Market Not Convinced by BOC’s Intentionally Neutral Tone
Despite BOC’s effort to temper the need of a rate cut, the market is obviously unconvinced. Market participants continue to price in about 30% chance of rate cut later this year and USDCAD surged to the highest level since January. The key message from the meeting is that the...
Risk Aversion Stays With Persisting Trade Worries, Franc and Yen Strong Again
Risk aversion stays in the global financial markets today but it's not in the most intense state yet. A trigger for selloff in stocks and decline in yield is China's threat to squeeze supply of rare earths to the US as part of a countermeasures in trade war. However,...
EUR/JPY Downside Breakout on Falling Yields and Risk Aversion
Yen and Swiss Franc are finally showing some strength today. There was no special escalation in US-China relationship as the former refrained from naming the latter as currency manipulator. But recovery attempts in stocks were rather short lived. Selloff in stocks is in tandem with free fall in treasury...
How Does Brexit Proceed? After Results of European Parliament Election Showing Divided Britons
The Brexit Party led by Nigel Farage emerges as the biggest party in the European Parliament, with 29 seats and 31.6% (up +31.6% from previously) of the votes across the 12 regions in the UK. Surge in votes was also seen in Liberal Democrats, a pro-EU party, and Greens,...
Yen Attempts to Rally on Falling German Yields, But No Follow Through Buying Yet
The forex markets are rather mixed today. Italy's budget clash with EU is clearly a concern of investors. Markets are anticipating the tension between Rome and Brussels to intensify with a penalty on breach of EU fiscal rules. Italian 10-year yield jumps sharply higher today while German 10-year yield...
Yen and Franc Mildly Lower in Consolidation, More Upside Still in Favor
The forex markets are generally steady in Asian session today. Risk sentiments firmed up mildly in Asia with gains seen in major indices. In particular, China's Shanghai SSE is back above 2900 handle with around 0.9% gain. The moves are reflect in strength in Australian, New Zealand and Canadian...
BOC to Avoid Hinting Rate Hike Despite Improvement in Economic Data
We expect BOC to stay put - leaving the policy rate unchanged at 1.75%, at the upcoming meeting. Macroeconomic indicators released since the April meeting showed improvement. Governor Stephen Poloz said in an interview last week that interest rates are likely to still go up “a bit”, if recent...
Dollar Rebounds after Trump Warns of Very Substantial Tariffs on China
After some initial weakness, Dollar surges broadly today after Trump admitted that he's not ready to make a deal with China yet. That overturned his repeated comments that a deal could happen soon. Instead, Trump opts for more verbal threats and warned tariffs could go up very substantially and...
CFTC Commitments of Traders -Bets for Lower GBP Jumped on Renewed Political and Brexit Uncertainty
The CFTC Commitments of Traders report in the week ended May 21 shows that NET LENGTH in USD Index edged slightly higher, by +35 contracts, to 26 712. Both speculative long and short positions increased during the week. All other major currencies stayed in NET SHORT positions.
Concerning European...
CFTC Commitments of Traders- Bets on Crude Oil Price Plunged on Both Sides, as Trade War Continues to Escalate
According to the CFTC Commitments of Traders report for the week ended May 21, NET LENGTH for crude oil futures declined -9 410 contracts to 478 398 for the week. Speculative long positions slumped -22 000 contracts while shorts also plunged -12 590. Uncertainty of US-China trade war continued...
Treasury Yield in Free Fall, But the Worst in the Markets are Yet to Come
Sterling was the weakest one last week as it suffered persistent selloff ahead of UK Prime Minister Theresa May's announcement on resignation. The Pound has indeed stabilized since then after the speculation was realized. Without May, the Brexit path ahead becomes even more uncertain. The key lies on who...
Pound Softer after May’s Resignation, Loss Limited Though
News from the UK catch most headline today as, finally, Prime Minister Theresa May announced to resign. Pound's reaction is generally softer but selloff is so far limited. Sterling has been under much selling pressure up to today's announcement and thus, the decision was well priced in. Now, the...
Dollar Rally Faltered on Free Fall in Treasury Yields, Trade War Drags Sentiments
Dollar's rally attempt faltered overnight as dragged down by steep decline in treasury yields. Dollar index did hit new high at 98.37 but closed sharply lower at 97.85. 10-year yield dropped -0.097 to close at 2.296, just inch above day low at 2.294. Concerns over prolonged US-China trade war...
ECB Lacks Confidence that Economic Forecasts Could be Achieved. Focus on June for TLTROs Details
Reinforcing the dovish tone, the minutes for April’s ECB meeting exemplified the members’ pessimism over the economic outlook. They were becoming less confident that the baseline scenario of growth can be achieved. As such, the central bank would try to stimulate bank lending via the Targeted Longer-Term Refinancing Operations...
Risk Off on Trade War Escalations and Eurozone Slowdown, EUR/USD to Break 1.1111 soon
Global markets are back is heavy risk-off mode today as US-China tensions keep on escalating. Words from both sides suggest that neither one is going to back down from the current stance and there is no chance of returning to the table any time soon. More importantly, it's seems...
Trade Concerns Drag Down Asian Markets Again, Yen and Franc Lifted
Swiss Franc and Yen firm up again in Asian session as markets are gradually convinced that a full-blown US-China trade war is underway. Tensions between the two countries have clearly worsened after trade negotiation collapsed weeks ago. And it's clearly not just about trade but a broad range of...
FOMC Minutes Reinforced Patience Approach to Monetary Decision
The FOMC minutes for the meeting in May unveiled that the members remained optimistic about the economic outlook. They also viewed that soft inflation was a transitory phenomenon. These resulted in the judgment that “a patient approach” to monetary policy decision remains appropriate and the policy rate should stay...
Rising US Inventory Adds Selling Pressure To Crude Oil
Crude oil price weakened for a third consecutive day. Besides the risk-off mode driven by intensifying US-China trade war, further increase in oil inventory has substantiated near-term bearishness in the oil market. The report from the US Energy Information Administration (EIA) shows that total crude oil and petroleum products...
Canadian Dollar Jumps on Retail Sales, Sterling Lower on Brexit, FOMC Minutes Next
US stocks open slightly lower today while major European indices are trading in red. But it's too early to say if risk aversion in back. US-China trade war is the biggest risks to the global economy and there is no end insight. Instead, it's reported that US is going...
Brexit Update – PM May’s Last Attempt to Win a Deal Likely in Vain
Possibly in her final attempt, UK Prime Minister Theresa May tries to win the parliamentary approval of the Brexit Withdrawal Agreement with a “bold new plan”. While the most eye-catching ingredient is a green light of a second referendum, the remainder of the plan was made by cobbling together...