foot as domestic turmoil and virus counts rise

The US dollar has opened today very much on the back foot, with the entire G10 group of currencies up on the day. Reports of coronavirus vaccine progress may also be bouying risk appetite in general, and therefore reducing demand for the greenback as a safe haven. Read more

Swift recovery in copper prices bodes well for ZMK

The Zambian Kwacha enjoyed a relative patch of stability in January and February 2020  following significant tightening of the central bank’s monetary policy in November and December 2019. Read more

Yuan to trade back to 7.00 but signs of stress remain

While China’s economy was the first to experience lockdown measures due to it being the epicenter of the pandemic, it was also one of the first countries to flatten the curve. After contracting 6.8% in Q1 due to the lockdown measures rolled out nationally, the Chinese economy is set to rebound at a rapid pace in Q2. Read more

Czech National Bank leaves key rate at the expected 0.25%

Markets barely flinched at today’s decision by the Czech National Bank to leave its 2-week repurchase rate at 0.25%, as the move was fully priced in – all economists who provided Bloomberg with an estimate of today’s decision expected the Bank to keep rates on hold. Read more

Dollar pares back gains after Donald Trump reaffirms trade agreement

After falling against most of its G10 peers yesterday on hopes of recovery, the dollar had a bumpy ride this morning and whipsawed back and forth following comments from US trade adviser Peter Navarro. Read more

Bank of England continues QE, but takes things down a notch from “Warp 10”

The MPC has kept rates unchanged while expanding QE by £100bn, with an intention to reach the allotted asset purchases by the end of this year. In the minutes, members were cautiously upbeat about how bad the initial covid-19 shock to the UK and global economy has been. Read more

NOK rises to 1-week high vs euro after Norges Bank announcement

The Norwegian krone ripped higher by just under a percentage point against the euro this morning, reaching a 1-week high after the Norges Bank raised its implied rate path for 2023 along with its forecasts for economic growth and core inflation for this year. Read more

NBP kept rates on hold as QE remains the focus

After having cut interest rates by a total of 140 basis points between March and May, the National Bank of Poland kept its benchmark rate unchanged yesterday at 0.10%, in line with the forecasts of all economists surveyed by Bloomberg. Read more

The Swedish krone recovers after hitting rock bottom

As a result of the pandemic, the Swedish Government has taken a number of measures amounting to more than SEK 100bn to limit both the rate of infection and the economic consequences. Read more

Markets buoyed by Fed’s advance into corporate debt 

The dollar traded with a negative correlation to risk appetite in general and US equities, in particular yesterday, with the decisive move lower in the greenback happening as US equities rallied after the Federal Reserve said it would commence corporate debt purchases. Read more

The BoE to step up QE firepower amid looming economic risks

Since the beginning of June, sterling has taken a leg higher on the back of improved global risk sentiment amid easing lockdown measures and economic resumption. The currency rallied for 10 consecutive days against the USD to a three-month high, the longest rising streak since 2012. Read more

BRL has ample room to recover while domestic and external risks abound

The real has recovered around 40% of the lost ground since the beginning of the year, despite the grim domestic economic outlook and the poorly managed pandemic situation. Read more

USD softens as the FOMC is expected to err on the side of caution in today’s meeting

This morning, the gauge of the dollar dropped to a three-month low ahead of the Fed announcement. The Federal Reserve is unlikely to trigger any policy moves at today’s meeting and is expected to set a transitioning tone. Read more

The Fed stands ready to switch to speedy recovery mode

While the debate on negative interest rates is broadly at ease after Fed officials cooled down expectations, the central bank continues to expand firepower under several facilities to money markets, municipalities and credit markets as the economic outlook clears out. Read more

All eyes are on Wednesday’s Federal Reserve announcement 

While the economic calendar is far from empty for the US this week, all eyes are turned to the Federal Reserve meeting that takes place on Tuesday and Wednesday. Read more

Things may start to brighten up for NOK as markets move out of the pandemic panic

After being hit by the double whammy of a strengthening dollar and a collapse in oil markets, the Norwegian krone became the worst performing G10 currency in the year to date.  Read more

ECB boosts pandemic firepower while passing the ball to fiscal policy’s court once again

The ECB delivers on market expectations and steps up the total amount of quantitative easing under PEPP purchases by €600 billion. The rise outperformed the consensus call by at least some €100 billion, bringing along a stronger-than-expected market reaction. Read more

Loonie breaks out of post-Covid range but the sustainability of the rally is faced with a multitude of risks

With social consumption collapsing, unemployment set to increase to levels above 2008-09, and the oil market in a state of tatters, the aggressive coordinated stimulus response from the Bank of Canada and Trudeau administration failed to prompt a recovery in the loonie. Read more

Another round of UK-EU trade talks starts today after weeks of little progress

The UK and the EU will start another round of negotiations today to try to reach a trade agreement, but each side has been blaming the other for the lack of progress so far. This morning, the pound continued its rally and saw another swathe of strength in the buildup to the trade talks. Read more

ECB is set to recharge batteries once again

The ECB is widely expected to bring further action in its next policy meeting on June 4th. In the April meeting, the ECB reinforced its readiness to increase the size and flexibility of the €750bn PEPP launched in March. Read more

The dollar’s safe haven appeal wanes as markets remain unmoved by Trump comments

The main trigger for markets moving out of the greenback and into other currencies comes from improved market confidence, after US President Donald Trump’s threats to China did not strike to the degree that markets had feared earlier last week. Read more

ZAR rallies in May on renewed risk appetite

The South African rand sits atop the EM currency board for May, joining fellow carry currencies MXN and RUB. Increased fiscal and monetary support, combined with the relaxation of lockdown measures in major markets have improved the outlook for the global economy in the short-run. Read more

Progression of EU stimulus to remain key EURUSD driver as political tensions now measured

The total financial firepower embedded in the EU budget is proposed to amount to €1.85 trillion, with the Next Generation EU fund of €750 billion to target the pandemic crisis, adding on top of the long-term EU budget for 2021-2027. Read more

Aussie dollar enjoys tailwinds from gentle shock to economy and RBA aversion to negative rates

The modest domestic outbreak, the RBA’s relative aversion to negative rates, and the inherently high sensitivity of AUD to risk appetite and global growth, mean AUD has good prospects to perform well relative to both USD and the G10 basket. Read more

The Mexican peso pares back losses on risk-on sentiment while the economic collapse is broadly priced in

The Mexican economy shrank by 1.2% in Q1 on a quarterly basis, or 1.4% when compared with last year's same period (not seasonally adjusted). Read more

Upbeat market mood drives currency markets in the absence of US-China headlines

Headlines have taken a break from the US-China tensions this morning, but any developments between the two nations may turn risk sentiment upside down. Read more

National People’s Congress drop GDP target but Hong Kong bill destroys markets risk appetite

With tensions rising again between the US and China after the Senate passed a bill to restrict semiconductor trade with Huawei, the latest measures taken by Beijing could see another collapse in US-Sino relations. Read more

Sterling underperforms in May as idiosyncratic risks mount

After a poor performance so far in May, sterling is lagging most of its peers in the G10 group of currencies, with only the New Zealand dollar and Norwegian Krone registering bigger losses against the dollar so far this year.  Read more

SARB matches TCMB with a 50bp cut

At mid-day today, the Turkish central bank (TCMB) cut interest rates by 50bps from 8.75%, which fell in line with our expectations and the market's median projection. This afternoon the SARB followed in the TCMB's footsteps, cutting rates by 50bps to a record low of 3.75%, as continuing lockdown measures erode inflation and expand the output gap.  Read more

USD bounces back as US-China tensions continue to rise

Easing of lockdown measures has been the main driver of improved risk appetite, but this has broken down overnight after the Senate overwhelmingly approved legislation that could lead to Chinese companies such as Alibaba Group Holdings Ltd and Baidu Inc being barred from listing on US stock exchanges. Read more

USD weakness continues as G10 makes inroads

Broad US dollar weakness has been the theme of this week’s trading thus far. Today, the kiwi dollar leads gains in the G10 space as the New Zealand government dramatically eases lockdown restrictions. Read more

Dollar weakening as optimism remains in markets 

The dollar spent another session declining yesterday as optimism was plentiful in markets. Little reaction from China over the latest Huawei restrictions has reduced the markets’ concerns over a potential re-emergence of the trade war. Read more

G10 in Green as Powell and Mnuchin head to Capitol Hill

USD is lower against most major currencies today, with JPY the sole loser among the G10. The week’s biggest new so far remains yesterday’s proposal for a mutual Eurozone recovery fund by the German and French Governments. Read more

Dollar weakens despite another phase of US-China trade war looming

The dollar continues to trade weaker in today’s session despite news of rising US-Sino tensions after the US imposed restrictions on semiconductor sales to Chinese telecommunications company Huawei. Additionally, comments from White House trade advisor Peter Navarro add to the growing complaints from the Trump administration over China’s containment of the pandemic. Although the potential for another phase of the US-China trade war is likely, markets continue to trade in a risk-on mood as major global economies start to scale back lockdown measures. WTI is back above $30 a barrel, boosted further by comments from China, while Angela Merkel and Emmanuel Macron are set to announce a new Franco-German initiative this afternoon at 16:00 BST. Elsewhere, comments from the Bank of England’s chief economist, Andy Haldane, regarding negative interest rates and other unconventional monetary policy tools put the pound lower this morning. However, this didn’t last with the dollar continuing its losses and now GBPUSD sits near 0.5% higher on what is broadly a quiet day for markets.   G10 broadly rallies against a softer dollar despite US-China trade tensions threatening to rear their head again US-China trade tensions are re-emerging as a trending topic in markets as the US administration increases the tone of accusations over China's active role in the global outbreak of the pandemic. The US has already taken action last week, after it prevented foreign chipmakers using US technology from supplying components to Huawei or any of its 114 subsidiaries without a license. The move is intended to curtail the company's ability to produce its own chips for smartphones on the basis of Huawei´s close ties to the Chinese government posing a threat to US national security. Chip manufacturing makes up for nearly 90% of the company's overall revenue. China threatened retaliation on this and further moves, with a state-run newspaper hinting on a series of countermeasures without further detail. The restrictions may freeze the entire chipmaking industry because of its wide use of US fabrication plants. While recent institutional frictions within the EU and re-emerging US-China trade tensions have put a lid to the euro price action, gradual reopening plans have kept the single currency supported above 1.08 level. As the number of new cases and fatalities falls across the eurozone, the region is gradually moving towards easing lockdown restrictions, although at different paces. In Italy, the worst hit country, retail businesses are open as of today with strict social-distancing precautions. The reopening date for bars, restaurants and hair salons was also moved to today from June 1st However, according to the Confcommercio retail lobby, one in ten Italian businesses is at risk of failing, amid criticism that state help hasn't reached small businesses as promised. A move deemed as a “calculated risk”by Prime Minister Guiseppe Conte, Italy eyes the reopening of domestic and international borders on June, 3rd; while sports centres and theatres are planned for reopening on May, 25th and June 15th respectively. In Spain, the government has kept its phasing out program of the national lockdown, with the Valencia region joining the half of the country already in phase one. Some islands will enter the second of four phases as well. However, the government is seeking support in Parliament to extend the state of emergency by an extra month , set to end on May 23rd, which major opposition parties refuse as they seek alternative options for managing the easing of lockdown. Portugal launches the second phase of the scaled-sector plan as of Monday, where restaurants, museums and coffee shops are included at reduced capacity. Headlines broke this morning that a scheduled meeting between French President Emmanuel Macron and German Chancellor Angela Merkel will take place later today at 3:30pm Paris time. The agenda for the meeting hasn´t been disclosed yet but will likely include a discussion on the European recovery fund, along with a range of topics covering public health, green and digital transition and industrial sovereignty. The two countries have lead opposing positions on the EU joint policy response to the pandemic, with Germany largely refraining from the issuance of collective “coronabonds” proposed by France. The European Commission recently hinted at the prospects for a softer aid plan, in which some of the intended €2 trillion fund would be delivered as grants to member states, as opposed to loans. The euro is modestly abandoning the range-bound price action from this morning, in hopes of crucial guidelines to emerge from today's meeting. Reporters will have access to the meeting details at 16:00 BST. Sterling was pushed into negative territory this morning as the bank of England’s chief economist, Andy Haldane, told the Telegraph newspaper that the UK is heading towards an unemployment crisis comparable to that of the 1980’s, while the central bank is considering negative interest rates and unconventional tools. The commentary pushed overnight interest rate swaps to price a negative bank rate as early as December’s meeting. Haldane made similar comments to the same newspaper back in 2015, but with both Governor Bailey and Deputy Broadbent vocally dispelling the likelihood of negative rates it still remains a distant possibility. Additionally, this week the pound faces UK public sector borrowing data on Friday. Expectations suggest borrowing is expected to come in at around the £20bn mark for April, with considerable upward revisions to come in the future to both the March and April debt. This comes after the country’s fiscal watchdog said that in the scenario where the UK remains in lockdown for the whole of Q2, resulting in the economy contracting 35% QoQ, that the fiscal deficit would rise from £218bn to £273bn in FY20. This would result in a fiscal deficit of around 14% of GDP - the highest since World War II and 4% higher than the peak of the financial crisis. With this in mind, the Chancellor of the Exchequer Rishi Sunak is set to face questions in Parliament between 14:25 - 16:00 BST after extending his job retention scheme until October last week. Markets can expect questions to focus on how the government aims to finance the ever-increasing fiscal deficit. WTI is at a two-month high after production data shows a sharp drop in both OPEC+ and North America, while Chinese officials announced that oil demand is almost back at pre-virus levels. OPEC+ is well on the way to slashing output as reports suggest 9.7m barrels per day of output have already been scaled back. Additionally, data out of North America shows production in the US has reduced by 1.5m bpd, with a 700,000bpd fall in Canada. US exports of oil is also estimated to have fallen 15% since the collapse in prices. Over the weekend, Swiss National Bank Governing Board member Andrea Maechler highlighted the SNB’s increased efforts to offset market forces as CHF continues to appreciate on haven flows. The comments follow that by SNB Governor Jordan, which have also been supported by data on sight deposits - a proxy for the central bank’s intervention in FX markets to weaken the franc. Maechler avoided questions about the SNB directly defending the 1.05 level on EURCHF, stating that the central bank takes the general foreign exchange situation into account, but the market has failed to drive below it despite multiple attempts. Today’s sight deposit data suggests this may be the threshold for the SNB as CHF4.4bn was added to the SNB’s balance sheet in the week ending May 15th.   WTI crude prices break the $30pb mark for the first time in one month in thinner trade volumes   The euro gains some traction ahead of the Macron-Merkel meeting this afternoon SNB steps up the pace of FX intervention as it resists further franc appreciation   Authors: Simon Harvey, FX Market Analyst Olivia Alvarez Mendez, FX Market Analyst     DISCLAIMER: This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. Read more

