Fed and US corporates in tussle over inflation

The release of record-busting US CPI-inflation data for October has seriously dented the Federal Reserve’s long-standing argument that high inflation will prove “transitory. What has proved transitory is the rally in short-end government bond yields in developed markets, in line with our expectations. Volatile monthly inflation in the US and fleet-footed developed central banks point to government bond yields remaining

Read more

Early EM rate hikes supporting EM currencies

Following key central bank policy meetings last week in Australia, the US and UK, short-end interest rate markets have turned more dovish. We had argued back on 2nd November that “hawkish interest rate markets may have got slightly ahead of themselves.” The Federal Reserve and certainly the RBA cooled market expectations of rate hikes while the Bank of England flat-footed

Read more

Hawkish rates markets ahead of themselves

Our measure of global headline CPI-inflation rose further in September to 3.7% yoy but the 0.17pp increase was entirely due to the 0.27pp rise in CPI-inflation in developed economies to a 13-year high of about 3.9% yoy. Headline CPI-inflation in EM economies was unchanged in September at about 3.3% yoy, with the fall in CPI-inflation in China and in particular

Read more

Macro data dog not wagging FX market tail

US macro data, including measures of US inflation, non-farm employment, retail sales, manufacturing output, ISM PMIs and consumer confidence indices, have been far less volatile since the peak in global risk aversion in March-April 2020 when the first national lockdowns decimated global growth. However, volatility in most of these monthly metrics remains high relative to history. This is particularly true

Read more

Vaccination and currency immunity

In the past couple of months governments in Asia-Pacific have materially accelerated the administration of Covid-19 vaccines. But because of low starting points, vaccination rates remain low compared to the EU, US and UK and even a number EM economies (including Turkey). The exceptions are Korea, Malaysia and Japan which have now administered a similar number of doses per capita

Read more

Powell Put in play but greater challenges ahead

Federal Reserve Chairperson Jerome Powell’s pre-prepared opening speech at the Jackson Hole Symposium on Friday afternoon was a key litmus test for the central bank. Powell took yet another small step towards an eventual tapering this year of the Fed’s asset purchases and a tightening of arguably extremely loose monetary policy while pouring cold water on any talk of policy

Read more

Low global FX vol: maturity or complacency?

Global FX volatility – as measured by the 5-day Standard Deviation (SD) in the daily percentage change in the spot (closing) price of a turnover-weighted basket of 32 major currency pairs against the US Dollar – remains depressed by historical standards. While global FX volatility rose slightly on 11th August to about 0.32 SD following the release of US CPI-inflation

Read more
1 2 3 4 13