Sat, Feb 29, 2020 @ 07:21 GMT
Dollar is under some pressure in early US session after disappointing job data. On the other hand, Euro surged broadly as market perceived the ECB monetary policy account as a hawkish one. US ADP employment report showed 158k growth in private sector jobs in June, below expectation of 180k. Prior month's figure was revised down to 230k, from 253k. Initial jobless claims rose 4k to 248k in the week ended July 1, versus consensus of 243k. The number, nonetheless, remain historically low and stayed below 300k handle for the 122 straight weeks. Continuing claims rose 11k to 1.96m in the week ended June 24, staying below 2m for 12 straight weeks. Also released in early US session, US trade deficit narrowed to USD -46.5b in May. Canada trade deficit widened to CAD -1.1b in May. Canada building permits rose 8.9% mom in May.
Sterling, Canadian Dollar and Euro surged broadly last week on hawkish comments from central bankers. The turn in BoE Governor Mark Carney was the most drastic as just a week a go, he said it's not the time of rate hike yet. But then, he indciated the BoE MPC will start debating raising interest rate in the coming months. BoC Governor Stephen Poloz repeated his comments that prior rate cuts in 2015 have already done their job. But this time, Poloz hinted that BoC is approaching a new interest rate decision. That tremendously raised the odds of a July hike by BoC. There were some jitters on Euro on report that markets misinterpreted ECB President Mario Draghi's comments. But after all, it's generally convinced that, with improvements in Eurozone inflation and growth, ECB is transiting into a phase of stimulus withdrawal. And there would likely be tapering announcement in September or by latest October.
As suggested in the CFTC Commitments of Traders report in the week ended August 28, NET LENGTH of USD index added +449 contracts for 34 571 contracts for the week. Both speculative long and short positions dropped, suggesting the...
Euro is initially short up as ECB turned a bit less dovish in the statement after keeping monetary policy unchanged. However, the common currency cannot extend gains as there is no follow through buying. More importantly, ECB President Mario...
Dollar strengthens notably in early US session with help from another set of solid job data. Initial claims is back trending down and hit another low since 1969. 10-year yield is also recovering and could head back to 2.5...
As US-China trade war continues to evolve, the market is increasingly concerned over the pace of slowdown in China’s economic growth. Meanwhile, weakness in renminbi (China Yuan) has given more bullets for the White House to attack China and...
The December minutes turned out more hawkish than expected. While the policymakers generally judged that the existing monetary policy remained 'appropriate'. They also agreed that the forward guidance might warrant some adjustments as the pace economic recovery accelerated. The minutes noted that the 'transition would take place without a change in sequencing', suggesting that no rate hike would be implemented before the end of the asset purchase program. The minutes indicate that the forward guidance would be a key policy tool in the year ahead.
Sterling turns mixed as markets await yet another vote about Brexit in the Commons today. MPs is now given a chance to vote for delaying Brexit beyond March 29. The question is whether it would be a short delay...
The forex markets are pretty steady in Asian session today. Commodity currencies remain generally soft on mild risk aversion. Traders are cautious ahead of the meeting between US President Donald Trump and China President Xi Jinping. Yet, they are calm in spite of the news that North Korea fired another ballistic missile. Euro is also staying in range after French presidential election TV debate. Yen pares back some gains after treasury yields stabilized but more upside is still favored. In other markets, both gold and WTI crude oil extended recent rally but momentum is not too strong so far.
Dollar is trading generally higher today and Middle East tensions seem to be out of traders' mind already, without any new developments. Instead, markets are focusing back on fundamentals and central bank expectations. Thus, Australian and New Zealand Dollars...
Traders have turned bearish on the commodity market, amidst concerns over deceleration in Chinese economic growth and US oil production. According to the CFTC Commitments of Traders report for the week ended August 21, traders trimmed speculative long positions of...
Dollar trades mixed in early US session as Fed chair Janet Yellen sounds balanced in her prepared speech for the testimony to Congress. The greenback is trying to rebound against Euro at the time of writing. Though, that's mainly due to Euro's own weakness after yesterday's rally. And the greenback is staying weak against Yen and Aussie. Sterling rebounds today on better than expected job data and is firm against Dollar too. Canadian Dollar is treading water as markets await BoC rate decision.
