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FxProUpdates

Forex: End of a roller coaster quarter

We come to the last trading day of what has been a pretty dramatic first quarter of the year, which has seen many developed stock markets sell-off, with double digit percentage losses in many cases, only to recover most, if not all, of the losses by the end of the quarter. This in itself has made it a very hard quarter for the tactical and macro players to make money, the underlying narrative having changed several times over the past three months. Compare this to the previous quarters, where ...

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Forex: Yellen turns the dollar

Fed Chair Yellen yesterday unwound most of the dollar rally seen since mid-March, with her surprisingly dovish speech placing a greater note of caution on the outlook for interest rates in the US. This pushed the US 2 year yield back down to levels prevailing at the beginning of the month and the broader dollar index is now down more than 3% on the month and just over 5% for the year. Recall that this was the year that the Fed was expected to continue its tightening path, started in December, ...

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Forex: A dollar pause

The sustained rally in the dollar seen over last week came to a halt yesterday, the dollar index ending its run of 6 consecutive sessions of gains. This was predicated in part on signs that Fed officials were becoming more confident on the ability of the economy to shoulder a further increase in rates this year. There is likely to be an air of caution in markets today ahead of a speech by Fed Chair Janet Yellen later today, where she is scheduled to speak on the economy at the Economic Club of ...

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Forex: Pushing the dollar higher

The dollar has been in the ascendency over the past four sessions and finds itself firmer again overnight. We've seen a slow creep of interest rate differentials in favour of the dollar, with the 2 year bond spread (US versus Germany) having moved 7bp in favour of the US (greater carry for long dollar positions) over the past week. This has pulled EURUSD back from the 1.1342 high seen last week, creating a neat double-top formation on the daily chart. In the bigger picture, this makes for ...

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Forex: Risk slowly returning

Suffice to day it was not an easy day in markets yesterday given the tragic events unfolding in Brussels. Whilst the human cost is enduring, the impact on financial markets tends to be transitory. Yesterday we saw a modest flight to safety in markets, with core bond yields falling, peripheral yields generally steady to higher. Gold was higher, although we’ve seen that move more than unwound in overnight trading. In FX, sterling was the currency that was losing out. There were two reasons for ...

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Forex: The faltering dollar

Sterling was suffering more than most yesterday, not impressed with weekend political developments, with the ever-present ‘Brexit’ cloud also hanging over it. Given these themes, the inflation data (released 09:30 GMT) will likely be of secondary interest, unless we see a major outlier from the expected small nudge higher in the YoY rate from 0.3% to 0.4%. The interest rate market remains more inclined towards a cut rather than hike in rates at the present moment in time, although with risk ...

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Forex: Sterling suffering again

It was a relatively calm end to the week in FX markets last week, but this was against the backdrop of a structural change in sentiment towards the dollar after the Fed meeting and their re-assessment of the longer-term prospects for the economy and rates. In essence though, they are still playing catch-up with the currency pricing in the market, which has not yet fully priced one increase in rates before the end of the year. Still, we saw some recovery of the dollar on Friday, after the push ...

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Forex: Changing the Market Thinking

We’ve seen a change in the tone to FX markets this week, with the dollar index moving to new lows for the year, and is now down a cumulative 5% since the start (calculation helped by close at 100.0!). Remember, once again, many started the year with a bullish dollar view, based on the Fed continuing its tightening cycle and other central banks (such as the ECB and BoJ) continuing to ease in varying different ways. The Fed’s forecast revisions this week reinforced the already weakening dollar. ...

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Forex: Fed moving to Reality

The common force yesterday was the revising of forecasts to the reality of slower growth, both domestically and globally. This was seen both by the US Federal Reserve and the UK Chancellor has he presented his budget. The Fed chopped 50bp from its median expectation for rates by the end of this year, the projection of four rate hikes given at the December meeting always looking too optimistic. But this has been the tendency of both central banks and markets over the past five years, in other ...