Negative rate expectations in focus as central banks prominent for the week ahead

The main focus for markets, and for central bank communique, has been increasing speculation that major central banks such as the Fed and BoE would be forced to cut interest rates into negatives. Read more

Negative rates in focus as US-China tensions rise to the surface

The dollar is trading mixed against the G10 this morning as markets gauge the building tensions between the US and China. The Trump administration took it a step further and suggested that Beijing sent airline passengers to spread the virus globally. Read more

Negative rates and Trump-China chat put markets on edge

The dollar has remained on the offensive today, as central bankers focus on managing increasing speculation in financial markets that major central banks such as the Fed and BoE may be forced into negative rates. Read more

USDSGD unlike to move below 1.40 without broad USD weakness 

While the Singapore dollar can trade within an undisclosed band, the tweaks to the exchange rate policy suggests USDSGD may struggle to break the 1.40 level. This is in part due to the premium the SGD has regained over its Asian peers since the March sell-off. Read more

Monetary stimulus remains focus for markets with Bailey next up on the wires 

Bank of England Governor Andrew Bailey will give a webinar at 11:30 GMT, having yesterday once again reiterated to ITV that the Bank was likely to expand asset purchases in the near future. Read more

UK GDP data shows early signs of damage while the Fed is back in focus

UK macro data in Q1 brought a modest unexpected boost to the pound, as the figures showed a relatively more resilient economy than expected amid initial coronavirus shock. Despite the initial positive surprise in the headlines, investors are left with a grim picture. Read more

G10 mixed as markets focus on Powell’s upcoming speech

Today markets will keep a close eye on Fed Chair Jerome Powell’s online conference today at 14:00 BST on current economic issues. Any comments on negative rates, as well as on general further stimulus measures, will be closely watched. Read more

FX trades with nervous tone amid fragile risk appetite

G10 FX has traded with a nervous tone so far this week, as yesterday’s broad dollar strength has given way to selling today, with price action following a roughly “risk on” pattern. Read more

Fed officials express apprehension about negative interest rates 

Senior Federal Reserve policymakers Raphael Bostic and Charles Evans both made comments suggesting they were opposed to or did not anticipate negative interest rates in the US, ahead of a major speech from Fed Chair Jerome Powell tomorrow that may touch on the subject. Read more

Dollar gains momentum amid fragile risk sentiment

Risk appetite is still looking fragile today, after the US dollar has rallied from an early-morning sell-off. Among the G10 currencies NOK and CHF are the best performers. Read more

Will the RBNZ go negative?

Since the Reserve Bank of New Zealand's last formal Monetary Policy Statement in February, the Bank has engaged in a full suite of crisis response measures, similar to those undertaken by the Federal Reserve, RBA, and Bank of England. Read more

Banxico to cut with prudence

Since the global outbreak of coronavirus in March, the Bank of Mexico has carried out two consecutive interest rates cuts of 50 basis points each in between meetings. Read more

G10 FX opens the week quietly amid ongoing improvement in risk appetite

The dollar is trading with a mixed tone this morning; risk appetite has slightly improved and pushed riskier currencies like NOK, AUD and CAD in the green against the US dollar, but dollar price action against other currencies in the G10 basket makes for a less straightforward story.  Read more

BoE keeps key rate and asset purchases unchanged

Sterling is trading higher this morning, after the Monetary Policy Committee of the Bank of England voted 7-2 to keep asset purchases unchanged, in a decision that also kept the official interest rate unchanged at 0.1%. Read more

BoE decision to avoid more QE is trivial, and forecasts look a touch optimistic

The Bank of England has followed the OBR in rebranding their forecasts as an “illustrative scenario”, a change of language that reflects the extent to which the forecasts are conditional on changeable assumptions. Read more

Turkish Lira joins the EM “record low” club

Despite the Central Bank of the Republic of Turkey's (CBRT) best efforts, the lira's breach of the 7.00 level against the dollar last Friday has been extended past its 2018 crisis low in this afternoon's session. Read more

Euro struggles amid poor EC forecasts, ongoing ECB legal drama

Today’s headlines are marked by the ongoing story of the German Federal Constitutional Court’s ruling that the European Central Bank must provide justification for its QE program within three months. The program in question is the Public Sector Purchase Program (PSPP) and would no longer have support from Bundesbank if the ECB fails to provide satisfactory justification for the program in the given time. The danger lies in the fact that unless the ruling is completely dismissed and the ECB finds the means to provide information that the Court is willing to consider, the ECB’s independence is in danger of being. The question now is whether the ECB will accept the jurisdiction of the German Court, and if that translates in saying that national courts can review monetary decisions. At this point, the ECB has not explicitly stated whether or not it has plans to comply, however, ECB Governing Council member Madis Muller sounded conciliatory this morning and stated that the central bank is “certainly able” to show its measures were proportionate, a key requirement the GFCC set out. Bundesbank President Jens Weidmann said to the German newspaper Die Zeit that the extraordinary measures enacted by the ECB were necessary to support the eurozone economy, but at the same time, the GFCC ruling is justified and the barrier between monetary financing and quantitative easing should be contained. The euro is still trading on the back foot since yesterday’s announcement by the Court, but even in the longer run, the situation may be enough reason for the euro to lose its footing as it may set the stage for other judicial systems in rejecting ECB rules.   EURUSD struggles to recover after GFCC decision European Commission releases gloomy economic forecasts In one line, the European Commission foresees a deep and uneven recession in the euro area that will bottom out in Q2, with a highly uncertain recovery path ahead. Overall, real GDP in the Eurozone is expected to crash by 7.7% in 2020, far deeper than the 4.3% in the 2009 recession during the financial crisis. Output will be severely hit in the second quarter of the year, clearing prospects for the worst economic recession in EU history. GDP growth is expected to rebound by an annual pace of 6,3% in 2021, leaving the EU economy 3% behind the pre-crisis estimated output level. This means that, even when the bounce back will likely be more sharp and quick than in the financial crisis in 2009, the recovery will be incomplete over the forecasting horizon. A few patterns to highlight: The recession will break through all economic sectors, although the biggest hit will likely land on the services sector and tourism in particular. The economic collapse and further recovery will hit across all economies within the area but in an uneven manner. Among the largest member states, the projected rebounds are more asymmetric than the expected declines, with Italy and Spain –the worst hit by the pandemic- experiencing worse recoveries. All demand components will be dragging severely on GDP growth, with the exception of public consumption and investment, which are set to play a counter-cyclical role. Private consumption should be the fastest to recover after a record drop in Q1, but uncertainty in the labour market will likely increase precautionary savings. The expected rebound of euro area investment next year should only help to recover some of the lost ground, with a projected shortfall of 6% compared to baseline estimates before the crisis for the year end. Net exports will add only a small contribution to growth, also meaning that the euro will receive only a mild boost from current account pressures. The path of recovery outlined contains unprecedented levels of uncertainty, given the nature of the underlying assumptions. Should any of the conditions divert from the given guidelines, forecasts could widen substantially, with risks mostly tilted to the downside. As per the currency standpoint, this could imply an ample degree of volatility, although it should be partly reduced by appropriate liquidity provision and monetary policy response towards preserving financial stability.   Projected real GDP growth path in the Euro area     Authors: Olivia Alvarez Mendez, FX Market Analyst Ima Sammani, Junior FX Market Analyst   DISCLAIMER: This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. Read more

EUR drawing all attention while pound crashes on construction PMIs

The euro sharply fell against the dollar yesterday and has managed only a minor recovery since then, after a ruling from Germany’s Constitutional Court that the European Central Bank’s QE programme violates the ECB’s mandate under EU law. Read more

SNB may be forced to cut rates as EURCHF fails to break 1.06 as sight deposits rise

In the current Covid-19 environment, the Swiss franc has seen considerable pressure from safe haven inflows which are unlikely to abate until the global economy starts to show signs of recovery. Read more

German constitutional court ruling casts shadow of doubt over ECB

The euro is among the worst performers in the G10 today, after Germany’s top constitutional court ruled on a suit against the ECB. The German Federal Constitutional Court ruled in a 7-1 decision that the ECB had not violated treaty prohibitions against monetary financing, which were the core of the claim. Read more

Risk aversion continues to drive markets on renewed US-China tensions

With the global economy sitting in a fragile state due to the impacts of COVID-19, news from Europe that Italy will ease lockdown measures for manufacturing and construction sectors starting today would normally equate to a brief euro rally. Read more

Bank of England to shift focus to liquidity support

Thursday’s Bank of England meeting will mark a shift in priorities for the Monetary Policy Committee. At March’s extraordinary meeting on the 19th, the main objective was to restore functioning in UK financial markets, especially gilts, and preventing further tightening in financial conditions. Read more

Trump’s tariff talk takes US dollar higher

US President Donald Trump’s threats to reignite the US-China trade war has triggered a risk-off move across markets in this morning’s session, with the FTSE 100 falling 2.5% in London and the Nikkei index sliding by over 2.8% in Japan on Friday. Read more

How do you say “whatever it takes” in French?