Trading in financial markets are generally subdued in holiday mood. DJIA closed up 11.23 pts, or 0.06%, overnight at 19945.04, still struggling to take out 20000 handle. S&P 500 also closed up 5.09 pts, or 0.22%, at 2268.88, but stays in recent range. Asian markets are mixed with little movements. US yields closed higher with 10 year yield up 0.02 to 2.563 but like others, stayed in tight range. Notable strength is seen in gold this week, hitting as high as 1151.7, comparing to recent low at 1124.3. There is prospect of a stronger rebound in gold in near term. WTI crude oil also strengthened mildly this week and breached 54 handle. But recent price actions suggest that it's staying in consolidation since hitting 54.51 and more sideway trading is in favor.
Dollar recovered overnight with the help of surging treasury yields. 10 year yield hit as high as 2.725 before paring gains to close at 2.696, up 0.034. That's also the highest level since April 2014. Nonetheless, the lift to the greenback would likely be temporary as Dollar and yields would likely go back to the "decoupled" relationship fairly quickly. British pound is trading as the weakest for the week. Renewed Brexit uncertainty is seen as a factor weighing on Sterling. But it's actually more about returning to reality after last week's utopic rally. For today, New Zealand Dollar is trading mildly higher after trade balance data.
The talk of the day is undoubtedly the flattening of US yield curve with the spread between the 10-year and 2-year yields fell to 64 bps, the lowest level since November 2007 on Thursday. Meanwhile, the spread between 30-year and 5-year yields also dropped below 75 bps, the lowest in about 2 week. Flattening yield curve has raised concerns as this is probably also a reason of diminished risk appetite this week, apart from disappointing global macro dat. Textbook knowledge suggests a normal yield curve is upward-sloping as yields for longer-dated investments are higher than shorter-dated ones. An inverted yield curve (short-dated yields exceed those of long-dated) is usually a signal of upcoming economic recession. A flat yield curve is the transitory period from a normal to an inverted curve. However, this interpretation does not necessarily hold true. For instance, US' economic growth managed to avoid recession, despite a series of global economic crisis from 1995-2000, years after the sharp yield curve flattening from 1994 to 1995 (Second Chart).
Despite the pleasant surprise in the first quarter GDP growth, the Fed would still leave its policy rate unchanged at the upcoming meeting. The Fed funds rate target is expected to stay at 2.25-2.50%. Its forward guidance would stay...
SNB left the policy rate unchanged at -0.75%. It reiterated the commitment to “intervene in the foreign exchange market as necessary, while taking the overall currency situation into consideration”. Additionally, the central bank adjusted the interest charged on banks’...
Dollar opens the week generally higher as boosted by news that Senate has finally passed their tax bill. But strength is relatively limited firstly on concern that Russian probe is getting closer to President Donald Trump. Secondly, there are talks that the final version of the tax bill would just give very little lift to the economy. Sterling is also cautious bullish on optimism over Brexit negotiation. Swiss Franc and Japanese Yen are trading as the weakest one today. Looking ahead, the week is jam-packed with RBA and BoC meeting, plus many heavy weight economic data including non-farm payrolls.
BOE voted 7-2 to raise the Bank rate by +25 bps to 0.5%, the first time in over a decade, in November. Two deputy governors, Sir Jon Cunliffe and Sir Dave Ramsden, voted to leave borrowing costs unchanged. BOE voted unanimously to leave the asset purchase program unchanged at 435B pound. Governor Carney declined to comment when the unwinding would begin. Traders have begun to dump British pound ahead of the announcement on profit-taking. The selloff accelerates upon release of the meeting statement and the quarterly inflation report. The rate hike this month is to remediate excessive inflation which has sustainably overshot the +2% target for months.
Markets are generally quiet in a typical Monday. Sterling is trading generally lower. Prime Minister Boris Johnson's push for general election ahead of Brexit deadline will likely be voted down today. But it's reported that he's planning to block...
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