Category: Daily Look

Considerable focus on the dollar



We talked about emerging market risks yesterday and the sell-off in EM currencies seen so far this month, with the Russian rouble leading the way. This continued yesterday, with shortages of foreign currency, primarily US dollars, which prompted the Russian central bank to offer FX swaps with the aim of improving dollar liquidity. This pushed the US dollar lower and some of the majors to reverse some of the recent weakness which has been seen on the majors. More notably, cable is near the 1.63 level as the latest polls have given a narrow lead to the ‘no’ side last night. Scotland enters the last day of campaigning before the independence referendum tomorrow, with results expected to be known by the start of European trading on Friday. Sterling volatility is assured whilst the vote remains too close to call.

Update: Taper 7: Dollar shooting higher – two dissenters

Join a live coverage of the Fed decision from 17:45 GMT

Before then, the US Federal Reserve announcement comes this evening. The momentum behind tapering is expected to continue, but the main focus is on the language and the scope for an adjustment to water-down or remove the pledge to keep rates at their current target level “for a considerable time” after the asset purchase program ends. With this expected to happen next month, then some are thinking that the language is incompatible with a Fed tightening rates around the middle of next year. The dollar is going to be sensitive to any change in language, which would give it a further lift, especially vs. the EUR where the policy parameters continue to push in the opposite direction.

Further reading:

AUDUSD – Aussie Gains Favored As It Breaks Key Resistance

Fed Quick Preview: Considerable chance of dollar slide

Focus on Dollar and Sterling

Focus on Dollar and Sterling

As we mentioned yesterday this week is all about the dollar and then sterling. For today, the focus is on both. For the dollar, it’s with the start of the two day Fed meeting, with results announced tomorrow evening. The main focus is on the statement and the potential for a change in language, which could prove

The FX rollercoaster continues

The FX rollercoaster continues

The past month has seen FX volatility increase for a variety of reasons and things don’t look set to calm down this week, with two key events to look forward to. The first is the Fed meeting on Wednesday, where the market is becoming more concerned that we could see a change of language in

Sterling rebounds after “No Campaign” takes the lead

Sterling rebounds after “No Campaign” takes the lead

Sterling has found support now as the rallying cries for Independence seem to be falling on deaf ears. The latest Gov poll (which is reputedly one of the more accurate pollsters, although they released the one last weekend that showed the Campaign in the lead causing the recent spike in volatility in FX markets), showed the No Campaign back in the

Currencies pressured down under

Currencies pressured down under

The Aussie was looking decidedly weak yesterday, having been pushed lower by a combination of weak iron ore prices (down more than 6% in Sep) and softer domestic data. The reaction to the much better than expected employment data overnight (initial 50 pip gain unwound) is indicative of the fact that few seem to be

The basis for increased volatility

The basis for increased volatility

The past 24 hours have seen some key moves in FX, most notably on the yen which has weakened further and taken USDJPY above the 106 level and more decisively above the tight range than has held so far this year. This could well bring some greater conviction to those pushing for a weaker yen,

US dollar dominates

US dollar dominates

The dollar rally that commenced in earnest just over two months ago seems to be gathering pace at the expense of many dollar denominated commodities such as gold and oil. Brent crude oil is a remarkable one as it has dipped back below the $100 level for the first time in over a year, down

Scottish independence referendum weakens the pound

Scottish independence referendum weakens the pound

The pound has weakened significantly during the Asia session on the back of the latest polls suggesting that the upcoming referendum on Scottish independence could be won by those wanting Scotland to separate from the United Kingdom. Polls have been narrowing in recent weeks, but the weekend’s Sunday Times poll was the first to give

ECB cuts rates to escape deflation

ECB cuts rates to escape deflation

Yesterday was a turning point for the single currency, as the ECB finally showed that it was serious in tackling the risk of deflation in the eurozone. EURUSD saw its biggest one day percentage fall for nearly 3 years, as traders and investors capitulated. The measures were in some ways modest (0.10% cut in rates,

ECB meeting takes center stage

ECB meeting takes center stage

All eyes of the ECB today and one can’t help thinking “we’ve been here before”. It seems that in the run up every ECB meeting in the past few years, in fact ever since Mario Draghi said famously that he would do “whatever it takes”, there’s been a build-up of expectation that something major will be announced