The ECB has kept its asset purchase program unchanged, but has tweaked its Long Term Refinancing Operations to make them more appealing to banks while also announcing a new facility, the Pandemic Long Term Refinancing Operations. Read more

Quiet G10 session sees dollar weaken further as ECB steps into gap left by European leaders

The dynamic loosely remains one of improving risk appetite: on the day, EUR and JPY are among the worst performers, GBP and SEK the best. Conditions in interbank lending markets appear to be showing a marked improvement. Read more


The South African rand was one of the worst-performing currencies in the expanded majors during March as the dollar reigned supreme in the global flight to safety. The rand depreciated nearly 16% against the dollar and 15.8% against the euro in March. Read more

ECB steps up to the plate after eurozone leaders under-deliver on virus response

The European Central Bank meeting will be in the spotlight today, with the rate decision being released at 12:45 BST and followed by a press conference at 13:30 BST. Read more

The ECB is urged to “fill the gap” in the Eurozone

Since the beginning of the coronavirus crisis, the European Central Bank has delivered a relatively rapid response to the economic challenges, mainly focusing on credit conditions. Read more

USD continues to trade on backfoot after negative GDP reading with FOMC in scope 

Today marks the beginning of this week’s data calendar for the US, with the advanced reading of Q1 GDP and the first Federal Reserve meeting since rates were lowered to the zero lower bound in successive inter-meeting announcements in March. Read more

Tension is mounting ahead of FOMC decision

With today’s Fed announcement, no further reductions in rates are expected as the FOMC has already cut rates close to zero and Fed Chair Jerome Powell stated earlier last month that he does not see negative policy rates as “likely to be an appropriate policy response here in the United States”. Read more

USD hammered amid broad risk-on move

As always it’s tempting to look for meaning in intraday price action. The most likely explanation of today’s dollar weakness seems to be a broad improvement in risk appetite. Read more

Markets consider re-opening of economies as USD softens

The dollar was caught on the back foot yesterday as developments in the APAC area sparked a mild risk-on mood in markets. Exit strategies in parts of Australia and increasing monetary stimulus measures from the Bank of Japan shaved off some of the fear regarding global growth. Read more

APAC news causes risk rally in otherwise quiet markets

Little has changed from this morning’s session as markets still trade off of headlines that the Bank of Japan will increase their QE program, Australia will begin to relax lockdown measures, and the worst affected European nation’s eye exit plans. Read more

FOMC meeting: no action, but plenty to think about

Jerome Powell and the FOMC are entitled to at least a tentative note of self-congratulation at this week’s meeting, on Wednesday, as so far the Fed’s measures in response to the covid-19 crisis appear to be having their desired effect on the US economy and financial markets. Read more

G10 rallies against USD as APAC news boosts growth sentiment

The dollar trades on the back foot this morning as the global coronavirus curve continued to flatten over the weekend, enabling governments to begin eyeing up exit plans. Read more

COVID-19: Global Policy Responses

Since the outbreak of the coronavirus in late December, COVID-19 has rapidly spread across the globe with nearly 3 million cases confirmed.  With this in mind, we have kept a track of all of the fiscal and monetary measures put in place by governments and central banks in the G10 since the onset of the virus. Read more

No PMI Panic

This morning’s purchasing managers indices for the eurozone and UK were by far the worst on record, confirming an unprecedented economic slowdown across the region’s major economies. Read more

MXN unaltered by Banxico’s emergency move

The Bank of Mexico stepped in yesterday with a unanimous inter-meeting decision to cut the benchmark interest rate by 50 basis points to 6%. Read more

US dollar weakens as Emerging Markets leads advances

While oil markets continue to draw the focus of markets today, risk sentiment has improved dramatically. In the G10, GBP and AUD lead the way in reclaiming ground lost earlier in the week while the dollar softens across the board. Read more

ZEW Survey Current Assessment and Expectations

The headline ZEW expectations index surged to 28.2 in April, following a dismal reading of -49.5 in March and overshooting Bloomberg's median forecast at -42.0. The assessment of the current situation printed -91.5, far below the forecasted -77.5 and the prior reading of 43.1.  The divergence between the current situation and the expectations has not been this large since the global financial crisis. With lockdown measures in full effect through April and eurozone countries making plans to gradually reopen the economy in the coming months, there are reasons to hope things won’t get much worse for the region. The timing of the easing of containment measures will be key in determining the recovery path. EURUSD saw a modest drop around the time of the release, but the many different factors in play at the moment make it nearly impossible to pinpoint the price action down to one event. Other factors, such as demand for the US dollar and crude oil volatility are also in play today.   EURUSD slightly drops around the time of the data release   ZEW Germany headline index, assessment of current situation vs 6-month expectations of economic growth   Author: Ima Sammani, Junior FX Market Analyst     DISCLAIMER: This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. Read more

Oil slide more widespread keeping USD well bid

Dynamics in oil markets continue to dominate FX market pricing today. After yesterday's headline-grabbing slide in WTI, which saw May delivery prices dive deep into negative territory, oil markets remain on the back foot and with more meaningful consequences for FX. Read more

NZD enjoys boost on easing of lockdown measures

This weakening of binary risk on/risk off dynamics may create trading conditions in G10 FX more conducive to idiosyncratic drivers such as economic and virus data. Read more

A week of data beckons as markets weigh how long “risk on, risk off” dichotomy can dominate FX

Broad risk-on/risk-off moves have dictated FX price action for the past few weeks, with the US dollar strengthening with deteriorations in risk appetite, and weakening with improvements. Read more

US Job claims suggest COVID-19 wipes out financial crisis recovery 

Today’s jobless claims data from the US saw another dramatic rise in the number of unemployed persons claiming insurance benefits. The 5.245m number of claims registered in the week ending April 11th has seen the aggregate number of job losses, if this is a true measure, erase the employment gains made since the global financial crisis. The data followed a 6.62m increase in claims the week prior, pushing the four-week sum to 22m filings compared to the 21.5m jobs added during the economic recovery beginning June 2009. The US dollar has gone mildly bid in markets following the release as risk sentiment continues to drive market pricing. However, despite today’s data highlighting a dramatic collapse in the US labour market, with the advanced seasonally adjusted unemployment rate rising to a record high of 8.2% for the week ending April 4th, it isn’t necessarily an accurate representation of the real economy. Below, we highlight some of the reasons for this which include; the loss of output from those leaving the job market altogether therefore not claiming unemployment benefits, system failures in states, backlogs in processing and the impact of the CARES act. State data for week ending April 4th: Georgia (+256,312), Michigan (+84,219), Arizona (+43,488), Texas (+38,982), and Virginia (+34,872) saw the largest rise in claims. California (-139,511), Pennsylvania (-127,037), Florida (-58,599), Ohio (-48,097), and Massachusetts (-41,776) saw the largest falls in claims. A note on US Jobless claims in general The US Jobless claims figure has been one of the most contentious data points during the coronavirus outbreak. While the data is one of the timeliest metrics to assess the impact lockdown measures are having on the US labour market, in turn allowing markets to gauge the effects on consumption and therefore growth, it is subject to a number of quirks. The quirks make it hard for economists to filter through the noise and truly measure the economic impact of social distancing measures in the US via the labour market, but given the lack of timely data markets will still use this as their best nowcast of the US economy. This means that initial jobless claims are likely to continue having an elevated market impact as more accurate unemployment data is compiled. Last week, the initial jobless claims data release saw the number of people claiming unemployment benefits in the week ending April 4th dip trivially to 6,606K from an upwardly revised 6,867K the week prior. The dip in jobless claims was concentrated in Pennsylvania (-143K), Florida (-108K) and Massachusetts (-103K), but recent reports in the Washington Post highlight that the benefits system in states like Florida has led to the state underreporting the true number of claims. Rebecca Vallas reported that the red tape surrounding the state claims system was deliberately designed by the former Governor Rick Scott to “make it harder for people to get and keep benefits so the unemployment numbers were low”. This is supposedly just the tip of the iceberg. System failures nationally have arguably suppressed the true number of new unemployment claims. Reports of system crashes in New York, Michigan and Nevada are also backed up by reports of increased server capacity nationally and extended call center hours beginning next week. The influx of claims and the current backlog suggests that the initial claims data will remain elevated for some time to come as opposed to seeing the data subdue and a corresponding rise in continuing claims. Additionally, the CARES act will now see more claims fall under the official data stemming from unemployment benefits being paid to self-employed and gig economy workers. With the widening criteria of claims, expect the nominal number to remain elevated in the numerous millions for some weeks to follow. While the multitude of factors in play makes it harder to assess the true economic damage, further drawbacks are found in the fact that the claims data doesn’t measure the loss of economic activity from those leaving the labour market all together. In the March household survey, approximately 60% of workers that lost their job were counted as no longer in the labour market because they didn’t want a job or were not looking. Additionally, the structural contraction in the economy is difficult to assess due to the amount of temporary claims crowding out the true structural unemployment rate. Markets know the short-term contraction in the economy is set to be sharp but much of this can be recovered once containment measures are relaxed. The concern is what the longer-term impact to the economy is and to measure that, and in turn the effectiveness of the stimulus measures to counteract it, markets will need to see the noise around the labour market data to subside. While containment policies are in place, the data will continue to be marred with noise and only reflect the short-term economic impact, but it remains the best and most timely measure of economic activity for now. Eurozone Industrial Production data fails to move euro This morning's eurozone industrial output data from February included a sharp contraction of 1.9% on a year-on-year basis and a 0.1% contraction month-on-month, with a decrease in capital and durable goods causing much of the slump. The month-on-month slump is negligible due to the increase in intermediate and non-durable consumer goods, as well as energy production. The data was already hampered in February as the virus had China under lockdown, causing many disruptions in supply chains of trading partners, including the eurozone. With eurozone countries following nationwide lockdowns in March, a sharp downturn in the next data release is a given. Reasonably encouraging purchasing managers' indices from March suggested on the surface the slowdown was particularly sharp, but the PMIs were subject to noise from the inverse effect of the supply delivery times. With some eurozone countries looking at options to gradually revive the economy again, an important question that arises is when factories and companies will resume production. Germany has already announced plans to ease some of containment measures at the beginning of May and will reopen some smaller shops, while Spain will allow workers in manufacturing, construction and some services to return to work from this week onwards. The rest of the Spanish population remains in lockdown. The moment at which countries resume production will be the largest factor in assessing what the lowest point of production will be and will pave the way for a recovery in the eurozone industry. The reaction in FX markets to the data remains limited... As markets are mainly concerned with the shift in risk sentiment that has appeared since this week's collapse in oil markets and renewed safe haven demand for the US dollar. The euro has weakened against the dollar throughout the day, including the moments after the data release, but remained relatively stable against Sterling, signalling that this story is a matter of dollar strength rather than euro weakness. Looking ahead, industrial production data for March and April, combined with the timing of the easing of containment measures will be key in determining the bottom eurozone’s industrial downturn.   Eurozone industrial production vs surveyed values   Eurozone industrial production February 2020 (Covid Crisis) vs January 2009 (GFC)   Mexico’s rating erosion will make it harder for the peso to recover The ratings agency Fitch downgraded Mexican sovereign debt to BBB- from BBB yesterday, just one notch above speculative investment grade, with a stable outlook. The downgrade comes after the coronavirus crisis has dampened the already grim outlook of the Mexican economy and its public debt outlook. The agency now foresees an economic collapse of at least 4% in 2020, while pushing prospects of recovery back to 2021. Despite the fact that the government has not enacted any additional fiscal measures to rescue the economy amid the coronavirus crisis, the economic fallout could represent an increase of the primary deficit as percentage of GDP of some 2.5pp to 4.4%. In turn, this could push the debt-to-GDP ratio above the 50%, a record not seen since the 1980s. Fitch is the second major agency to cut Mexico’s sovereign debt rating in less than a month, after S&P downgraded it to two notches above junk at the end of March. The country is extremely sensitive to further downward revisions by major agencies despite AMLO's austerity stance, as structural growth could be impacted for years to come. According to the OECD's PPP standard, the Mexican peso is currently undervalued by nearly 160%, while the currency has lost over ¼ of its nominal value in less than two months. Even if USD strength starts to ease in the following quarters worldwide, poor domestic fundamentals will hardly help the peso to recover towards its pre-coronavirus levels in the short-to-medium term horizon.   Mexican debt-to-GDP ratio is set to jump to above multi-decade levels amid coronavirus economic collapse     Authors:  Simon Harvey, FX Market Analyst Olivia Alvarez Mendez, FX Market Analyst Ima Sammani, FX Market Analyst     DISCLAIMER: This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. Read more

USD rips higher as OPEC+ cuts insufficient to stem global glut

The dollar is broadly higher this morning after risk appetite soured as falls in crude oil prices accelerated. JPY is dominating G10 FX along with CHF, while EM currencies are mostly in the red. Read more

Eurozone CPI data

The euro fell against the dollar this morning after reaching a 10-day high overnight, as French retail sales plunged 24% month-on-month according to data from the Bank of France. Read more

Risk appetite continues to improve after Eurozone and OPEC deals, fresh Fed measures

