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.
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
South African President Zuma survived the no confidence vote. What now? We remain negative. Continue reading
The Hong Kong dollar has steadily weakened this year. Yet there is no threat at all to the peg, which we see being maintained for the foreseeable future. Continue reading
EM FX appears to be rolling over (see our recent piece “Is EM FX Finally Turning?”). Technical indicators are stretched as many EM currencies bump up against strong resistance levels. Strong US jobs data is bringing Fed tightening back into focus. We think ZAR could be shaping up to be the canary in a coalmine. It was -3% vs. USD last week and by far the worst in EM. Continue reading
Is 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
The Czech National Bank meets tomorrow and is expected to be the first European to hike rates. The economy remains robust, and the koruna has appreciated slowly but steadily since the floor was eliminated. Continue reading