This post examines the factors driving FX markets and previews this week’s Fed and BoJ decisions. The main points are: • Calmer market conditions, driven by a continuation of the factors I discussed here, mean that G10 and EM FX volatilty has fallen thereby further raising the attractiveness of FX carry trades. This seems likely … More FX focus: Fed probably won’t rock the (carry) boat, BoJ could add tailwind
This post details my expectations for Thursday’s ECB meeting, dissects the evolving macro-financial situation facing the ECB and provides some interest rate and FX views. The main points are: • Draghi will likely robustly defend the easing measures (recent German criticism), probably referencing the already-apparent positive impact on market corporate borrowing conditions. • He will … More ECB preview: further details in the (nervous) waiting room
Tuesday’s IMF warning of the adverse (global) impacts of a Brexit vote, with some effects already apparent, follows concerns in the March MPC minutes (which seem likely to be amplified in Thursday’s April MPC minutes). Unfortunately, neither provided any specific evidence. This post fills that gap, detailing the macro-financial impacts evident thus far, drawing on … More Tracking the macro-financial impacts of Brexit uncertainties: Killing the goose that lays the golden eggs?
Sterling has, as I previously anticipated here and here, continued to depreciate as Brexit uncertainties have become increasingly priced. The TWI is now down 11% since November (GBPJPY down over 19%) while implied volatilities and risk reversals have continued rising. But Brexit effects have more recently been reinforced by renewed concerns about the UK’s current … More Current account and growth concerns add to sterling’s Brexit worries: further weakness ahead