Markets traded with a relaxed tone this morning, characterised by a modest but continued recovery in risk appetite and easing financial conditions, accompanied by a weaker US dollar. Read more

Semblance of calm in FX markets as Europe lockdown persists

Lockdown measures in hard-hit countries such as France and Italy will be in focus this week. The UK and EU will return to Brexit negotiations on Wednesday after the lead negotiators on both sides fell ill with Covid-19 last month. Read more

US dollar falls amid Fed credit measures, OPEC+ and Eurogroup

The dollar is lower this afternoon, after the Fed announced a raft of aggressive new credit easing measures. On the whole it seems global macro markets are no longer trading in a binary “risk on, risk off” dynamic – this suggests risk appetite on the whole has improved, for the time being. Read more

Dollar mixed with key announcements pencilled in for today’s session

The main news for the greenback yesterday was the release of the first set of Fed minutes since its dramatic decision to drop rates to its effective lower bound. Today, Fed chair Powell will likely give more clarity to markets with an economic update scheduled via webcast at 15:00BST.  Read more

Eurogroup failure sees ominous tightening in European interbank funding markets

European finance ministers failed to reach an agreement on a response to the virus pandemic after a marathon 16-hour conference call that went through last night. Read more

Risk-on returns as investors eye signs of coronavirus slowing

While the number of fatalities and new confirmed cases continues to pile up, the daily change in both figures have shown consistent evidence that the pandemic curves could be somewhere near to peaking. Read more

ZAR hits a record low but rebounds aggressively amid some optimism in global markets

The introduction of COVID-19 has exacerbated the economic contraction as South Africa, along with many developed markets, enters an extended containment period which shuts down both manufacturing and social consumption. Read more

FX trades with mild risk-on vibe amid signs of virus stabilization

G10 and EM FX are trading with a broad risk on vibe this afternoon, with the dollar lower against AUD, NZD, NOK and CAD, and enjoying some modest gains versus JPY and EUR. Read more

US dollar pares losses – but no sign of March madness despite a week of awful data

The US dollar is broadly higher this week, but at this point, it looks like a recouping of some of last week’s sell-off, as opposed to the beginning of another leg of intense dollar buying of the sort seen in mid-March. Read more

Trump makes bold claims of oil production cuts from Saudi Arabia and Russia

Donald Trump continued his extraordinary efforts to support crude oil prices yesterday, by claiming that Saudi Arabia and Russia would cut oil output by 10-15 million barrels. Russian officials were quick to deny that Putin and the crown prince of Saudi Arabia had spoken. Read more

Trump tweets send oil skyrocketing

Donald Trump has sent oil prices and petro-currencies soaring after saying that he hoped Saudi Arabia and Russia would agree to oil production cuts of 10-15m barrels. Read more

Sky-rocket US jobless claims dictate FX dynamics today

Yesterday, the DXY dollar index ticked higher on an apparent bounce from last week's losses. The move could be hardly attributed to safe-heaven pressures as per the relaxed, or even positive, performance of most financial conditions indicators. Read more

NOK and CAD rise as oil jumped on China’s purchase plan

While both the krone and CAD are benefitting from the oil rally, the Norwegian krone is leading in the G10 space. NOK's faster recovery compared to the Canadian dollar shows that while oil has been the main character in today's gains. Read more

No one knows what to do with the dollar

The dollar remains bid today, despite a period of relative calm in bond markets, financial conditions, and USD funding markets. This suggests that the dollar strength we have seen this week is not panic buying, but simply a steady demand for greenbacks after last week’s sell-off. Read more

Dismal manufacturing PMIs from Hungary push the forint to another record low

The Hungarian forint continues to slide, reaching another record low against the euro this morning in a new wave of selling following dismal manufacturing figures, combined with a global risk-off mood. Read more

Markets might get used to ugly data for a while

G10 FX has had an eventful day so far, with the US dollar remaining bid and up against the whole G10 except for NOK. NZD and AUD were in the green briefly in the early hours of the morning after Chinese PMI data printed much better than expected. Read more

USD bid during uneventful morning session

Monday has proven to be a reasonably uneventful open to the week after the tumult of the past three weeks. The dollar is trading modestly higher against the G10 currencies today, although there is little sign of the intense investor panic and risk aversion that drove the dollar to highs earlier in the month. Read more

South Africa lost Moody’s Investment-Grade Credit Rating

March has not bought an easy end to the quarter for the South African economy, as the nation has been dealing with a mix of structural domestic concerns over the economy and international fears over the spread of coronavirus. Even before the virus spread globally, the country was struggled with various macro issues - since the end of 2019, unemployment has hit an 11-year high, manufacturing and production numbers have slumped to a 5-year low, and Eskom has experienced its worst ever generation crisis, leaving the entire economy without power for hours at a time. Long-standing structural labour market rigidities and persistent weak business and investor confidence finally made South Africa enter its second recession in two years. On Friday night last week, Moody's Investment Services announced that South Africa had lost its investment-grade credit rating after more than 25 years, meaning the country now has a junk rating from all three major international rating agencies. The announcement was made after the nation went on a three-week lockdown, on the same day as the number of infections passed 1,100 and the first victim died. Moodys' statement describes the key driver behind the rating downgrade from Ba1 to Baa3 as "the continuing deterioration in fiscal strength and structurally very weak growth", and does not expect current policy settings to address the concerns effectively. The rating agency has downgraded SA's long-term foreign-currency and local-currency issuer ratings and senior unsecured debt ratings, as well as the foreign-currency senior unsecured MTN and senior unsecured Shelf ratings to (P)Ba1 from (P)Baa3, as well as its foreign-currency other short-term rating to (P)NP from (P)P-3. Due to the downgrade, South African government bonds will be excluded from the FTSE World Government Bond Indexes, which are tracked by $3 trn of funds. The index will be reweighted in April, with South Africa's 0.45% weighting deducted from the index. The announcement was not entirely unexpected. Moody's downgraded their outlook on South African debt to negative in November, warning of SA's growing debt-to-GDP ratio, but the icing on the cake was when the country had no choice than to impose containment measures to curb the further spread of the coronavirus. South Africa's National Treasury sees the downgrade of the country's debt to junk by Moody's investors Service as an opportunity to fix the economy and stated that they "take this downgrade as an opportunity to do the right thing", and acknowledges that instead of putting more money into the economy, the nation should shift to structural reforms. South Africa's rand weakened to a record low this morning and breached 18 rand per dollar for the first time in history. An index of SA bank stocks slumped 6.1% on top of Friday's 12% drop. Acknowledging the still early stage of the spread and the economic damage that it has already done, this may signal that SA's economy may get impacted more severely as the virus hits its peak. While further short term downward risks certainly play a role for the rand given the economic outlook and downgraded rating, this does not directly have to translate into an even weaker rand in the long term. The shape that the structural reforms will take will be key in determining a longer term economic outlook. Finance Minister Tito Mboweni stated that the nation will approach the IMF and World Bank for assistance in mitigating the economic turmoil caused by the coronavirus.   The South African rand weakening past 18/$ for the first time ever recorded   USDZAR - 1 month window   MSCI Index    Eskom 2028 bond yield curve - now vs 1 month ago Author: Ima Sammani, Junior FX Market Analyst.   DISCLAIMER: This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication.   Read more

GBPUSD remains vulnerable to further sentiment shocks despite historic easing measures

From Monday’s lows to Friday’s high sterling rallied more than 9% against the US dollar last week, completing its best weekly performance since at least 2009. Read more

Dollar holds steady, EU squabble and BoC surprise

The greenback fell by over a percentage point against all G10 currencies yesterday as liquidity conditions improved in markets and the dollar's synthetically produced strength due to credit and liquidity issues unwound. Read more

Markets breathe a tentative sigh of relief

Price action across FX, equities, and fixed income are suggesting a mood of relief today, with the US dollar lower across the board and equities higher after the US Senate passed a $2 trillion fiscal stimulus bill. Read more

USD may find support as Central Banks up liquidity

The US dollar continues to trade on the back foot in today’s session following its fall from grace yesterday. The DXY index, which tracks the dollar's performance against most major trading partners, continued its fall this week from a 4-year high. Read more

Latest Fed measures seem to be working, for now.

After a worrying initial market reaction yesterday, the Fed's aggressive monetary and credit easing measures appear to be working. The US dollar is generally weaker across the board, US equity futures are pointing up, and there are reasons to believe the pressure on financial conditions may be easing. Read more

Norwegian krone sees record volatility

As the most volatile currency in the expanded major currency space over the past week, the Norwegian krone has been swept away in the worsening virus-driven economic knockout and was hit by the double whammy of a strengthening dollar and a collapse in oil markets. Read more

USDMXN trades beyond dollar liquidity constraints

The Mexican peso is sitting at a new record low against the US dollar on the back of an increasing risk-off mood. Risk sentiment has caused extreme demand for dollar liquidity and hasn't been soothed by Banxico's latest measures, which may be regarded as underwhelming.  However large both the Fed liquidity provision measures and Banxico stimulus might be, we see the bottom for USDMXN nowhere in sight provided the substantial global and domestic recession risks. The increased provision of USD liquidity to domestic Mexican markets funded by the swap line with the Fed may help ease the speed and size of the fall, but the peso faces notably downside risks in front of several policy choices. Last Friday, Banxico moved forward its monetary policy decision scheduled for March 26th, implementing an emergency interest rate cut of 50 basis points. At 6.5% now, the policy interest rate is still deemed to be restrictive relative to the estimated neutral interest level, which is estimated at around 5%. This restrains the ability of the Mexican economy to navigate through the inevitable recession, especially in a context of constrained fiscal space. One of the committee members even leaned towards a shorter 25bp reduction, suggesting the board is not fully on board with the idea of substantial easing. There are two reasons for Banxico to stay fairly conservative on its policy stance despite threatening growth prospects: The Mexican capital account is largely reliant on its premium payments given the increasing risks of credit downgrade by foreign rating agencies and The potentially large pass-through effects on inflation from the policy-induced currency depreciation. Banxico assessed that upside inflation risks from a weaker currency are broadly balanced with the negative impact of soft demand and lower energy prices under the current policy stance. However, the central bank stated that the uncertainty to the inflation outlook has increased, adding to the prospects of cautious forward guidance. We now expect Banxico to engage in further easing by at least 150bp of additional cuts over the next two quarters, in line with repriced market expectations of monetary easing after the last Banxico move. While this size of accommodation could prove insufficient to prevent Mexico from a large recession this year, further moves might be counterproductive for the domestic inflation outlook. Regardless, either policy choice in the cards of Banxico –a sharp or mild monetary easing- poses significantly negative risks for the peso. On one hand, lower interest relative yields on Mexican increasingly riskier assets will force a major sell-off of in the peso. On the other, sticking to a rather conservative stance and refraining from cutting rates aggressively could send the economy into an even larger recession, curtailing demand for MXN too. The remaining silver lining in the peso's outlook comes in the form of Banxico directly intervening in the FX market. Last week, the Fed engaged in a swap line arrangement with Banxico for provision of $60 billion of USD liquidity, which Banxico is now injecting in local markets via repo operations. However, in both of the offerings conducted so far of $2 billion each, the market intake of USD has fallen short of the amount offered, about 23% and 76% respectively. This surprising mismatch indicates that the MXN price action might not be driven by USD fund squeezing in full, but rather by a fundamental sell-off of MXN, which may have slightly eased just for now.   Markets are pricing in a more proactive policy stance after Banxico unexpectedly cut rates in an emergency meeting on March 20th.   MXN sell-off has probably surpassed USD fund squeezing limits and is fundamentally trading on risk-off mood.   Author: Olivia Alvarez Mendez, FX Market Analyst     DISCLAIMER: This information has been prepared by Monex Canada Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Canada Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. Read more

Flash PMI Data: UK & Eurozone

Flash Purchasing Managers Indices for the UK and leading Eurozone economies will be released on Tuesday morning, giving markets a first look at the impact of the coronavirus outbreak on business confidence. Read more

BoE Primer

The combined fiscal and monetary response from the UK is both cutting edge and timely and is likely to be studied in textbooks for decades to come. As far as mitigating the economic impact of the coronavirus, it is likely to be a “best in class” solution in terms of scope and timeliness. Read more

Fed switches to “Whatever it takes” in bid to beat yield curve and financial conditions into submission

Jerome Powell and the FOMC have finally had their “whatever it takes moment” and promised open ended asset purchases aimed at beating the US yield curve and financial conditions into submission. Read more

Markets breathe a sigh of relief, but is it short lived?

