Angus Campbell

The €1 trillion ECB splurge

The euro suffered further losses against the US dollar yesterday hitting a fresh 11 and a half year low following a morning of mixed to slightly weaker than expected Eurozone services data and decent numbers from the US which attracted more buyers of dollars at the expense of the single currency. Sterling also suffered losses against the greenback but it is the euro that is always going to feel the brunt as today Mario Draghi will reveal the ECB’s plan to execute its €1 trillion quantitative ...

Angus Campbell

Central banks continue to surprise

This time it was the turn of the Reserve Bank of India to surprise markets with an interest rate cut which has come at a time when a handful of central banks have surprised the markets recently by taking unexpected action. The PBOC over the week end reduced its benchmark interest rate in a move that highlights the rapid slowing of the world’s second biggest economy, which has taken the buoyancy out of the equity market rally. With the RBI making its surprise move overnight Indian stocks spiked ...

Angus Campbell

Dollar retests highs

Despite there being some mixed manufacturing data from the US yesterday, the dollar ticked higher taking USDJPY back above the 120.00 level and the dollar index itself hit a fresh eleven year high. This resurgence in the dollar has surprised some considering that, payrolls aside, the economic data has been less than impressive which allowed some currencies to recover against the greenback in February. The dollar bull market looks to have re-established itself and this is supported by the move ...

Angus Campbell

GBPUSD a rate to watch as election nears

We start the new month, already the last of the first quarter of 2015, reflecting on what has been in many respects an extraordinary start to the year. It all kicked off with the move by the SNB in mid-January which sent shockwaves through the FX markets and then continual toing and froing between Greece and the Troika, a drama that is set to continue throughout 2015. FX volatility has spiked and after an initial rise in equity volatility things have been rather calmer in February. The start to ...

Simon Smith

The record dollar run

We highlighted yesterday the fall in volatility that had been seen over the past week, but also mentioned that month end brings with it risk of more erratic trading. Some of that was evident yesterday in the wake of the latest price data from the US, which showed headline inflation falling into negative territory. Still, the dollar managed a decent recovery, especially against sterling and the euro, largely on the firmer than expected increase in core prices. Sterling itself failed to push ...

Simon Smith

Ray of (volatility) Light

With the dust having cleared from the Swiss franc move, the Greece situation having been resolved (at least for now) and twenty central banks having now eased policy so far this year, FX volatility has been falling in the past week, like a caped fallen Madonna from a Brits Award stage. The CB CVIX index (similar basis to equities VIX) is now back at levels prevailing around the middle of December last year. Still, there is a ray of light for some currencies. Sterling has been pushing ahead over ...

Simon Smith

Being patient for volatility

In the wake of Fed Chair Yellen's testimony yesterday, the algo and machine readable news programs will be set to buy the dollar when the word "patient" is removed from the Fed statement. Yellen stated that the removal of this word, which replaced the phrase "considerable time" for keeping the current rate that existed up to the December Fed meeting. In sum, the impact was to weaken the dollar, push stocks higher and delay future dollar volatility and gains. Stocks were also modestly firmer as ...

Simon Smith

It’s all about the rate

Today’s focus will be with Fed Chair Yellen’s testimony to the Senate Banking Committee in Washington. This happens every six months and is a key element of the Fed’s accountability to the US Administration. The dollar will be looking closely for further clarification of when the Fed may start tightening rates, having moved their forward guidance language from referencing “considerable period” to them being “patient”. But the Fed has struggled with such guidance and Yellen in particular, namely ...

Simon Smith

Not quite over for Greece

The deal on Greece put together during the latter stages of Friday gave the single currency a lift into the weekend; EURUSD moving up above the 1.14 level. That has struggled to be sustained though, as there are still doubts regarding the measures that Greece will commit to in order to secure the funding. They are due to put these to the Eurogroup today and if they are not accepted, then another meeting of finance ministers will take place tomorrow. On the face of it, Greece appears to have ...

Angus Campbell

Greece remains biggest determinant to EURUSD movement

The market continues to behave as if a resolution to the Greek issue is imminent and it would seem that investors remain confident that a Grexit is not going to happen. Despite the lack of an agreement to the extension of the existing bailout, EURUSD has held up relatively firmly and other risk assets such as equity indices remain near their all time highs. For the Eurozone as a whole, the economic outlook doesn’t look all that bad with business, confidence and manufacturing surveys remaining ...

Angus Campbell

Kicking the Grexit can

The ECB has come to the rescue of Greek banks once again by increasing the cap on ELA from €65b to just over €68b. This does not resolve the problem of deposits being depleted as people continue to withdrawal funds from Greek banks and of course the wider issue of a new deal being negotiated to prevent a Grexit. Today it is expected that a six month extension to the existing bailout will be accepted today in order to give more time to negotiate a more permanent deal later in the year. It’s a ...

Angus Campbell

Recent sterling strength to be tested

Currency markets have been placid so far this week, in particular the euro which has been taking the negotiations between Greece and Germany in its stride. It’s been a far cry from a couple of years ago when volatility was much higher during the debt right down agreements, but the risks remain the same of a possible Grexit. Perhaps investors are getting a little complacent as today will not only see negotiations continue, but the ECB is due to make a key decision about Greece’s access to ...

Simon Smith

Living in continued hope

The drop in the euro after the collapse of the Greece talks (initially one big figure) looked out-sized given the fact that no-one really expected it to be any different. This had much more to do with illiquid markets in the face of the Presidents' Day holiday in the US. Still, it seems that an agreement was close at one point, only to be snatched away from the table. Both sides appear to agree on some sort of extension of the current program. The eurozone wants this to happen in its current ...

Simon Smith

The next Greek showdown

Not for the first time and probably not the last, today is once again the day of reckoning for Greece and the Eurozone. The story is all too familiar and the suggestions in the press are that the chances of a deal being struck look to be fairly slim. That’s all well and good, but time is naturally running out for a tidy resolution on either side. There remains only a marginal spill-over into other peripheral markets and the single currency remains relatively sanguine about it all. That is ...

Angus Campbell

Markets defy convention

The recent moves in FX markets have caught many people off guard. Perhaps not to the extent of the SNB floor removal a month ago, but the dollar strength of last year and the first part of January has come to a grinding halt. Despite the Bank of England at their quarterly Inflation Report saying that there is room to ease monetary policy further, GBPUSD rallied as growth forecasts for next year were readjusted higher. The market had become too bearish of sterling considering the growth ...

Simon Smith

Euro bets on Greece crumbling first

It was no surprise at all that there wasn’t an agreement for Greece from yesterday's meeting of finance ministers. Neither side can even agree on what is up for negotiation. Germany had taken the calculated risk that Greece has more to lose than they have, so have chosen to hold tight. For their part, they know that giving Greece the negotiating room beyond the Troika will open up the doors to further anti-austerity movements in the eurozone and they fear they will be the ones paying the price. ...