Trump’s impossible trinity likely resolved by dollar strength but potential bumpy ride

This piece discusses dollar propsects in light of it’s 2017 retracement and the impossible trinity of fiscal expansion, independent US monetary policy and dollar jawboning which the Trump adminstration seems to be pursuing (alongside prospects for US and foreign monetary policy).  If Trump eventually delivers a substantial fiscal expansion the impossible trinity seems most likely … More Trump’s impossible trinity likely resolved by dollar strength but potential bumpy ride

FOMC Preview: Cautious Yellen likely aiming to limit market impact of rate hike, but watch term premia

This post summarises my views on Wednesday’s much-anticipated US Federal Reserve meeting and potential 2017 trends.  The main points are: A 25bp Fed rate rate hike is fully priced by Fed Funds futures – given the improved US macro situation, Trump’s prospective (but uncertain) fiscal stimulus and strong signals from Fed Governors. So the market … More FOMC Preview: Cautious Yellen likely aiming to limit market impact of rate hike, but watch term premia

Could lightning strike twice? FX impacts of US election cliffhanger: Trump win underpriced

This report analyses the likely FX market implications of the too close to call US election. Overall it seems that markets could, like the Brexit vote, be under-pricing lightening striking. But the dollar could rise irrespective of the result, although more immediately/obviously following a Clinton win, with vulnerable risk-positive currencies likely being most sensitive to … More Could lightning strike twice? FX impacts of US election cliffhanger: Trump win underpriced

Brexit safe haven impacts turn global: Fed and BoJ to take note

This post discusses the increasingly global financial market “safe haven” impacts of rising Brexit uncertainties, and previews this week’s BoE, Fed and BoJ policy meetings (which will impact market tone). The main points are: Previous financial market complacency about Brexit risks (see here) has been replaced by more generalised “safe haven” asset prices impacts, as … More Brexit safe haven impacts turn global: Fed and BoJ to take note

Yellen to cautiously leave door open to June hike

Financial markets remain sceptical about further US rates rises heading into the tomorrow’s FOMC announcement. Less than one Fed rate increase in 2016 is fully priced, although the current 80% probability contrasts with only 10% a few weeks ago, whereas in December the Fed signalled four rate hikes in 2016. While a rate increase this … More Yellen to cautiously leave door open to June hike

Yellen will likely find it difficult to calm the sum of the markets fears: fixed income rally and JPY strength to extend

Fed Chair Yellen’s semi-annual testimony occurs at a time of considerable uncertainty about the global economy and substantial financial market volatility.  Oil price and equity price falls, particularly bank stocks, have dominated recent moves as global government bonds have fallen up to 60bp since end-2016 (with 10 year JGBs turning notably negative) and the dollar … More Yellen will likely find it difficult to calm the sum of the markets fears: fixed income rally and JPY strength to extend

Confident Fed equates to further (limited) Treasury sell-off and USD upside but watch for China and risk aversion

Last night’s Fed rate hike, with more balanced that expected accompanying material, seems to have given the green light to further limited (short-end US) yield rises and consequent USD dollar strength over the next few months. The latter will likely supported by gradual increased pricing of policy divergences – the Fed seems confident in anticipating … More Confident Fed equates to further (limited) Treasury sell-off and USD upside but watch for China and risk aversion

Caution in Threadneedle Street: weak pay growth supportive near-term but watching the Fed carefully

This morning’s surprisingly-weak UK pay data provide further ammunition to the dovish MPC members and the growing sense that the Committee really is in no rush to start raising interest rates and want to try and differentiate themselves from the Fed. That said, the recent UK pay growth slowdown has limited implications for inflation under … More Caution in Threadneedle Street: weak pay growth supportive near-term but watching the Fed carefully

FOMC likely to keep options open and acknowledge commodity weakness: limited USD downside possible

Tomorrow’s FOMC press release is being eagerly anticipated by market participants, keen to see whether FOMC will provide more definitive guidance about whether Fed liftoff will start in September (most economists’ favoured date) or December (more consistent with market pricing). Despite such hopes, I suspect that the FOMC press release will likely contain only relatively … More FOMC likely to keep options open and acknowledge commodity weakness: limited USD downside possible