All major currencies are in the green against the US dollar overnight, after the wave of risk aversion and dollar liquidity stress that drove the greenback higher has abated slightly. Read more

Norges Bank surprises with another rate cut

Norges Bank unanimously decided to cut its benchmark policy rate by 75 bps to 0.25% this morning - a record low for Norway's economy. The previous cut was announced just a week ago when the central bank reduced its policy rate from 1.5% to 1%. Read more

Currencies rally vs US dollar amid reprieve in global risk-aversion

Global currencies began to rally overnight as risk appetite improved and bond yields fell in the developed world, although some major currencies have yet to recoup their losses from yesterday. Read more

USD note

The dollar’s rampage continues into another session today in FX markets, focusing on the G10 currencies that previously performed well amidst the market turmoil; EUR, JPY and CHF. Read more

BoE joins wave of desperate central bank action aimed at stabilising sovereign bond markets

The Bank of England has decided to cut interest rates by 15 basis points to 0.1%, and will increase asset holdings by £200 billion following an extraordinary meeting. Read more

USDNOK reaches levels never seen before

Worsening concerns about the global impact of Coronavirus and plunging crude oil prices have created a perfect storm for commodity currencies, especially NOK. Read more

What to expect from SNB tomorrow

The Swiss franc currently sits at a 5-year high against the euro on the back of increased global demand for heaven assets triggered by fears of recessions occurring globally. Read more

Canada unveils $82bn fiscal package

Worryingly for spectators, PM Trudeau sidestepped questions about whether the Canadian economy is set for a recession, which it undoubtedly is in the current climate. USDCAD continues to climb higher towards levels not seen since 2016, with the high of 1.4690 now in scope.  Read more

Sterling falls to unstoppable US dollar as markets stare down the barrel of crisis…

Sterling has fallen to the lowest level against the US dollar since 1985 amid a global dollar liquidity shortage that has seen the greenback run rampant against all major currencies. Read more

The Fed dusts off another 2008 liquidity tool

The Federal Reserve today said it has established a new Commercial Paper Funding Facility, similar to that used during the 2008 financial crisis, to try and appease further dollar funding stresses – this time in non-financial corporate debt markets. Read more

MXN faces further downward risks under current market uncertainty

The peso has led losses driven by the coronavirus within the EM space, and its dominant trading volume in Latam has made it particularly sensitive to recent market turmoil in the area. Read more

Riksbank blow dust off of QE machine to avoid shame of negative rates

Late on in yesterday's session, the Riksbank came out and signalled to markets that it was willing to spend as much as Kr300bn ($30bn), or almost 6% of GDP, from March to December this year on government bonds, municipal bonds and covered bonds. Read more

Fed goes nuclear to suppress dollar demand and mitigate economic impact from virus

The Federal Reserve has taken the extraordinary step of slashing interest rates a full percentage point, restarting quantitative easing, and announcing a host of additional liquidity and credit easing measures. Read more

ECB opts for scalpel instead of bazooka as Lagarde delivers train wreck press conference

Christine Lagarde has opted for a scalpel instead of a bazooka. Although there is merit to the ECB’s targeted lending approach, today is likely to go down in history for Lagarde’s fateful and possibly catastrophic remarks about sovereign spreads. Read more

The Bazooka Budget

Today’s measures show not just synchronisation between the Treasury and Bank of England, but massive coordinated fiscal and monetary stimulus. Sunak was keen to emphasise this coordination early in his speech; instead of merely taking policy action at the same time, the BoE and treasury have clearly built their response to be synergistic, particularly in targeting support to businesses. Read more

BoE sends message of policy synchronization with Treasury, setting stage for historic budget

The Bank of England has cut its policy rate by 50 basis points this morning, slightly surprising markets but failing to move the needle much for sterling. Read more

JPY has woken up

As economic and financial risks to the economy intensify, markets are looking to Japanese fiscal and monetary policy for an aggressive response. Read more

UK budget set to blow the doors off

Receptive market conditions, changing political ideologies, and the coronavirus shock all mean that this week’s UK budget is likely to see Rishi Sunak open the fiscal taps and allow the UK deficit to increase.  Read more

ECB must ease – but has limited options

G7 finance ministers and central bank heads may not have officially agreed to a synchronised monetary response at last week’s conference call, but the US Federal Reserve’s 50 basis point inter-meeting cut has made the issue of coordination moot. Read more

Coronavirus fears forces a race to the bottom

Monetary policy has been the global economy’s front-line of defence against the spread of COVID-19, with fiscal support only now beginning to trickle through outside of Asia. Read more

A concerned SNB will prevent further CHF overvaluation despite US Treasury vigilance

With CHF trading close to three-year highs against the euro and upside pressure building on the currency from global risk-off moves, SNB intervention remains likely despite surveillance by the US Treasury, limiting the extent to which we believe the franc can rally in the coming periods. Read more

US yields tumble as stocks remain under pressure

The dollar continues to trade on the back foot today with February’s Nonfarm Payroll release in scope. Treasury yields continued to fall in Asian trading today. Read more

Tentative signs of USD softening against safe carry trade targets

The dollar has traded on the back foot this morning, with modest losses coming against GBP and NZD in the G10 space and KRW, MYR, and TYD elsewhere. This pattern is consistent with a modest improvement in risk appetite relating to open, developed economies. Read more

USDCAD and Bank of Canada

Yesterday's Bank of Canada meeting poses the greatest short-term risk to our outlook. Governor Stephen Poloz is currently in a precarious position; cut by 50 basis points and risk inflating house prices further or cut by 25 basis points and run the risk of currency appreciation unwinding the stimulus. Read more

Jay Powell takes out the big guns with intra-meeting cut not seen since 2008

The Fed’s surprise rate cut was the first outside of a regular monetary policy meeting since 2008, and was accompanied by a press conference where Fed chair Jerome Powell said the US economy remained strong, but that the early indicators of the virus’s impact had worsened the outlook and prompted a rate cut. Read more

FOMC cuts rates outside of a meeting for the first time since 2008

Jay Powell and the Fed have taken the warning financial markets have given about coronavirus over the past weeks to heart and brought out the big guns with a 50bp intra-meeting rate cut. Read more

Murmurings of fiscal action in Germany

With the euro attempting a nascent recovery last week in the face of a worsening virus shock, and the ECB seemingly resistant to short term policy easing, hopes of a fiscal response from the eurozone’s largest economy came in to focus last week. Read more

The Reserve Bank of Australia must weigh coronavirus shock against tailwind from rising house prices

With AUDUSD reaching fresh decade lows last week and house prices rising, the RBA has considerable tail winds to weigh against the incoming coronavirus shock at Tuesday’s meeting. Read more

Bank of Canada preview – wiggle room may dissipate by April’s meeting

Next week’s Bank of Canada meeting is arguably too soon to see a rate cut from Governor Poloz, but swap markets have aggressively priced in a greater than 50% probability on Friday afternoon alone. Read more

Cracks finally show in US dollar as markets expect FOMC cuts driven by virus shock

As the virus outbreak spread to new countries and hopes of containment faded last week, the US dollar finally began to weaken against certain currencies, including low yielding G10 partners like EUR, CHF and JPY. Read more

China PMIs: Time to address the elephant in the room

While the PMIs themselves will give markets the clearest indication to date of the shock to Chinese growth, quirks to the individual data readings will still leave some grey areas for markets to jostle with, as the dollar may begin to find out as rate cut bets build. Read more

NZ economy enjoys tail winds, but NZD rally contingent on coronavirus shock easing

New Zealand’s economic outlook stabilised in Q4 2019 after a plunge in business confidence earlier in the year due to US-China trade tensions. Combined with a moderately optimistic tone from the RBNZ and our base case for modest weakness in the US dollar, this led us to take a bullish view on the Kiwi dollar in 2020 in our last global outlook. Read more

NOK faces coronavirus fears but should outperform in H2 on domestic data

The Norwegian krone has sold off over 6% against the US dollar since the start of the year predominantly due to a deterioration in the external climate. The downturn in global growth prospects due to the coronavirus outbreak has not only fueled further dollar strength but also resulted in a softer euro. Read more

Fundamentals remain good for AUD, provided coronavirus shock dissipates

Australia’s economic outlook began to improve in Q4 2019 - a change the Reserve Bank of Australia described as a “gentle turning point” after a significant slowdown over the course of the year. Read more

Yen should strengthen modestly on the back of fiscal support

A positive rebound in the global backdrop for the second half of the year, along with an expected domestic growth pick-up, should underpin the currency rally, while the USD strength gradually fades. Read more

US economy remains robust, but the FOMC determinedly remains on the defensive

The US economy remains robust by most measures, having weathered last year’s trade war shocks to register 2.1% annualised growth across both Q3 and Q4 2019. Read more

Loonie and BoC face fresh external growth concerns

A double whammy of a dovish Bank of Canada meeting on January 22nd and news of the coronavirus outbreak in China reversed sentiment in the Canadian dollar. USDCAD soon found itself trading in the $1.32 range, with the $1.33 barrier falling shortly after. A further deterioration in risk appetite now sees USDCAD trading up near $1.35. Read more

Domestic data should underpin SEK but short-term risks prevail for the krona

Our SEK calls remain mostly intact from our 2020 outlook, with just a minor upwards revision to USDSEK to account for the deteriorating global growth outlook. However, our adjustment for a weaker krona is lower than our euro adjustment, ultimately leading to a downwards revision in EURSEK. Read more

Macro data, coronavirus, and EU-China trade will be the key themes for Q1

Recent eurozone data flow has been poor, and the coronavirus outbreak presents an additional downside risk to the eurozone. Read more

UK Economy in good place for whatever comes in Q1

The recent fall in GBPUSD may look like more Brexit-related losses for the pound, but in reality the decline from around 1.32 at the beginning of February to 1.2900 this week has been mostly driven by the US dollar. Read more

Sterling sells off on latest brinkmanship from Boris

As outlined in earlier speeches, the mandate is a bid for absolute control over UK standards for competition, environmental standards, labour rights, and the other areas that the EU has insisted must be subject to “level playing field” provisions. Read more

Rand rallies despite upwards revisions to debt trajectory

Following the release of February’s medium-term budget statement, the South African rand reversed its losses early in today’s session to sit half a percentage point higher on a day where markets battle a heightened risk environment and the dollar continued to firm across the board. Read more

Mboweni’s medium-term budget in scope for South African investors

Following an underwhelming State of the Nation Address by South African President Cyril Ramaphosa two weeks ago, market participants turn their eye to Finance Minister Tito Mboweni’s medium-term budget announcement on Wednesday 26th. Read more

Euro weighed down by economic sentiment and a strong US dollar

Last week, the currency fell through a 34-month support level against the dollar, after plummeting nearly 3% since the beginning of February and recording fresh lows for 13 consecutive sessions. Read more

IFO Data Release Exceeds Expectations

This morning’s IFO data release saw upside surprises in all three readings. Being based on ~9000 survey responses from German firms in different sectors, the IFO reading is a leading indicator of any turning points in the German economy. Read more

USD dominant as markets focus on worsening regional macro risk

The dollar’s bull run accelerated last week, as official data indicated the coronavirus outbreak in China was beginning to slow, but regional outbreaks in South Korea and Japan worsened, and investor risk appetite once again deteriorated. Read more

UK consumer spending uptick comes after noisy adjustments

January’s retail sales report suggests that UK consumers are joining in the burst of optimism experienced by businesses in the new year. Read more

Canada’s inflationary overshoot may not last

Today’s CPI release saw headline inflation overshoot expectations by 0.1 percentage points to post a print of 2.4% in January – the highest reading in 15 months. However, the loonie’s reaction was relatively muted. Read more

Markets vs. the Fed: An ongoing debate

The Federal Reserve fund futures prices show that markets are expecting more easing from the Fed this year, probably as a result of the macroeconomic impact of the coronavirus outbreak. Read more

UK PMIs follow Javid resignation

Sajid Javid’s resignation as Chancellor of the Exchequer last week triggered a rally in sterling, as markets began to speculate that his departure suggested an increased likelihood of fiscal stimulus from Boris Johnson’s government. Read more

Coronavirus risk and souring data weigh on the euro

The euro proved highly sensitive to these releases, which is understandable considering the poor performance of the manufacturing sector in 2019 prompted fears of a recession. Output in the manufacturing sectors remains the weak point in the eurozone’s growth outlook. Read more

Sterling rallies on hopes that Sajid Javid’s resignation heralds a Trumpian spending spree

This morning’s cabinet shuffle turned out to be exiting after all, when Chancellor Sajid Javid resigned after reportedly being asked to replace his staff of advisors with choices picked by Number 10. Read more

Sajid Javid sets out UK’s ambition for equivalence agreement with EU

GBP saw a slight rally yesterday and overnight, amid a major leak of part of the UK’s negotiating position in trade talks with the EU, and ahead of today’s release of gross domestic product data. The “opening position” of the UK was snapped by a long-lens camera while an unreleased briefing paper was carried into downing street, and is being widely reported on in UK newspapers. Read more

OPEC undecided heading into the weekend

Last week’s emergency three-day OPEC meeting in Vienna in response to news that China’s oil demand has fallen by 20% due to the coronavirus lockdown has yet to bear fruit. Read more

Risks to the downside as RNBZ must navigate China slowdown

The RBNZ surprised both our expectations and the market by holding rates unchanged in November, but must now navigate the risks of coronavirus to New Zealand’s small open economy. Read more

PBOC toolkit prevents panic

Repo rates were cut by 10 basis points on Monday, and a net 550 billion yuan was pumped into repo markets over the first two days of the week. CNY was allowed to depreciate above the 7.00 level, with the PBOC leaning against further depreciation. Read more

The Riksbank’s return to zero – was it wise?

Next week marks the first Riksbank meeting since December’s decision to hike the repo rate by 25 basis points and return policy to 0%. While the central bank signalled heavily that the return to zero would occur in either of the December or February meetings, the decision to hike rates sooner rather than later wasn’t unanimous. Read more

Greenback roars with NFP in scope

The weighted DXY index of USD vs major currencies is trading at a high for the year, and is on track to enjoy its biggest weekly gain since September. Today’s non-farm payrolls report, therefore, will be facing high expectations when it is released at 13:30 GMT. Read more

Dollar takes no prisoners as risk climate continues to shift

The dollar broadly firmed for another trading day yesterday with the broad dollar DXY index reaching levels not seen since late November. The data likely helped the greenback as risk sentiment continues to chop and change in markets as survey-based measures of output and employment change showed the strong state of the US economy. Read more

Markets lick wounds as PBOC measures deemed ample, for now

Sterling began yesterday with an extension of its sell-off from Monday, reaching fresh lows in the morning, but then stabilised and managed to end the day marginally higher against the dollar and euro. On the whole, the US dollar has been on the back foot against AUD, SEK and NOK since yesterday’s tentative risk rally began, but advancing against CHF and JPY. Read more

PBOC shores up risk appetite

The Chinese renminbi gained some strength overnight as Chinese stocks stabilized after the largest recorded market loss following the virus outbreak and boosted sentiment. Read more

Banxico easing likely to continue

The Mexican peso outperformed in the first month of 2020, being one of the only four currencies in the EM space with positive spot returns against the dollar. Read more

Sterling after Brexit

The pound continues to face two serious risks that are hampering a rally: ongoing political uncertainty, and murky growth prospects. Read more

FX pricing of coronavirus has been limited but all may change

The coronavirus has rocked global financial markets this week although the effect has been limited in the G10 FX space compared to equity and commodity pricing. Read more

CNY weakens but no signs of collapse

The dollar is on firmer ground this morning after a partial sell-off at the end of the month on Friday. Data, politics, and geopolitics will create a rich mix of narratives this week for global markets, with the dollar caught up in the middle as usual. Read more

Dollar strengthens with Trump acquittal and PCE in scope

The dollar had a mixed session yesterday, posting substantial losses against haven currencies and the pound while exacting a pound of flesh from commodity-linked G10 currencies. Read more

Monetary Policy Committee majority not persuaded by “risk management considerations”

The key factors driving the majority of the MPC voting to hold rates seems to have been the obvious ones: Brexit risk has fallen and the US and China have signed a trade truce. Read more

Volatility returns to USDCAD

The Canadian dollar was one of the more exciting G10 currencies against the dollar last week with only the Norwegian krone and British pound proving more volatile. Read more

FOMC in focus: on hold until proven otherwise

This week’s FOMC meeting not only marks the first of eight meetings in 2020 but also the first time Jerome Powell faces both media and markets since the phase one trade deal was signed. Read more

Monetary Policy Committee likely to hold rates in knife-edge decision

Thursday’s MPC decision will be the least clear cut in years, with UK data uncertainty and global conditions providing compelling arguments for both an “insurance” rate cut and for no change. Read more

UK businesses breathe a sigh of relief after election

The general election seems to have made a world of difference in UK business sentiment, which picked up sharply in January after what appears to have been a dismal fourth quarter. Read more

Loonie lower post BoC but a rate cut isn’t a given

The reaction in the loonie is just what the Bank of Canada needed with economic activity practically grinding to a halt in Q4. While transitory events are likely to taint the GDP figure at the back end of last year, suppressed economic activity along with rising public infrastructure spending suggests capacity constraints may begin to alleviate as the output gap widens. However, as per the winter Business Outlook Survey, the main concern for businesses increasing output is supply restraints in the labour market, which has remained tight by historical metrics for some time now. From an inflationary outlook though, looser capacity constraints outside of the labour market pose the most substantial deflationary risk to the bank’s current outlook, as highlighted in chart 2 below. The Monetary Policy Report highlights this shift in risk parameters for the BoC’s outlook from external headwinds to more domestic factors in 2020. Despite the financial market reaction, the projections don’t suggest a rate cut is a foregone conclusion before Poloz’s term ends. The main takeaway from Wednesday's Bank of Canada meeting is that the Governing Council may revert to verbal stimulus and therefore play a game of cat and mouse with financial markets while the data materialises as opposed to a more conservative insurance rate cut. For now, a weaker currency is definitely favourable, especially considering the drag export growth had in the fourth quarter and the drag heightened imports are expected to have on Q1 this year (chart 1). From an inflationary standpoint, measuring the development of the output gap and the reassessment of the neutral rate in April will be key for nailing in the next policy move as economic activity is closely monitored in the meantime. Until then, without a substantial downturn in the data for Q1, it is hard to envisage a cut in before April being the likeliest option, especially with Governor Poloz ruling out an insurance rate cut. If the loonie continues to trade at a weaker level and fiscal stimulus provides mild support for growth, the bank is likely to embark on a holding pattern until the data suggests otherwise. Governor Poloz showed that the central bank will return to sitting behind the curve and policy will be data dependent.   Chart 1: Both Governor Poloz and Deputy Wilkins stressed the importance of Chart 5 of the MPR when discussing the bank’s forecast for the growth rebound in Q1.   Chart 2: Deputy Wilkins stressed the impact that a widening output gap will have on inflation, adding extra emphasis towards the April projections   Chart 3: USDCAD hits a 2020 high as markets begin to price in the increased probability of a rate cut in March   In the coming months, metrics of economic activity, the development of house prices, the willingness of consumers to spend at the margin, and current account dynamics will be key for predicting the next policy move. The data calendar is likely to return as a source of volatility for USDCAD for this reason.     Author: Simon Harvey, FX Market Analyst at Monex Europe.      This information has been prepared by Monex Europe Limited, an execution-only service provider. The material is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is, or should be considered to be, financial, investment or other advice on which reliance should be placed. No representation or warranty is given as to the accuracy or completeness of this information. No opinion given in the material constitutes a recommendation by Monex Europe Limited or the author that any particular transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, it is not subject to any prohibition on dealing ahead of the dissemination of investment research and as such is considered to be a marketing communication. Read more

EUR lower after Lagarde dodges big questions

The euro has reached fresh lows for the year after Christine Lagarde’s second press conference as ECB President. The ECB kept rates on hold, and formally announced the scope of its monetary policy strategy review. Read more

Central banks take over market focus

The euro continued its two-way price moves yesterday and remained well within this week’s range, but saw a short drop after US President Donald Trump threatened to impose “very high” tariffs on car imports from the EU if the bloc does not agree to a trade deal. Read more

Labour market data complicates UK macro picture even further

The UK data picture is exceptionally murky currently, and today’s jobs figures only complicate things further. Last week saw expectations of rate cuts from the Bank of England soar after a weak GDP print, poor retail sales, and dovish comments from MPC members. Read more

USDCAD outlook remains intact as trade deal remains on pause

While the pair broke the psychological barrier in the early part of January due to rising geopolitical tensions in the Middle East and its ensuing impact on oil markets, USDCAD has since resumed trading above $1.30 leaving the base case intact. Read more

A week of bad data and dovish MPC commentary builds expectations of rate cut

Last week’s UK data and MPC commentary overwhelmingly pointed towards a rate cut from the Bank of England. Read more

Euro looking steadier as ECB likely to strike upbeat message this week

The ECB’s first meeting of 2020 will be different to those of 2019, and not just due to the prospect of Christine Lagarde’s scarves replacing Draghi’s ties at press conferences. Based on recent data, meeting minutes, and macro conditions, the Governing Council is likely to strike a more optimistic tone and focus on the upcoming policy review Read more

South African Reserve Bank unexpectedly cuts rates

The South African Reserve Bank unexpectedly cut rates yesterday alongside downgrades to both their CPI and growth projections from November’s forecasts. The central bank’s quarterly projection model now forecasts the repo rate to close out there year at 6.1%, suggesting another 25 basis point cut is soon to come in Q4. Read more

CBRT cut rates but at a slower pace than 2019

The Central Bank of the Republic of Turkey cut rates today by 75 basis points as the cutting cycle continues but at a dramatically slower pace than in 2019. Today’s decision marked the smallest cut in policy rates under Governor Uysal since he was appointed governor in July. Read more

CPI undershoots emboldening dovish pricing

Sterling continues to trade on the back foot this morning as the growing flock of doves at the Bank of England gets their second piece of confirmatory data to suggest a rate cut at the end of the month may be a done deal. Read more

US removes currency manipulator designation from China

The US dollar traded mixed overnight, with CNY the biggest gainer after signs of progress emerged from US-China trade talks. It really does seem like white smoke is rising from Washington as the US and China are closing a phase one trade deal. Read more

Sterling trades heavy as GDP data confirms BoE concerns

Following comments from Bank of England policy setter Vlieghe over the weekend, markets are beginning to turn their attention back to the economic data in anticipating whether the central bank will embark on a 25 basis point cut on January 30th.  Read more

USDCHF stability to be a theme of the coming year as authorities enjoy franc depreciation vs the euro

We have brought forward the previous EURCHF forecasts to also represent our expectations of a more aggressive euro rally in the first half of the year than previously expected – the previous 3-month forecast is now the 1-month forecast etc. Read more

Risk off move after US drone strike raises Middle East tensions

Sterling price action has mostly been quiet so far this week, and this morning the pound has followed most of its peers lower against the US dollar on fears of rising risk of conflict in the Middle East. Read more

Soggy US dollar collapses

Sterling was among the biggest winners from last week’s broad US dollar weakness, and regained much of its recent losses since the general election. Read more

USD soggy over the festive period

The dollar has drifted broadly lower against G10 companions over the course of the week, but the move has less impact with many market participants away from their desk. Read more

Sterling glimpses the sunlit uplands of a post-Brexit economy

In a novel change for markets, this morning’s political developments have seen sterling climb up a cliff instead of falling off one. The pound shot higher by more than 2.5% in minutes last night after official exit polls showed the Conservative party with a commanding majority. Read more

Sterling Election Primer

Sterling looks set for yet another night of politically driven volatility as the UK essentially chooses between a massive Tory led fiscal expansion, and an even more massive Labour led fiscal expansion. Read more

Sterling unfazed by leaders debate this morning

Sterling’s gains from Monday began to erode yesterday, with the losses extending this morning. Boris Johnson and Jeremy Corbyn squared off in a television debate last night, exchanging barbs on the NHS, trust, and of course Brexit. Read more

USDCAD may test $1.33 if core CPI undershoots

While markets remained in the dark about the possibility of a phase one trade deal being struck between the US and China, and the greenback traded mixed in such an environment, the loonie didn’t fare well in either scenario. Read more

Dollar trades sideways

The US dollar traded with a mixed tone last week, with idiosyncratic reasons and changes in broad  risk appetite driving losses for AUD, KRW and MXN and gains for NZD, ZAR and GBP. Read more

This week’s meeting minutes from the RBA and Fed come after a dramatic week for AUDUSD

Australian jobs data delivered a gut punch to the currency. The Australian dollar was the worst performing major currency against the greenback last week. Read more

Can EURUSD avoid another sustained trip below 1.10?

This morning’s German GDP beat may offer some support in the short term. The Eurozone’s largest economy was widely expected to have entered a technical recession in Q3. Read more

To cut or not to cut? Risks weigh on both sides for the RBNZ this week

The RBNZ faces a finely balanced decision this week, with domestic data offering both positive and negative surprises. Read more

Political risk is the key driver for LATAM

Riots and civil unrest predominantly due to the austerity measures has been a key driver for LATAM markets over the past few weeks as government’s attempt to restructure their fiscal liabilities. Read more

G10 Views: AUD

Our view is that the Aussie will be broadly flat in Q4 as the RBA cuts rates once more and US-China tensions ease, but remain unresolved, creating persistent uncertainty. Read more

G10 Views: CHF

Our view is that USDCHF is likely to remain broadly stable in Q4 and Q1, as the effects of easing trade tensions lead to reduced demand for CHF as a haven asset, but the US dollar itself deteriorates. Read more

G10 Views: EUR

Offsetting ECB and FOMC easing is likely to make for uninspiring EURUSD price action in Q4, although the more limited room for rate cuts by the ECB provides a minor source of strength for the euro. Read more

G10 Views: USD

The main theme of our updated G10 views is a moderately weaker US dollar, due to the US economy finally “catching down” to the rest of the G10. Read more

VIDEO: Ranko Berich talks risks to the eurozone economy

Ranko Berich, Head of Market Analysis at Monex Europe, talks to Estrategias de inversion at the Madrid Stock Exchange about the greatest current risk to the eurozone economy… the US-China trade war. Read more

Exuberant US consumer provides large fig leaf for falling investment

Headline US GDP growth has printed at a better than expected 1.9% seasonally adjusted annualised rate. Read more

ZAR: Medium-term budget puts pressure on rand

Both the South African rand and South African bonds are under pressure this afternoon, with headlines suggesting an outlook downgrade from Moody’s is almost inevitable on Friday. Read more

A cut from the Fed, but no further dovishness?

The FOMC will almost certainly cut the Federal Funds rate by 25 basis points this Wednesday, but with markets pricing in a deeper pricing cycle than suggested by recent Fed communications. Read more

Euro weakens after Draghi issues a stark warning

Sterling fell victim to a stronger dollar yesterday along with the usual bombardment of Brexit headlines. Read more

Whatever it takes – farewell Super Mario

ECB President Mario Draghi takes to the stage for the last time this afternoon before handing over the keys to the office to former IMF chief Christine Lagarde. Markets are expecting no policy change from Draghi following September’s dramatic decisions. Read more

Thursday Central Banks

In September, we wrote a note about how inflation data in Sweden continues to nullify the Riksbank’s rate path projection, which forecast interest rates returning to 0% at the beginning of 2020. Read more

US-China phase one deal shows cracks prompting mild risk-off mood

US-China trade sentiment turned negative, allowing the dollar to make some progress against the G10, especially against risk-sensitive currencies such as NZD, GBP, NOK and AUD. Read more

Two deals in one day… was it Black Friday?

The euro had a strong finish to last week, with two of its main rivals the dollar and sterling fell due to idiosyncratic factors. Sterling has largely held on to last week’s rally this morning, despite Brexit noise in the headlines turning mildly unfavourable over the weekend. Read more

Q4 Forecast Update: Asia

The APAC summit in mid-November is where a breakthrough, or even a narrow preliminary trade deal, may occur. Until then, we expect CNY to act as a buffer against tariffs, trading in the mid-point of the 7-7.20 range. Read more

Q4 Forecast Update: CEMEA

Stability has been the common feature of the Turkish lira in H2 2019 as the economy shows signs of rebounding and the deflationary trend continues under the watchful eye of Governor Uysal and his cautious cutting cycle. Read more

Q4 Forecast Update: LATAM

The Mexican peso faces considerable downside pressures from both domestic and external risks. The BCB have joined the heard of EM central banks cutting rates to spur on growth and inflationary pressures. Read more

GBP Week Ahead

Boris Johnson finally presented the outline of his plan for a withdrawal agreement. The key question for the immediate future is if talks with the EU result in a withdrawal agreement that the Government is willing to present to parliament. Read more

Under pressure ft Jerome Powell and the greenback

Soft survey data dominated FX market pricing last week following a substantial downturn in the US ISM manufacturing index on Tuesday. Read more

Canada’s economy stalls in July

After trading in a remarkably tight range last week, USDCAD extends to the upside as data shows Canada’s economy didn’t expand in July. Read more

Euro hits a 2-year low as fiscal stimulus measures announced

This morning’s Eurozone data hasn’t helped the single currency as the bloc’s economic data continues to post negative surprises. This morning, inflation data from France and Germany has added to broad USD strength at the end of the quarter in pushing EURUSD to fresh 2-year lows. Read more

Sterling shrugs off supreme court as still a lot to play for

While it adds to the political excitement, today’s supreme court ruling gives very little in terms of certainty to the Brexit process. Read more

Short-term USD liquidity dominated market focus yesterday

Although one 25 basis point rate cut was universally expected well before this week’s drama, there is some risk of a larger 50 basis point cut, a pause in the Fed’s current reduction in its balance sheet, or a dovish revision in forward guidance. Read more

US dollar continues to surge ahead of Fed

The US dollar is back on the front foot after a relatively bad start to the week. The market’s focus will soon shift onto the upcoming Federal Reserve meeting tomorrow. Forward guidance will be the key for the dollar as markets have already priced in another 25 basis point cut. Read more

Oil rallies most since 1988 – markets await US supply response

WTI crude is up 7.8% this morning with Brent touching the 10% mark after rallying some 20% at the open of Asian trading hours. Read more

Draghi exits ECB with a bang as EURUSD climbs higher

The euro had a wild ride yesterday, driven by adjusting fixed income markets following a historic last monetary policy meeting for President Mario Draghi of the European Central Bank. Read more

EUR dips below 1.10 ahead of ECB decision

Today is a historic day for the euro and the ECB, which is likely to restart its quantitative easing programme while also cutting interest rates. Today’s press conference at 13:30 BST will be Mario Draghi’s last as President. Read more

Markets sit flat as Scandies lead sell-off

The Scandies were the place to be in the G10 space yesterday as market volatility was subdued. Poor inflationary data from Sweden and reducing inflationary pressures in Norway sparked a Scandie led sell-off in the G10 space yesterday morning as expectations of Scandanavian rate hikes were put on ice. Read more

Current EURJPY Strength Is Based On Market Risk Sentiment

EURJPY has been an interesting cross over the last few months as it accurately depicts the markets gauge of the US-China trade war and the resulting global growth story. Read more

UK Wage Growth Hits 11-Year High

UK labour market data has come in fairly solid, with headline Average Weekly Earnings, including bonuses, beating expectations to reach an 11-year high. Read more

G10 mixed ahead of key rate decisions

Sterling etched marginally higher against the US dollar yesterday as July’s GDP figures surprised to the upside with a reading of 0.3% MoM growth. Read more

Draghi’s final ECB meeting dominates this week’s events

The euro’s fortune this week and beyond will, in large part, come down to the events of this Thursday’s European Central Bank meeting. Read more

What tonight’s vote – and a general election – means for sterling

Elevated no deal risk is the overall driver of the current bout of sterling weakness, we estimate that the pound is likely to weaken by around a further 7% Read more

Boris may have Labour work for him – sterling expects extra volatility

Johnson has said MP’s will still have enough time to discuss Brexit, however, there may be little time left between the new opening of Parliament Read more

Sterling rises on hints of compromise

Sterling has rocketed to month highs against both EUR and USD after two days of meetings between Boris Johnson and the leaders of France and Germany Read more

Strong week of data scrapes sterling off 2 year lows as G7 summit looms

Sterling rose to just shy of a high for the month last week after a series of strong data releases seemed to take the edge off Brexit concerns Read more

UK Consumers don’t give a fig about Brexit, but no-deal still hangs over sterling’s head

It would seem UK consumers still don’t give a fig about Brexit, and remain more than willing to spend their real wage increases Read more

Cracking jobs report…when’s the BoE cutting again?

The UK labour market remains in cracking shape despite business investment grinding to a halt and growth turning negative in the second quarter Read more

Mexico’s Central Bank faces a complex trade-off ahead of Thursday’s monetary policy decision

The Mexican peso is exposed to downside pressures given the uncertain scenario, a restrictive stance of the monetary policy Read more

PBOC puts Yuan into play for play for trade war

The yuan is in play as a factor that Chinese authorities are willing to use in the event of further escalations in the US-China trade war Read more

Political storm brews in the Med

The announcement of fresh elections in Italy has put no pressure on the single currency thus far as fixed income markets take the beating. Two-year Italian government debt now carries positive yield again, rising dome 20 basis points on open this morning. Risk-off sentiment in the Eurozone has led to German 2-year bund yields falling to early-2017 lows. Read more

Loonie battles with downside risks; data may not be enough

A string of positive data surprises last week proved ineffective in supporting the loonie against broad US dollar swings last week. Read more

RBNZ to cut rates, RBA to sound dovish but remain on hold

Trump’s threat of new tariffs on China throws a spanner in the works for both antipodean central banks, which will issue rate decisions this week Read more

Sterling scenarios become clearer – and it isn’t pretty

This Friday’s first look at Q2 GDP will be only mildly relevant for sterling, after the BoE made it clear that it would not be doing any “insurance cuts” Read more

Yuan breaks key psychological level as trade wars bite

The People’s Bank of China set a soft fix for the onshore yuan this morning which allowed the pressure of the offshore traded yuan to filter into local markets Read more

Trump announcing tariffs on China could be a slippery slope

Donald Trump added to the latest batch of market volatility yesterday by extending tariffs to cover all Chinese imports just hours after the Federal Reserve's hawkish outlook on rate cuts.  Read more

It’s hard to see how the FOMC can live up to expectations with US data this good

As Powell, Williams and others have recently made clear, the FOMC is about to cut rates despite historic tightness in the labour market Read more

Buying the sterling dip still requires nerves of steel

Sterling hovered near two year lows last week, as Boris Johnson was installed as PM and confirmed that his strategy was to insist the EU reopen the Withdrawal Agreement Read more

Muscle flexing and toolkit display prepares Mr. Draghi for his final day

We expect Mario Draghi will start preparing for a dovish legacy by keeping all options open, reminiscent of his “whatever it takes” speech in 2014 Read more

Even after last week’s two year lows, downside risk is far from priced for Sterling

June’s Purchasing Managers indices set the stage for the latest bout of sterling weakness when they were released two weeks ago, showing the UK economy in contraction in the second quarter. Since then GBPUSD has reached its lowest level since April 2017. Given GBPUSD has fallen more than 13% from 2018’s highs to last week’s lows, it’s tempting to conclude that weak growth and Brexit risk are already in the price for sterling. We disagree – compared to the fragile state of the UK economy and its susceptibility to further Brexit shocks, fixed income and option pricing suggests that markets may even be complacent to sterling risk. This suggests further downside surprises in the form of poor data, ongoing regional malaise, and of course Brexit have the potential to push sterling significantly lower, even before the October 31st deadline for Brexit.   Chart: GBPUSD lowest since April 2017 Compared to the Fed, markets aren’t pricing much action from the BoE – yet   Compared to the darkening macro and political outlook for the UK, fixed income and options market pricing is looking rather tame, or even complacent. Fixed income pricing has been cautious about the Bank of England’s likely response to the current UK slowdown – OIS contracts for the December MPC are currently trading at a yield of 0.6%, only 15 or so basis points below bank rate. Fed OIS, in the meantime, is fully pricing three cuts from the FOMC by December.   Chart: Market Pricing of Fed and BoE December meetings shows sterling has further to fall Implied volatility from GBPUSD options markets, in the meantime, is trading at around 8.5% - compared to above 13% in late 2018 during May’s attempts at passing a withdrawal bill through Parliament. In this context, Tuesday’s labour market report and Thursday’s Retail Sales figures will be crucial tests for sterling. Employment was a rate bright spot in June’s PMIs so any weakness here would be a particularly unwelcome surprise. Conversely last week’s BRC retail sales monitor was very weak, while consumer credit growth and savings intentions both point to some degree of belt tightening from UK households. Read more

