Drivers for the Week Ahead

Blog icons-DRIVERS

  • Spain’s reassertion of its authority over the secessionist-minded Catalonia will draw attention 
  • Investors will digest the results of the Japanese national elections 
  • The BOC and ECB meetings could have broad implications 
  • US tax reform is in the spotlight 
  • EM FX likely to remain under pressure 

Continue reading

US Dollar Starts New Week on Firm Note

new laptop

The US dollar is enjoying modest gains against most currencies as prospects of both tax reform and additional monetary tightening by the Fed carry over from last week.  The strong showing of the Liberal Democrats in Japan, where the governing coalition has maintained its super-majority is seen as confirmation of continuity.  This helped lift Japanese shares and weighed on the yen.  The Nikkei advanced 1.1%, the most in a month, and extends the advancing streak to a record 15 sessions.  The Nikkei is at 20-year highs.  

Continue reading

EM Preview for the Week Ahead

blog-icons-empreview emerging markets previewEM FX ended the week on a soft note.  Indeed, nearly every EM currency was down for the entire week, led by ZAR, BRL, and TRY.  While higher US rates will pressure EM FX as a whole, we think heightend political risk will continue to hit these three currencies particularlly hard, plus perhaps MXN too.  Continue reading

Greenback’s Recovery is Intact

Blog icons - FX Outlook dollar

The prospect of tax reform and a Fed hike in December, with expectations of more next year, helped lift the dollar broadly last week. Although the Japanese election and ECB meeting lie ahead, the fundamental backdrop for dollar looks constructive.  The technical condition is also favorable, especially on the weekly charts. 

Continue reading

Abe’s Third Arrow

new Japan

Japan’s Abe’s gamble to call snap elections shortly after the stunning defeat in the Tokyo elections appears likely to pay-off.  He called the bluff of his former defense minister and now Governor of Tokyo Koike who is leading the main opposition party now, the Party of Hope.  The Party of Hope may have over-reached and now appears to be stumbling.   The polls suggest that the LDP may secure more seats in the lower chamber than it a current hold.  

Continue reading

The Euro’s Complicated Top

Euro complex

This chart depicts the top the euro is carving.  We suggest that several fundamental developments lie behind the price action.  Interest rate differentials are widening interest rate differentials favoring the US.  Speculative market positioning is leaning heavily long euros. European politics no longer the tailwind that it was, it is not surprising that the euro appears to be carving out a top.  

Continue reading