Where We Stand
Marc to Market
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1w ago
I am on vacation, and then on a business trip that will interrupt the commentary until the weekly note on April 30. The May monthly analysis will be published the following week after the FOMC meeting and April employment report. I wanted to weigh in on a few key market issues before leaving.  New Divergence: The continued robust US jobs growth (276k average in Q1 24 and 251k average in 2023) and above-trend growth allow the Federal Reserve to remain focused on inflation. And for good reason: CPI has consistently been reported this year above expectations. The headline rate stands at six ..read more
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Dollar Consolidates but Adjustment is Not Over
Marc to Market
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1w ago
Overview:  Higher than expected US CPI for the third consecutive month drove US interest rates sharply higher and lifted the greenback broadly. The market appears to be catching its proverbial breath today, but the shallow consolidation suggests the moves are not over. The ECB meeting is likely to highlight the new divergence that has opened. The dollar has reached nearly JPY153.30, and although Japanese officials cautioned about the fx moves, intervention while Prime Minister Kishida is on his state visit to the US strikes us highly unlikely. In any event, the broad dollar gains we ..read more
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US CPI, New Security Initiatives with Tokyo and Manila, Bank of Canada Meeting
Marc to Market
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1w ago
Overview: The dollar has been confined to narrow ranges ahead of the US CPI report. Given the backup of US rates and the stronger-than-expected jobs growth, the greenback's performance has been unimpressive. The Reserve Bank of New Zealand signaled that it was in no hurry to cut rates and it helped underpin the New Zealand dollar. Up about 0.2% today, it is leading the G10 currencies higher. Strong earnings from TSMC may have helped underpin the Taiwanese dollar (~0.3%), which is trailing the Mexican peso (~0.35%) to lead the emerging market currencies. Many Southeast Asian markets are c ..read more
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Dollar Consolidates Softer Ahead of Tomorrow's CPI
Marc to Market
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1w ago
Overview: The dollar is trading with a softer bias in mostly narrow ranges against the G10 currencies. It did not rally much ahead of the US jobs data, and it was not able to sustain the upside momentum afterwards, despite the jump in US yields. Former St. Louis Fed President Bullard, who still has a strong reputation in the market, told Bloomberg TV yesterday that three cuts were his base case this year. The Scandis and Antipodeans are the strongest today, up about 0.25%-0.33%. The dollar continues to hold below JPY152 barely. Most emerging market currencies are also firmer today. The d ..read more
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Will the Market Push the Dollar Above JPY152 as Japanese Prime Minister Heads to the US?
Marc to Market
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1w ago
Overview:  The jump in US rates after the employment report failed to ignite a sustained rally in the dollar and this shaken the market's near-term confidence. The dollar has been mostly confined to narrow ranges and the low yielding Swiss franc and Japanese yen are softest with the G10 complex today. The dollar is knocking on JPY152. The Scandis and Antipodeans lead the advancers. The euro has made little headway despite a much stronger than expected German industrial output. Mainland China markets re-opened, and the dollar remains at the upper end of the 2% band and above it again ..read more
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US Employment Data to Set Dollar's Course
Marc to Market
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2w ago
Overview: The focus is squarely on the US employment report. At the risk of oversimplifying, given the position adjustment in the past 48 hours, a solid report can see the greenback recover, while a disappointing report will likely see it deepen the correction of the rally that began with the February jobs report. The dollar recovered in the North American afternoon yesterday and many observers attributed it to the bevy of Fed comments. Yet, the interest rate market saw little reaction. It seemed that it was the dramatic reversal in US equities that helped dragged global shares down toda ..read more
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Greenback Losses Extended, but Look for Consolidation in North America
Marc to Market
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2w ago
Overview: The softer-than-expected ISM services report caught the market leaning the wrong way. Although interest rates had a muted reaction, the dollar was sold. In fact, the Dollar Index saw its second-biggest loss of the year, falling by about 0.50%. ISM services prices paid increases moderated to their slowest since March 2020. Supplier deliveries improved to their best since 2009, suggesting a supply chain improvement. Still, the Fed funds futures shaved the odds of a June hike to about 61% from 66%, but the market feels more comfortable about a July cut, which once again is fully d ..read more
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Gold, Oil, and Interest Rates Rise
Marc to Market
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2w ago
Overview:  The market put more weight on the rise in the US ISM manufacturing survey than the downward revision to the manufacturing PMI and the unexpected back-to-back decline in construction spending. US rates shot up and lifted the greenback. The Dollar Index made a new high for the year, a little above 105, which had been anticipated by the new lows recorded by the Bannockburn World Currency Index (a GDP-weighted basket of the currencies of the 12 largest economies) last week. The two-year Treasury yield surged almost 9 basis points to settle above 4.7%, its highest in ..read more
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China PMI is Better than Expected but the Greenback Still Rises above CNY7.23
Marc to Market
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2w ago
Overview: The dollar is trading quietly against the G10 currencies as European markets remain on holiday. Narrow ranges have prevailed. The dollar-bloc currencies are leading with minor gains, perhaps helped on the margins by better-than-expected Chinese PMI, but the Scandis, which also typically do well amid a better global growth profile are the laggards. This may speak to the light liquidity conditions. Japan may have missed a tactical opportunity to intervene to knock the dollar back ahead of what may be a solid US jobs report at the end of the week. Erdogan's AK Party lost the weeke ..read more
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April 2024 Monthly
Marc to Market
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3w ago
The macroeconomic and geopolitical developments have not changed substantially over the past month. The resilience of the US economy allows the Federal Reserve to put more emphasis on achieving price stability. While the market favors a June cut (66% vs. 80% at the end of February), it has not been fully discounted for over a month. The biggest event in March may have been the well-telegraphed exit from negative interest rate policy and Yield Curve Control by the Bank of Japan. Yet, over the course of last month, Japan's two-year yield rose was virtually unchanged and the 10-year yield rose l ..read more
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