Powell presses pause on dollar rally

Jerome Powell left very little doubt about the likelihood of Fed cuts in the immediate future last week. Testifying to lawmakers, Powell said that uncertainties around global growth were weighing on the US economy Read more

SARB set to cut on Thursday but won’t do Ramaphosa’s dirty work on promoting growth

The South African economy hasn’t shown signs of a vigorous rebound in activity following the largest economic contraction in a decade in the first quarter of 2019, with the latest data releases pointing to 0.5% GDP growth for the year. Read more

Geopolitics in scope this week

Last week’s price action was dominated by speculation over global policy rates following a dovish turn by the Federal Reserve. While markets have increased their bets on how much the Fed will cut rates, with pricing currently suggesting 78 basis points by January 2020, this week’s geopolitical events are beginning to take the mantle in dominating market focus and sentiment in the run-up to a pivotal G20 meeting. Tensions between the US and Iran continue to simmer after Revolutionary Guard forces shot down a $100m US navy surveillance drone over Iranian airspace. Yesterday saw the release of the White House’s response, following an aborted missile strike last week.  Last night Trump announced the first stage of sanctions on Iran as the US will aim to freeze the assets of leader Ali Khamenei along with other Iranian military commanders. The President suggested further sanctions will be imposed on Foreign Minister Zarif later this week. By turning the screw the Trump administration is sustaining maximum pressure on Iran to bring them to the negotiating table. However, the potential backlash from Iran, who have repeatedly threatened to close the key shipping chokehold that is the Strait of Hormuz, has kept markets on edge this week. Tensions between the US and Turkey continue to simmer in the background following Turkey’s pledge to purchase the Russian built S-400 missile system. The purchase of the Russian defence system puts a spanner in the works for the NATO defence network and prompted the Pentagon to halt the training of Turkish pilots for the upcoming F-35 fighter jets. The Russian defence system is expected to be delivered in July, and recent rhetoric by Turkish officials suggests that the $2.5bn deal between Turkey and Russia will not be reversed regardless of the level of sanctions imposed by the US. Under the 2017 Countering America’s Adversaries Through Sanctions Act (CAATSA) the US could levy further sanctions on Turkish officials and defence companies such as restricting their access to US financial markets. This would reignite tensions between the two NATO members which have only recently subdued following the Pastor Brunson imprisonment and adds to an increasingly tense political landscape. That said, market’s aren’t anticipating sanctions to be levied prior to the G20 meeting between Presidents Trump and Erdogan, but rhetoric from Istanbul and Washington continues to dominate EM sentiment. This was highlighted by the Turkish lira retracing its rally after the release of the Istanbul vote due to Turkish officials voicing their willingness to swallow US sanctions. The move also filtered through into other EM currencies such as ZAR.   Chart 1: USDTRY leads EM sentiment yesterday as evidenced in USDZAR     The G20 summit is not only pivotal for US-Turkey relations but also the headline US-China trade war. Both Trump and President Xi are expected to hold an “extended meeting” after dialogue broke down and further tariffs were levied back on May 10th. As things stand, channels of communication are open in the run up to the lengthy meeting in Osaka, but a threat of imposing tariffs on a further $300bn of Chinese goods still lingers over the negotiation table. The new tariffs extends to an array of consumer products including electrical items and have already been written into legislation of which is set the period of public consultation is set to end on July 2nd. Most recently the US Commerce Department added five new Chinese entities to its exclusion list which bars them from buying US components without prior state approval. Both parties have economic and political incentives to build bridges and cool tensions for a second time at the G20 summit. However, with substantial sticking points such as Intellectual Property theft yet to see any traction, the markets expectations are dramatically low for any further progress between the two economic powerhouses.   Chart 2: USDCNY is far from recent highs (6.9311) however the yuan is at its weakest level since January against a basket of its closest trading partners   This suggests that a ramping up in trade tensions will weaken the yuan but the effect may not be channelled through USDCNY. This is due to the Fed having to cut rates as aggressively as fixed income markets suggest due to downside risks materialising. The PBOC may be willing to hold the USDCNY rate steady and watch the yuan weaken against its closest trading partners (EUR, JPY, KRW, HKD, AUD) For now, US protectionism and the rise of geopolitical tensions is currently the overwhelming force that is dictating financial markets, central banks and the global economy alike, and shows no signs of abating. However, if it does, the turning point may be the upcoming G20 meeting.   Author: Simon Harvey, FX market analyst at Monex Europe. Read more

ZAR rallies after Draghi hints at policy easing

Despite global growth woes still prominent on investors’ minds, the prospects of lower interest rates and increased liquidity in the Eurozone prompted a surge into the rand and South African bonds this morning Read more

Draghi’s legacy: letting the rate cutting geenie out of the bottle

A full ECB rate cut is now priced in by futures markets for 2019 after Draghi showed his concerns about the persistently low inflation in the Eurozone and the lingering risks to growth, especially stemming from weak manufacturing and export conditions. Read more

Key FOMC preview

As the FOMC blackout period rolls on, market participants continue to ask if the current Fed pricing is too aggressive as the dollar begins to trade in a tight range in the run-up to next week’s main event. Read more

Conditions in South Africa begin to look up

The South African rand remains the worst performing EM currency month-to-date as Q1’s GDP release roiled investor nerves. However, with much of the sell-off in the rand attributed to souring foreign investor sentiment given last quarters deterioration in economic conditions, the rand may start to show signs of a sharp reversal if the economic data supports an improvement in sentiment. Granular data releases are likely to have increased market impact for this reason as investor’s try to gauge the economic rebound in Q2. Thus far, current economic activity indicators point towards a strong reaction in growth, especially in April, as the effects of load shedding begin to fade.   Chart 1: Current activity monitors point towards a strong rebound in South African growth following a dismal Q1 This has been reinforced today with the strong beat in manufacturing production data for April, with the 4.6% non-seasonally adjusted rise the largest one-month increase since June 2016. Much of the increase can be attributed to the rise in production of basic iron and steel, metal products and machinery (+9.4%) and motor vehicles, parts and transport equipment (+18.6%). The median consensus remains overly bearish on the currency, which has a large reserve of upside factors it can tap into. With the Federal Reserve turning increasingly dovish by the day, the door remains wide open for market reforms from the reinstated President, which will likely have a substantial impact on the rand once publicised. In the short-term, pessimism on South African assets may have peaked as idiosyncratic risks begin to retreat from the markets limelight and economic data shows signs of recovering.   Chart 2: The South African rand starts to claw back heavy losses seen at the beginning of the month as idiosyncratic risks retreat from the limelight Regardless, the risks are still apparent and further quarrelling inside the ANC party, load shedding by Eskom, or bleak commentary from Moody’s could reset the rand back into its path of depreciation.   Author: Simon Harvey, FX market analyst at Monex Europe. Read more

Non-farms miss only partly validates expectations for dovish Fed

Non-Farm payrolls missed expectations to print at +75,000 in May, far less than the 178,000 median forecast on Bloomberg. Revisions to previous months were net negative by 75,000. Average earnings were up 0.2%, compared to 0.2% monthly growth in May and up 3.1% year on year. On the surface, it certainly looks like there is enough bad news in this report to perpetuate the current dominant narrative of a slowing US economy and dovish Fed. The headline miss, together with a lack of any noticeable acceleration in wage growth, means that these figures have little in them to suggest the Fed’s recent dovish turn will be reversed any time soon. However, these figures don’t justify expectations of three rate cuts from the Fed in the next year. Slowing headline job growth and accelerating wage growth are what you’d expect from a late-cycle economy like the US. In contrast, fixed income markets are pricing for a significant slowdown in growth, less wage growth and a weakened inflation outlook, and even rate cuts from the Fed as early as this quarter. Today’s report does not validate this narrative, but it certainly sets the stage for further USD selling and lower fixed income yields, particularly if next week’s Retail Sales and Inflation data also miss expectation Ultimately, today’s non-farms report is only slightly below expectations and in different circumstances could well be dismissed as consistent with a late cycle economy where job growth is slowing but wages are holding up. EURUSD heads higher as broad US dollar sell off deepens Source: Bloomberg Two additional risks loom over the US economy and weigh on market sentiment   There is an element of self-perpetuating gloom from the fact that the US sovereign curve is inverted over the 3 month-10 year horizon. This has been a reliable indicator of recession in the past and remains concerning even though the strength of the signal today has been distorted by low global yields after decades of central bank asset purchases. The real threat to the US and global economy, as well as financial markets, remains the erratic and dangerous trade policy of the Trump administration. As bearish as current market pricing is for the US, it’s still well short of how bad things could potentially get if the US simply followed through on the current full suite of current threats against China and Mexico. When viewed in this light, current expectations of a bearish Fed start to make sense, or even look optimistic.   Author: Ranko Berich, Head of market analysis at Monex Europe. Read more

Trump’s tariff threats weigh on MXN fortune

The Mexican peso opened the European session at its worst levels of the year against the dollar, following the announcement by Donald Trump on a round of progressive tariffs from 5% to 25%, to take effect between June 10th and October 1st, until the Mexican authorities "stop" illegal immigration at the border. Read more

What next for May and Sterling?

Following the latest failure of her withdrawal agreement, Theresa May’s premiership is over in any meaningful sense.  The only question is when she will finally announce her resignation, and what tone the race to replace her takes? Read more

Sterling falls off the Boris Cliff once again

Friday’s collapse of talks between Labour and May confirmed what markets had been progressively pricing in last week: that May’s final attempt at passing her withdrawal agreement in Parliament was likely to end in failure and resignation. The two key things to watch this week will be how the chances of May’s deal evolve, and the tone of the simmering battle to replace her. Read more

Sterling pushes towards a 3-month low as May’s tenure looks set to end

News from Westminster that the Withdrawal Agreement will be put to a vote in the Commons at the beginning of June has brought the Brexit headache back for those investing in British assets. The game of picking the likeliest Brexit outcome has re-emerged, however, this time around market sentiment has deteriorated substantially. With the withdrawal agreement up for a vote for the fourth time this year, Theresa May will be holding out for progress in cross-party talks. Financial markets, on the other hand, are proving more impatient on a cross-party agreement breaking the current Brexit impasse. Brexit Secretary, Stephen Barclay, is right to reference heightened risks to Brexit being revoked or a no-deal Brexit should the Withdrawal Agreement be rejected yet again. The increased risk of such extremities occurring has prompted sterling to sell-off towards 3-month lows this afternoon, with momentum and risk pointing to a more prolonged fall.   Chart 1: GBPUSD pushes towards 3-month low Risks are currently tilted to further sterling depreciation, regardless of whether the Withdrawal Agreement is ratified or not. If opposition parties decide to pass the bill at the beginning of June, it is likely to be Theresa May’s last act as Prime Minister. This would increase the chances of a Brexiteer such as Boris Johnson or Dominic Raab taking over the reins and potentially imposing a harder Brexit than the customs arrangement that is currently being floated. This scenario would likely prove unpalatable for most MPs in Westminster and would increase the chances of a vote of no-confidence being triggered in Parliament. Sterling has a track record of not fairing too well in the run-up to such events. Alternatively, the Withdrawal Agreement could fail to make it past lawmakers for the fourth time this year. Another failed attempt by Theresa May would embolden opposition within the Conservative party and would likely see the 1922 committee intervene. The only upside for the pound is if Labour gets a more entrenched commitment from May outlining that the government's stance is to avoid reversing any previous commitments after June’s vote. The chances of this remain slim, and the Brexit process looks set to approach another pivotal juncture. That said, should Labour find the commitments by the current government as sufficient, sterling will likely see the green light to rebound up towards the $1.34 level against the US dollar. Read more

EURUSD nears $1.10 level

The recent response by the single currency is the complete opposite to that seen last year in April and May when a surge in global trade uncertainty had the euro quickly sink below the $1.20 level. This time it’s different for the euro, which suggests the currency may be close to a bottom on EURUSD. Read more

Bitcoin-Altcoin Spread Suggests different dynamic to previous Crypto Booms

Bitcoin is on a tear this week, having strengthened by almost 40% against the US dollar since Friday. Read more