10th October 2019
I don’t have any rates tables today because I was out of the market yesterday, but sterling seems to be the focus of attention. It plunged on Tuesday after UK PM Boorish Johnson talked with German Chancellor Merkel by phone. Afterwards, Downing Street apparently told reporters that taks were “close to breaking down.”
8th October 2019
JPY was the big mover overnight. I suspect this was due to a report from Nowcast, a new daily data service that uses scanner data from about 300 supermarkets across Japan to give daily information on prices and quantities purchased. According to their real-time data, supermarket sales fell 10%-20% yoy during the first week of October, following the Oct. 1st rise in the consumption tax from 8% to 10%.
7th October 2019
Well well well…I always admit it when I’m wrong, so do you mind if I take a moment to admit it when I’m right, too? On Friday morning I said it was odd that JPY had gone up while CHF had gone down, and that “with CHF/JPY at the lowest it’s been in about three years, it’s due for a rebound at some point.” That “some point” turns out to have been Friday: CHF was indeed up sharply, far outperforming the other currencies, while JPY was down. Net net, CHF/JPY was the big mover of the day, something I’ve rarely seen happen.
4th October 2019
NZD and AUD led the pack today, but frankly speaking I can’t find any explanation for it for the life of me. “Short covering” is the best I can find – that’s generally the explanation used when no one has a good idea. NZD/USD went vertical several times during the day, so that does seem possible – no news to trigger the move. In fact, Australian retail sales missed estimates (+0.4% mom vs +0.5% expected, although previous month revised up to +0.0% from -0.1%). There’s no general “risk on” mood as stocks in Asia are mixed.
3rd October 2019
The disappointing ADP report raised expectations of further US rate cuts. The probability of a rate cut at the Oct. 31st meeting rose to 73% from 61% the previous day. The ADP report was slightly weaker than expected at 135k vs 140k expected, but what really hit the market was the downward revision to the previous month’s figure to 157k from 195k. That weakened the dollar somewhat, particularly vs JPY. (The USD TWI rose slightly however because of the large role that CAD plays in it – see below.)
2nd October 2019
Overnight the Reserve Bank of Australia (RBA) cut the cash rate another 25 bps to 0.75%. As before, they said that they are prepared to cut further if necessary. The key change was some clarification of their goal: whereas before they said rates would have to stay low “to make progress in reducing unemployment and achieve more assured progress towards the inflation target,” now they are saying they want “to reach full employment and achieve the inflation target.”
20th September 2019
I was surprised to see GBP at the top of the list this morning, after the Bank of England adopted a more dovish tone yesterday. The Bank said for the first time that if there was “entrenched uncertainty” over Brexit, “domestically generated inflationary pressure would be reduced.” That Implies that they might cut interest rates in such a situation, particularly if underlying economic growth was only “slightly positive,” as they said.
19th September 2019
Some pretty big moves today and all on independent reasons. JPY rose, initially for no particular reason that I could see. Bloomberg said it gained “as the BoJ sat tight and said it will review prices and economy in October.” I think Bloomberg uses the word “as” when they don’t know what causd the move. In this case, USD/JPY moved up sharply when the Fed announced its decision (see below), but then started to fall around 00:47 GMT for no visible reason that I could find. The results of the BoJ meeting were announced at 02:50 GMT, by which time it had already come down to 108.17 from 108.43.
18th September 2019
A big “risk on” day in the FX market as Saudi Arabia said it had restored 41% of capacity at the stricken oil processing plant and would satisfy this month’s commitments by drawing on reserves. Yesterday WTI was up about 4%, today it’s down about 5%. So still up from before the strike but well off the highs. Brent, which was more affected by the strike, opened at about $72/bbl Monday but is now trading around $64.43, up from $60.25 at the close on Friday.
17th September 2019
The market is focused again on oil, which had another spectacular day, up over 4% on top of yesterday’s opening gains of some 8%. Saudi Arabia initially said significant amounts of oil could start flowing again within days, but that’s since changed to weeks or months. I guess OPEC+ won’t have to change its strategy after all. The surge in oil was capped after the US said it would release oil from the Strategic Petroleum Reserve (SPR)..
16th September 2019
The focus of attention was the weekend attack on Saudi Arabian oil facilities. The key point here is exactly what was hit: the gas oil separation plant (GOSP). According to energy expert Amy Meyers Jaffe, all Saudi crude oil production goes from the oil well through a gathering system and is then processed in the GOSP.
13th September 2019
On the one hand, there was a positive surprise from the introduction of open-ended quantitative easing. The ECB decided to restart its QE program at EUR 20bn a month. Furthermore, it said it would continue with the purchases “for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ECB interest rates.