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Forex: Dollar suffering into month end

We mentioned in the daily the risk of some more choppy trading into month-end, which is proving to be the case. Both sterling and the Aussie are fairly buoyant, with cable above the 1.71 level and also the euro up to near 1.37.   It's not wise to attach too much significance to these moves, but it's notable that we are seeing dollar weakness into the end of the half year that had so much hope for dollar strength.

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Forex: The dollar – struggling

The following is an extract from our quarterly outlook, published 23rd June 2014.  We've included our table of forecasts at the foot of the blog. As mentioned before, we were not great buyers of the secular dollar bull trend for 2014. That view still holds and has been enhanced by subsequent events, principally the weaker economy and stronger pound.  We’ve talked a lot in recent years about the change in dynamics surrounding FX markets. The “risk-on, risk-off” mantra that went by the wayside ...

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Forex: Half time

We enter the last trading day of the quarter and also half year end.  This creates some risk of greater volatility as bigger players square positions into month end and also from hedge adjustments from the benchmarked community. Fittingly, the dollar index is virtually unchanged from its closing level of last year, both reflecting the quashing of expectations for a period of dollar strength and the lack of volatility that has beset FX markets over the past few months. For a more detailed review ...

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Weekly Look Ahead 27th June

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Forex: Watching the yen

The yen has strengthened overnight to push to 5 week lows on USDJPY. Inflation data was broadly in line, with prices rising 3.7% on an annual basis. Recall that this has been boosted by the consumption tax increase which took effect earlier in the year. The 21st May low of 100.82 is now in focus, with this seen a strong area of support, together with the early Feb low of 100.76. The risk is that we see some further covering of yen shorts into month end as more short positions are forced to bail ...

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Forex: The volatility conundrum

The following is another extract from my half year outlook, completed 23rd June. As we head into the half year end, the lack of volatility in markets is one of the defining factors for pretty much all asset classes.  For FX, we’ve seen declines in both intra-day ranges and by design implied volatility in the options market.  At the same time, bonds have rallied, both in the US (on the back of the weaker economy) and also peripheral Europe. Italian yields were on a par with UK yields mid-June. ...

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Forex: Bank of England bares teeth

Leaving aside Suarez references for now, the Bank of England has today taken the opportunity to bare its teeth in the new power given to it under the guise of the Financial Policy Committee (FPC). Previously, the Bank monitored financial stability and conditions, but did not have the power to take action. That changed post-financial crisis, with the FPC given macro-prudential tools to tackle perceived financial excesses or potential issues. The measures announced today are seen as insuring ...

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Forex: The year so far

This is the first of several blogs for my half year review and look ahead.  This is more looking back, but nevertheless this is always an important part of this. Looking back at what you got right (and if it was for the correct reasons) and also what you go not so right. The subtitle to our 2014 dollar outlook ‘subtly stronger’. The first half of the year stretched the definition of subtle to the limit (dollar index up just 0.3% to 23rd June) and the dollar did not wholly perform in the way we ...

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Forex: Watching sterling

Looking at the net change of the dollar index, the dollar seems to be just about holding its head above water so far this year.  Yesterday’s further downward revision to US GDP for the first quarter was a further blow to the notion that differing policy cycles would provide support through most of 2014. From here, it’s a case of the durability of the recovery from the Q1 weakness, but also the extent to which the dollar is able to stand apart from the crowd. Against the euro, that’s still ...