From Unconventional to Bizarre

25 April, 2016

We are in what can only be described as a slightly messy phase in currency markets at present. Those currencies that were seemingly a one-way bet have seen some fairly sharp reversals. The yen is the most obvious of these, after Friday’s speculation (Bloomberg, subsequently denied by BoJ) that the central bank is considering offering negative rates on loans. This saw the biggest one day up-move on USDJPY since the end of January, when the BoJ announced its surprise negative rates policy (on deposits). Welcome to the ever more bizarre world of central bank policy, where the conventional was exhausted a long time ago, unconventional is reaching its limits, which just leaves room for the every more bizarre policies to get economies moving again. We have a BoJ policy meeting at the end of this week, so it’s likely that the market will be reluctant to push the yen that much higher going into it, for fear that such speculation could turn into policy. Elsewhere, sterling was meant to be ever more fearful of the impending Brexit referendum coming this June. But the bearishness that pervaded most of the first quarter has lifted over the past four weeks, sterling managing a modest but choppy reversal against the dollar and a more meaningful reversal against the single currency.

Ahead of the BoJ meeting on Thursday, we have the Fed meeting on Wednesday. We’re unlikely to get any major changes to the Fed’s statement, but it’s likely that we will see a cautious dollar in the interim. Elsewhere, the weekend has seen the first round of the Presidential contest in Austria where mainstream parties lost out to the more peripheral parties. The right-wing FPO candidate gained 36% of the vote. This is a trend we’ve seen in many Eurozone countries and although not immediately having an impact on the single currency, it’s an on-going trend that could well have longer-term consequences for the single currency project.


Source link  
US Jobless Claims Lowest Since 1973

US Department of Labor released Initial Jobless Claims for the week ending October 13th that showed a resilient and stable labor market...

Politics Influence Markets

With fears abating surrounding the threat of Catalan independence, the EUR moved higher overnight. Catalan President Puigdemont stated...

US Unemployment at Lowest Level

On Friday, the US Department of Labour released Nonfarm Payrolls for September. The meagre forecast of 88K was beaten with an even worse...


Further Strong Data From the US

On Wednesday, the US Institute for Supply Management (ISM) released Non-Manufacturing PMI for September that surprised the market...

Upbeat Data Boosts Dollar

On Monday, the US Institute for Supply Management (ISM) released data showing the index of national factory activity surged to a reading...

Harvey & Irma Effects Still Evident

The EUR suffered a second day of selling pressure, as the markets are growing concerned that the rise in right wing nationalism witnessed...


Risk-On or Risk-Off?

The rhetoric continues between North Korea and the United States with North Korea’s Foreign Minister, Ri Yong Ho, describing President Trump’s recent comments as “tantamount...

German & New Zealand Elections

The results of the German Election have re-elected Chancellor Angela Merkel for a fourth term. Her CDU party won fewer votes than was expected and Chancellor Merkel...

Fed Holds Rates for Now But...

Unsurprisingly, the Federal Reserve kept rates on hold following the end of its 2-day meeting on Wednesday. They did, however, indicate that...

  


Share: