Forex Traders Weekly Outlook – Interest Rate Differential Risks with Fed, BoJ & ECB Meetings

The U.S. Dollar Index recovered 1.1% this week after the sell off since the last inflation reports. The two key pillars of the greenback’s rally since early 2021 were growth and interest rate differentials. Since then we have seen a slowdown in US inflation, a deceleration in the US labor markets and tighter credit conditions. This week we have the latest monetary policy decision from the Federal Reserve. Resilient core inflation pressures are suggesting that European central banks will keep … Continue reading “Forex Traders Weekly Outlook – Interest Rate Differential Risks with Fed, BoJ & ECB Meetings”

Forex Traders Weekly Outlook – US Dollar Pulls Back Further with Yields After CPI and PPI

The U.S. Dollar Index dropped a solid 2.4% this week to 99.96 along with yields. Sovereign yields were lower and led by US 2s decline post-CPI and a cumulative ½% lower since the July 6th peak and toward where they were three weeks ago. The lower yields pressured on the dollar this week, as the ECB and Bank of England are seen as having further to go with their rate-hike cycles. The 2-yr note yield declined 21 basis points this … Continue reading “Forex Traders Weekly Outlook – US Dollar Pulls Back Further with Yields After CPI and PPI”

Forex Traders Weekly Outlook – Conflicting Data Ramping Currency & Bonds Volatility

The U.S. dollar had a volatile week, no less the moves Thursday to Friday with the differing US jobs report the private ADP showed red hot job growth sending yields flying and the dollar soaring. Come Friday it all reversed with a lower government report, less than half of the ADP number. The dollar finished the week down reversing Japanese Yen and Chinese Yuan continued weakness this week. For the week the Japanese yen increased 1.5% and the Chinese (onshore) … Continue reading “Forex Traders Weekly Outlook – Conflicting Data Ramping Currency & Bonds Volatility”

Forex Traders Weekly Outlook – Mid Year Update, Yen and Yuan Weakness Deepens

The Japanese Yen and Chinese Yuan continued to weaken this week. The U.S. dollar index was around unchanged for the week. On Friday the dollar moved lower as traders focused lower inflation going forward after the May US core PCE prices May rose 0.3% as expected but the YoY level was mostly lower at 4.6% versus 4.7% last month and expected. The PCE price index fell from 4.3% to 3.8%. That was the 1st decline below 4% since early 2021. … Continue reading “Forex Traders Weekly Outlook – Mid Year Update, Yen and Yuan Weakness Deepens”

The British Pound Crisis Revisited, Will There be Deja Vu?

The Bank of England raised rates 50 bps last week as the bank battles with rampant inflation and the government and MPC appear to be willing to risk sending the British economy into recession to arrest spiraling prices. There is balancing act managing a confluence of inflation, economic stagnation, and financial fragility. With that and some of the Gilt action of late there have been concerns of another crisis in confidence that could hit the pound. In September last year … Continue reading “The British Pound Crisis Revisited, Will There be Deja Vu?”

The Strong US Dollar Effect on the US Economy, Earnings and Rates

The U.S. dollar has pulled back significantly from highs, 2023 had been the worst start for the dollar to the year since 2018 with the interest rate forwards feeding the pullback as they price in the terminal rate for the Federal Reserve to end its most aggressive program of interest-rate increases since the 1980s. In that period, we have seen two quarters of earnings and the lower dollar impact is noticeable. The strong dollar negatively affected multinational earnings and the … Continue reading “The Strong US Dollar Effect on the US Economy, Earnings and Rates”

Forex Traders Weekly Outlook – US Dollar Bid on Safe Haven & Tightening Forwards

The U.S. dollar gained much of its losses this week those currencies that the forward margin widened, after a heavy Central Bank week prior. There were two factors one safe haven buying which will likely become intensified with the latest’s events in Russia. The other a shift back in forwards after the dismal PMMI reports out of Europe, in particular France and Germany. In simple terms Notionnel and bund yields fell much further than Treasury yields. This also hit the … Continue reading “Forex Traders Weekly Outlook – US Dollar Bid on Safe Haven & Tightening Forwards”

Bank of England Raises Interest Rates to 15-year High 5.00%, Risk of British Recession Increases

The Bank of England MPC at its May meeting Thursday raised the key bank rate by raised by 50 bps to 5.00% as expected by many after the previous days hot inflation numbers. It was the 13th consecutive rate hike and BoE’s benchmark rate puts the cost of borrowing at the highest level since late-2008. The vote was 7-2 (Tenreyro and Dhingra voted to keep rates unchanged, similar to the last meeting). The bank risks pushing the UK into a brutal … Continue reading “Bank of England Raises Interest Rates to 15-year High 5.00%, Risk of British Recession Increases”

Forex Traders Weekly Outlook – Euro, Aussie and Loonie Forward Margins Widen

The U.S. dollar pullback picked up pace against those currencies that the forward margin widened, after a heavy Central Bank week. With the ECB, RBA and BOC all raising rates boosting those currencies at the same time the FOMC kept rates unchanged. The less hectic US CPI and PPI reports soothing the Fed and the market. The pound hit one-year highs as gilts yields rose ahead of next week’s BoE meeting. The Yen fell against the crosses and dollar after … Continue reading “Forex Traders Weekly Outlook – Euro, Aussie and Loonie Forward Margins Widen”

Forex Traders Weekly Outlook – Surprise RBA and BOC Rate Hikes Lead to USD Selling

The U.S. dollar rally took another breather this week, in a tight range for the US dollar index of 103.290-104.400, down -0.49% for the week. The dollar dribbled down from Monday after below-expectation US services ISM data, (50.3 v expected 52.2). More selling when the RBA on Tuesday unexpectedly raised the cash rate and signaled further tightening to control inflation. The Australian dollar rebounded from a week low of 0.6578 on Monday to a Friday high of 0.6750. On Wednesday … Continue reading “Forex Traders Weekly Outlook – Surprise RBA and BOC Rate Hikes Lead to USD Selling”