Richard Jones
Summary The Bank of England (BoE) left rates unchanged yesterday but shifted towards a cut as early as next month. The Monetary Policy Committee (MPC) voted 7-2 in favour of the hold, with two dissenters (including Deputy Governor Dave Ramsden) calling for an immediate cut. Governor Andrew Bailey was notably dovish on market pricing in […]
Richard Jones
Summary USD/JPY briefly printed above 160 on 29 April, a public holiday in Japan, before quickly falling back below 155. Money market data suggested the Japanese Ministry of Finance (MoF) bought about 5.5tn yen that day. A second bout of intervention, following the Fed policy update on Wednesday, saw the MoF buy 3.5tn yen, leading […]
Richard Jones
Summary Long EUR/CHF was one of our strongest conviction trades in Q1 2024. The pair topped out earlier this month, but pullbacks have been shallow and short-lived. We think the Swiss National Bank could sell CHF during its easing cycle, while the BEER valuation for EUR/CHF sees the pair as 8.5% undervalued. Both factors would […]
Richard Jones
Summary After last week’s US jobs report and yesterday’s CPI data, US yields have exploded higher and have made new year-to-date (YTD) highs across the curve. USD/JPY has also accelerated quickly, closing above 152 for the first time in TKTK years, which greatly increases the probability of JPY intervention by the Japanese Ministry of Finance […]
Richard Jones
Summary US yields across the curve are at or near their year-to-date (YTD) highs, as are the USD Dollar Index (DXY) and most G10 USD pairs. At such levels, we would normally position for retracement lower. However, Friday’s US non-farm payrolls (NFP) report presents major event risk. Market Implications We wait for price action post-NFP […]
Richard Jones
Summary Yesterday, USD/JPY traded to its strongest level since 1990 (on an intraday basis). This prompted the Japanese Ministry of Finance (MoF) to verbally intervene (following further pushback earlier this week) to combat JPY weakness. This makes it much more likely that the MoF will buy JPY in the market, as verbal pushback has only […]
Richard Jones
Summary In the next seven days, six G10 central banks provide monetary policy updates. Excepting the Bank of Japan (BoJ), no interest rate moves are expected. Markets are therefore largely in wait-and-see mode, with most G10 currencies in a range, presenting very few attractive trades. Market Implications One exception to this is being short the […]
Richard Jones
Summary US 2-year and 10-year yields have range-traded year-to-date (YTD). US yields in both curve points have retraced slightly lower this month after sharp moves higher in February. We think the US jobs report tomorrow will be the catalyst for the next directional move in the US rates market, with the next Federal Reserve (Fed) […]
Richard Jones
Summary Two weeks ago, EUR/USD traded down to the bottom of its YTD range of ~1.0700/1.1100, the lowest level since mid-November. Strong US data prints and hawkish Fed messaging drove the USD outperformance. Recently, however, buoyant risk sentiment and rallying equities have supported the euro, which is trading like a risk-on/risk-off currency. Downside momentum in […]
Richard Jones
Summary USD/JPY has traded above 150 in the past week or so for the first time since mid-November. This immediately prompted verbal intervention from Japan’s Ministry of Finance (MoF), opposing JPY weakness. Should the pair remain above 150 and push towards the 2023 high near 152, we expect additional verbal intervention. We are also very […]
Richard Jones
Summary After rallying on haven demand late last month, the Swiss franc (CHF) has weakened in February. Weaker-than-expected Swiss inflation data drove the decline, with imported product prices sliding. This indicates the currency is weighing materially on inflation and has prompted the market to price a strong probability of an SNB rate cut next month. […]
Richard Jones
Summary In the two-year maturity, the spread of UK yields over Eurozone yields has widened in recent weeks. We think hawkish BoE pricing has gone too far, as has dovish ECB pricing. A repricing could see spreads narrow and support our bullish EUR/GBP view. Market Implications We would fade any widening of the Eurozone/UK short-end […]
Bilal Hafeez, Viresh Kanabar
Summary In the US, we expect core PCE at 15bp on Friday. That would drop the figure below the Fed’s 2% target and increase ‘lowflation’ risks. Dominique still expects a 50bp Fed cut in March. The ECB should leave rates unchanged on Thursday. We see the first cut in June. In the $-bloc, the NAB […]
Richard Jones
Summary The Swiss franc (CHF) was the strongest G10 currency in 2023, rallying sharply in December as asset managers aggressively increased long positioning. The CHF is at or near record highs versus several G10 currencies, suggesting valuations may be stretched. The Swiss National Bank (SNB) says it is no longer biased to support the CHF […]
Richard Jones
Summary Since US yields peaked across the curve in October, subsequent countertrend rises have been short-lived, and the trend of broadly lower yields has been building over the past three months. Buying dips (in futures terms) in the US rates space has been a winning strategy. The USD Index (DXY) has also been trending strongly, […]
Ben Ford, Richard Jones
Summary The major G10 currencies – the US dollar, the euro, the Japanese yen, the British pound, and the Swiss franc – have had varying performances in 2023. USD declined during the first half of the year, before rebounding sharply from July-October, and has traded lower in Q4. EUR rallied from January to July, giving […]
Bilal Hafeez, Viresh Kanabar
We standardise WoW price changes across different markets to allow for cross-market comparisons. Last Week’s Highlights US jobs data surprised higher. Friday’s NFP data surprised modestly on the upside, with 199,000 jobs added in November versus consensus expectations of 180,000. The unemployment rate also surprised, falling back to 3.7% from a two-year high of 3.9% […]
Viresh Kanabar
US inflation came in hot, hot, hot! While US core CPI aligned with expectations, headline at 3.7% exceeded them.
Vasileios Gkionakis
The last few weeks have seen several material developments in global markets. Nominal and real yields at multi-year highs alongside soaring oil prices have recently added to existing trends (dwindling excess savings and contracting global trade), increasing the risk of a global recession.
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