Richard Jones
Summary The UK 2-year yield hovers near last week’s six-month high. The Bank of England (BoE) Monetary Policy Review (MPR), following last week’s 25bps cut, broadly aligned with our expectations, without overly hawkish messaging. However, hawkish Fed pricing is feeding into BoE pricing, which challenges fading elevated UK short-end yields. Market Implications Despite the risks, […]
Richard Jones
Summary The US election triggered very choppy price action across all asset classes, with the USD especially volatile this week. USD/JPY, after spiking initially following the Trump victory, has pulled back considerably. USD/JPY price action makes us think further upside will not come easily, although volatility is likely to persist. Market Implications More USD/JPY downside, […]
Richard Jones
Summary Last week’s Japanese election saw the current ruling coalition lose its majority, starting a rare period of political uncertainty in Japan. Following very choppy price action, USD/JPY initially moved higher this week on this uncertainty, but now trades back near pre-election levels. The Bank of Japan (BoJ) kept rates on hold today but reaffirmed […]
Richard Jones
Summary USD/JPY has traded above 150 all week, closing above 152 for the first time since 30 July. Since troughing near 140 in mid-September, USD/JPY has rallied roughly 9%, with rising US yields as well as Japanese and US political the drivers. This has caught the Japanese Ministry of Finance (MoF)’s attention, whose top currency […]
Viresh Kanabar
Summary The BoC wants strong growth to absorb labour market slack. However, Q3 GDP growth could be nearer 1.6%, while core inflation may also undershoot in both Q3 and Q4 by 10bps. The BoC will likely look through October’s unemployment report given the hiring outlook remains weak. Market Implications We expect the BoC to cut […]
Richard Jones
Summary Since the Federal Reserve (Fed) cut 50bp on 18 September, yields across the US treasury (UST) curve have risen. Post-FOMC, overbought technical indicators have unwound as yields have risen. We remain cautious of a further rise in yields after tomorrow’s US non-farm payrolls (NFP) report. Market Implications Our bias remains to buy USTs on […]
Richard Jones
Summary The Swiss National Bank (SNB) cut 25bp yesterday, less than the 35bp the market priced. The SNB significantly lowered its Swiss inflation forecasts from June, citing the strong CHF as a key driver of weaker inflation. The SNB was very clear it is ready to intervene in currency markets and says further interest rate […]
Richard Jones
Summary Switzerland’s August inflation data came in weaker-than-expected across the board. This would normally lead to CHF weakness, but softer global risk sentiment this week resulted in the currency tracking sideways, with CHF haven demand offsetting weaker Swiss data. As we wrote last month, we think the Swiss National Bank (SNB) will intervene in the […]
Richard Jones
Summary As we wrote last week, August seasonality has seen reduced market liquidity and rendered trading conditions suboptimal. This is especially true in USD/JPY, having a ~6% high/low range in the three trading days between 1 and 5 August. Expect another week of choppy, illiquid markets, with new direction in USD/JPY emerging only next month. […]
Richard Jones
Summary Amid the market turmoil this week, on Monday EUR/CHF traded at its lowest level since 2015 (~0.9211). That day, the Swiss National Bank (SNB) abandoned the EUR/CHF ‘floor’ at 1.2000. Since then, although the pair has traded choppily, EUR/CHF has bounced decisively off this week’s low to now trade over 2.5% higher at 0.9460. […]
Richard Jones
Summary Since the Japanese Ministry of Finance (MoF) bought JPY on 11 July, USD/JPY has declined ~5.75%, its biggest two-week drop since late last year. USD/JPY is now trading at its lowest level since early May (~152.50). Much event risk exists for USD/JPY in the next week. The Bank of Japan (BoJ) updates monetary policy […]
Richard Jones
Summary After weaker-than-expected US CPI last week, the 2-year US Treasury yield broke below the ~4.6% floor in place since early April. The yield remains below this level, having touched ~4.4% this week. Similarly, the UK 2-year yield has traded lower over the past couple months. The yield gained momentum over the past week, printing […]
Richard Jones
Summary EUR/CHF has retraced all the down move following the European election results and the snap French election call, both on 9 June. The pair dropped almost 2% between the close of business 7 June and close of business on 18 June. EUR/CHF rallied modestly after the SNB rate cut on 20 June but has […]
Macro Hive
Key Events G10 In the US, the main events are: Core PCE – Friday. Expect no surprise since PPI and CPI allow for close approximation. The more reliable indicator of trend will be the Cleveland Fed’s median price PCE, published a few hours after the BEA release. Personal income and spending – Friday. Consensus estimates […]
Richard Jones
Summary EUR/CHF is down ~2.8% in June, poised for its biggest monthly drop year-to-date (YTD). The SNB, broadly consistent with market expectations, cut its policy rate 25bps to 1.25% yesterday. CHF strength this month has been driven largely by political uncertainty in France, where President Emmanuel Macron announced snap parliamentary elections. This political uncertainty is […]
Richard Jones
Summary The 2-year UK gilt yield has fallen over 30bps from last month’s peak. This followed the dovish policy update from the Bank of England (BoE)’s Monetary Policy Committee (MPC) last month, voting 7-2 in favour of holding rates. Two dissenters (including Deputy Governor Dave Ramsden) called for an immediate cut. The BoE updates policy […]
Richard Jones
Summary USD/JPY is trading very near the middle of the range seen since the Japanese Ministry of Finance (MoF) intervened in the FX market in late April. Over this period, the US 2-year yield is currently near the bottom of the prevailing ~4.7%/~5.0 range. Tomorrow’s US non-farm payrolls (NFP) report will be key for determining […]
Macro Hive
Key Events G10 In the US, the main data releases are: NFP – Friday. Consensus expects 185k and unemployment at 3.9% – i.e., a tight labour market still. I agree. Trade balance – Thursday. A downside surprise to the consensus estimate of ‑$69.7bn would indicate a buildup of domestic demand pressures. JOLTS – Tuesday. We […]
Richard Jones
Summary Comments from Swiss National Bank (SNB) President Jordan on inflation and the Swiss franc (CHF) have driven the biggest one-day decline in EUR/CHF since October. The pair is now poised for its worst week of 2024. The franc also found support from the much stronger-than-expected Q1 Swiss GDP data. Market Implications We stand aside […]
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