Speculators Add to Sterling and Peso Shorts, While Cutting Euro and Canadian Dollar Longs

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Speculators made several significant position adjustment in the CFTC reporting week ending August 15, that included an escalation of aggressive rhetoric by the US and North Korea.  The reporting period also covered a domestic terrorist incident in the US, and the White House response led to the defection of leaders of America’s largest businesses from advisory councils, ultimately forcing the President to end the entire exercise.  

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Synthetic FX View–Macro and Prices

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An escalation of threatening rhetoric by the United States and North Korea emerged as the key driver last week.  The US was unable to build on the success it enjoyed at the UN on August 5 when the Security Council unanimously voted to impose the stiffest sanctions to date on North Korea.  Even if President Trump’s “fire and fury” threat was more visceral than strategic initially, there have been several opportunities to backtrack, and instead, the administration seemed to double down. Continue reading

What Has Changed in EM

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  • Tensions on the Korean peninsula are still rising
  • Hong Kong boosted its 2017 growth forecast
  • S&P affirmed Israel’s A+ rating but moved the outlook from stable to positive
  • The corruption investigation against Israeli Prime Minister Netanyahu has intensified
  • South Africa’s parliament voted down the no confidence motion against President Zuma
  • Argentina officials are taking steps to support the peso
  • Banco de Mexico has ended its tightening cycle  Continue reading

Is EM FX Finally Turning?

MindMkts Blog ICON-FX TechPicIs EM FX finally turning?  We have been surprised (and puzzled) by how well EM currencies have held up as DM rates have risen.  Recent price action suggests we may be at an inflection point for EM FX.  We note too that similar patterns are being seen in the major currencies as well. Continue reading

What Has Changed in EM

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  • The Reserve Bank of India started an easing cycle by cutting all policy rates 25 bp
  • Bank Indonesia has tilted more dovish after signaling earlier this year that the easing cycle was over
  • Czech National Bank became the first in Europe to hike
  • Political risk is rising in Israel
  • President Trump signed the Russia sanctions bill
  • Nigeria is trying to unify its system of multiple exchange rates
  • Brazil President Temer survived a lower house vote that sought to put him on trial for corruption
  • Fitch moves its outlook on Mexico’s BBB+ rating from negative to stable.
  • The US put sanctions on Venezuelan President Maduro Continue reading