Rising Rates Not Going to Derail Hong Kong Property Market, Weakening Chinese Economy Might
Although Hong Kong dollar (HKD) had approached the weak side (7.85) of the trading band against US dollar (USD) in May and June, after HKMA’s intervention in April, the gap between HIBOR and LIBOR has narrowed significantly since then. Through buying HKD and selling USD, HKMA’s numerous rounds of...
Bulls Increased Bets While Bears Cowered on USD’s Rally
USD bulls won ahead of the June FOMC meeting, as suggested in the CFTC Commitments of Traders report in the week ended June 19. Speculative long positions for USD Index (DXY) futures gained +2 267 contracts while shorts slumped -11 142 contracts, resulting in Net LENGTH of 18 072 contracts,...
US Companies Doomed to Suffer from Trump’s Protectionist Policy
US-China trade tensions intensified shortly after Trump-Kim Summit. Last Friday (Jun 15), the White House announced that it would impose 25% tariffs on a list of Chinese exports worth of US$34B, effective on 6 July, with another list of goods, covering US$ 16B under further review. In response, China...
Traders Bet for Further Strength Despite USD’s Pullback
Both bulls and bears added bets on US dollar ahead of the June FOMC meeting, as suggested in the CFTC Commitments of Traders report in the week ended June 12. Both speculative long and short positions were increased in USD Index (DXY) futures, resulting in Net LENGTH of 4 663...
PM May Avoided Defeat in Brexit Vote as a Key Amendment Got Rejected
On June 12 and 13 the House of Commons, the lower house of the parliament, is due to vote on the 15 amendments proposed by the House of Lords, the upper house of the parliament. The key amendment – “meaningful vote”, has been rejected by the Commons, avoiding humiliation...
Bets for USD Trimmed as Traders Lacked Clues after Recent Rally
Both bulls and bears trimmed bets on US dollar after its rally to the highest level in over 6 months, as suggested in the CFTC Commitments of Traders report in the week ended June 5. Both speculative long and short positions were reduced but the latter overwhelmed, resulting in...
Italy’s New Government Formed Eventually. Next Uncertainty is Economic Reform
Political deadlock in Italy was broken last week as President Mattarella approves the new cabinet after the euro-sceptic finance minister candidate, Paolo Savona, was replaced by Giovanni Tria. Tria supports that Italy should remain in the Eurozone, despite his call for reforms to the single currency. He is also...
Bulls Added Bets on USD Appreciation
Traders added more bets for higher USD, as suggested in the CFTC Commitments of Traders report in the week ended May 29. Net LENGTH for USD Index (DXY) futures added +1 338 contracts to 3 924. During the week, the DXY index gained +1.3%, as the greenback strengthened against major currencies...
Re-emergence of Monetary Policy Divergence II – High – Yield Currencies
In our report last week, we pointed out that monetary policy divergence between the Fed and other major central banks has re-emerged since April. While economic developments in the first several months of the year have reinforced FOMC’s commitment to continue gradual rate hike as planned, other major centrals...
Prolonged Political Uncertainty in Italy Sparks Fear of Financial Market Contagion to Neighbors
(Updated on 0230 GMT, May 30) 10-year Italy-Germany yield spread jumped further to 2.83%, highest since 2013, on May 29.
Hopes of forming a populist coalition government in Italy hit the rocks as President Sergio Mattarella rejected eurosceptic Paolo Savona’s nomination as the next finance minister. Yet, he has invited...
USD Bulls Remained Intact
Traders were increasingly bullish over US dollar, as suggested in the CFTC Commitments of Traders report in the week ended May 22. USD Index (DXY) futures stayed in NET LENGTH for a second consecutive week. Rising speculative long positions and dropping shorts resulted in NET LENGTH of 2 586 contracts,...
Re-emergence of Monetary Policy Divergence I -European Currencies
Policy Divergence was once a hot topic back in 2015 through early 2017, when the FOMC began to increase the Fed funds rate, while other major central banks maintained extra accommodative monetary polices as they struggled to boost the economies. This was then replaced by the story of convergence...
Italy Policy Turmoil Not Yet Resolved although More Hurdles Cleared for New Government
Italy’s two populist parties – the anti-establishment Five Star Movement and the far-right League- have agreed on a prime minister candidate, clearing another hurdle to forming a new coalition government. Over the weekend, members of both parties approved the joint economic policy, finalized last Friday, which showed softer stance...
History Repeats Itself – Argentina Seeks IMF Bailout
Failure to rescue currency slump despite aggressive rate hike has led Argentina to seek IMF bailout. Last week, it was reported by the government has asked for a flexible credit line worth $30B from the world lender. According to President Mauricio Macri, “this is going to allow us to...
Lasting Impacts of Trump’s Unilateral Withdrawal from Iran Nuclear Deal
Donald Trump confirmed that the US would withdraw from the Iran nuclear deal, an agreement reached in 2015 between Iran, the P5+1 (5 UNSC permanent members including US, France, Russia, UK, China + Germany) and the European Union. New sanctions, both financial sanctions and bans of oil exports, would...
China Trade Surplus with US Highest This Year; No Deal from Trade Talk but Not Yet Hopeless
China recorded a trade surplus of US$ 28.8B in April, beating consensus of US$ 27.5B. In March, China reported a deficit of US$ 5B due to seasonal factor. Compared with the same period last year, trade surplus narrowed by -23.1%. The +12.9% y/y increase in exports was overshadowed by...
Brexit Uncertainty Remains Key Determinant of BOE’s Rate Hike Path
British pound remains under pressure after Friday’s selloff. GBPUSD slumped almost -1% on Friday, resulting in a second consecutive weekly decline of the pair, as weakness in first quarter GDP growth was accompanied with BOE Governor Mark Carney’s dovish BBC interview in the prior week. The double disappointment also...
SNB Unlikely to Act Despite Recent EURCHF Strength
EURCHF remains in consolidation after briefly breaching 1.2 last Friday. We see policy divergence, US sanctions against Russia and the upcoming referendum on SNB’s power are key reasons for the recent weakness in Swiss franc. Despite the symbolic meaning – SNB set 1.2 as the floor of EURCHF in...
How is US Yield’s Breach of 3% Related to Recent Crude Oil Rally?
The two most astonishing features in the financial market over the past week were soaring US Treasury yields and crude oil prices. After making a fresh 4-year high last Friday, the 10-year yield extended gains and eventually broke above 3% this week. Meanwhile, both crude oil benchmarks rallied to...
Singaporean Central Bank Turns Hawkish on Upward Core Inflation Pressure
The Monetary Authority of Singapore* (MAS) last Friday announced to increase the slope of the Singaporean dollar nominal effective exchange rate (SGD NEER) policy band “slightly”, the first adjustment since the policy tool was reduced to 0% in April 2016. As usual, the central bank did not disclose how...