Economic Conditions

  • Asia's slowing growth may be overstated.

    Is the Slowing Asian Economy Secular in Nature?

    A gloomy outlook is enveloping the world’s economies. There are concerns too that countries are failing to sufficiently focus on long term policy responses to reverse the decline in global growth. Some argue that the global growth slowdown may be permanent, highlighting the danger of a period of chronically low growth, or what economists term “secular stagnation.”

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  • All was quiet on the currency front before the jobs data.

    What Happened Before the Jobs Data and More

    Activity in the global capital markets is subdued. Yesterday's moves are being consolidated, and the dollar has been confined to narrow ranges.  The euro is in a quarter cent range, while sterling is in a 50 cent range and the dollar has been confined to about two-thirds of a yen. 

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  • The dollar was doing well and now it's under pressure.

    ADP and ECB Preview

    The US dollar remains under pressure.  It is off for the third day against the yen and slipped below JPY109 for the first time in a little more than two weeks.  The Nikkei struggled to cope with the foreign exchange developments, lost 2.3%, the most in a month, after gapping lower.  At JPY108.50, the dollar would have given back 50% of its rally off the May 3 low near JPY105.50.   Below there, the JPY107.80 is the 61.8% retracement. 

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  • Pockets of growth in Asia may be obscured by China's woes.

    Does Asia's Slowdown Contain Undue Pessimism?

    A gloomy outlook is enveloping the world’s economies. There are concerns that countries are failing to sufficiently focus on long-term policy responses to reverse the decline in global growth. Some are even arguing that the global growth slowdown may be permanent. However, for developing Asia, this downbeat view is clearly overstated.

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  • Rate hike talk is heating up and bookmakers get new 'leave' money.

    Place Your Bets on a Rate Hike and the UK Referendum

    The US dollar is broadly mixed.  The main narrative of increased prospects for a Fed hike in June or July has been pushed off center stage as the market reacts to local developments as investors await from US economic data.  Ostensibly, the data will determine whether the Fed raises rates in June or July.

    On the other hand, despite the Fed's data dependency, we argue that the determining factor is the Fed's risk assessment.  In particular, we accept at face value the official recognition of the risks posed by the UK referendum.

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  • Sometimes the response doesn't match the data.

    Is it the Data, or the Response?

    The US dollar bottomed against nearly all the major currencies on May 3.  The hawkish April FOMC minutes that began swaying opinion about the prospects for a summer rate hike were not published until two weeks later, and the confirmation by NY Fed President Dudley was not until May 19.

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  • Indications are for a stronger dollar though oil does not seem affected.

    Technical Indicators Signal Dollar Strength

    The US dollar was mostly firmer over the past week.  There were two exceptions among the major currencies:  Sterling and the Canadian dollar.

    Many linked sterling's outperformance (+0.8%) to a growing sense that the UK will vote to remain in the EU, despite angst reflected in the elevated cost of insurance (one-month options).  The Canadian dollar (+0.7%) was helped by oil's flirtation with $50 a barrel and a central bank that was perhaps less dovish than some expected. 

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  • The G7 summit ended and issue remain, but the markets move on to Yellen.

    G7 Over, Yellen on Deck

    The US dollar is winding down the week on a firm note, but still in a consolidative mode.  The euro, yen, and Australian dollar are well within yesterday's ranges while sterling and the Canadian dollar pushing through yesterday's lows.

    Asian shares were mostly higher, though Chinese markets closed with slight losses.  The MSCI Asia-Pacific Index rose (~0.7%) for a third session and secured a 2% gain for the week.  European bourses are seeing some profit taking ahead of the weekend, which trims their weekly gain.

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  • Sterling put purchases may mean Brexit insurance and crude continues higher.

    Oil Price Recovery and Brexit Insurance

    The US dollar is trading with a softer bias today after the momentum stalled yesterday.  The pullback is shallow but could be extended a bit more in the North American session.  The US reports weekly jobless claims, durable goods orders and pending home sales.

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  • The markets are relatively stable, but it may not last.

    Capital Market Stability is Relative

    The US dollar is little changed against the major currencies as yesterday's moves are consolidated and traders wait for fresh developments.  Global equities were higher after Wall Street's advance yesterday.  Asia-Pacific bond yields were firm, following the US lead, but European 10-year benchmark yields are lower, led by the continued rally in Greek bonds after an agreement was struck that will free up a tranche of aid.

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