Richard Jones
Summary EUR/USD has bounced about 2% since bottoming out on a 1.03 handle (intra-day) last week. This has coincided with a decline in US yields across the curve. Crowded short positioning, plus oversold technicals that are starting to unwind, have also contributed to the rise in EUR/USD. Market Implications We still think EUR/USD can rally […]
Richard Jones
Summary The USD Index (DXY) has rallied to a new YTD high in the past week. This rally is pausing ahead of 107, which is also the 2023 high. The RSI for the USD index recently indicated the DXY was overbought and is now starting to unwind. Market Implications We think the DXY is due […]
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 […]
Richard Jones
Summary This week’s UK inflation data was weaker than expected, with headline and core at the lowest levels since 2021. This has weighed on UK yields and GBP and increased the probability of two 25bp BoE rate cuts in November and December. Market Implications We expect further downside for UK yields and GBP. We like […]
Richard Jones
Summary US Treasury (UST) yields have risen sharply across the curve, driven by a stronger-than-expected US jobs report last Friday. Market pricing of further Fed easing for 2024 aligns with the FOMC’s Summary of Economic Projections (SEP) and our expectations. We expect rates to remain rangebound ahead of the elections next month, with the next […]
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 […]
Ranen McCormick
Summary The financial industry has witnessed the dramatic rise of private equity and index funds over the last two decades. Now, just a handful of asset management institutions dominate American finance, as John Coates reveals on our recent podcast and in his new book, The Problem of Twelve. Political hostility to private equity and index […]
Richard Jones
Summary US fixed income has staged an impressive bull run since late April/early May, with yields plummeting across the curve. Yet several signals now warn of a short-term correction higher for US yields. We anticipate the correction will depend on the FOMC’s policy update next week and therefore avoid initiating countertrend tactical positioning as the […]
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 As is common in August, reduced market liquidity has rendered trading conditions sub-optimal. This month has seen big moves, and sizeable retracements of those moves, across all global macro asset classes. We see these dynamics continuing for the next 1-2 weeks so keep our powder dry into September. Liquidity should improve then, and durable […]
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 In July, USD/JPY had its worst month since November last year, falling almost 7%. Before the MoF intervened on 11 July, the pair topped out intraday just below 162. Now, post-Fed and BoJ, USD/JPY lingers near its lowest level since March. Although most of the event risk for this week has passed, the US […]
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 […]
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