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Markets bereft of key macro data releases and policy events in recent days will be turning their attention tomorrow to the European Central Bank’s policy meeting. The consensus forecast, which we share, is that the ECB will leave its policy rates, including its deposit rate (-0.50%), and the modalities of its PEPP and APP unchanged. However, unnamed ECB Governing Council
Read moreSterling has enjoyed a strong, if bumpy ride, since late-June. It has been the second strongest major currency against the US Dollar and appreciated 3.7% in NEER term, thanks in part to a build-up of speculative long-Sterling positions. Markets have seemingly taken heart from government measures to support the economy, including the labour and housing markets and service sector, the
Read moreFed Chairperson Powell, in his opening speech at the “virtual” gathering of central bank governors yesterday announced that going forward the Fed would “seek to achieve inflation that averages 2% over time” and therefore that “following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”
Read moreThe United States’ post-war record GDP contraction in Q2 of 9.5% qoq and the Dollar’s recent depreciation have been making headline news but some perspective is required. The US GDP contracted about 10.6% in H1 2020, far more than in China (+0.6%) and South Korea (-4.6%). However, of other economies which have so far released Q2 data – including the
Read morePrice action in major currencies was again subdued last week. With few tier-one macro data releases for markets to trade off the focus was on the reaction function of governments and central banks to covid-19 related developments. Only a handful of currencies appreciated by more than 1% vs the Dollar last week and no major currency depreciated by more than
Read moreMajor currencies, equity markets and the price of crude oil since 8th June – the cycle low in the US Dollar – have exhibited reasonably limited directionality, narrow trading ranges and very low volatility, with the notable exception of currencies in Latin America. However this is not a case of more confident financial market participants finding their feet, in our
Read moreWhile the United States and China have not gone as far as re-introducing or increasing tariffs on each others’ imports, the war of words between the two trading superpowers has clearly escalated with Hong Kong caught in the middle. In line with our expectations the Chinese Renminbi has depreciated versus (a weaker) Dollar and in nominal effective exchange rate terms
Read moreRead the full article here Olivier DesbarresOlivier is an economist and rates & FX strategist with over 22 years experience in financial markets. He is Director and Founder of 4X Global Research, an independent, London-based consultancy which provides institutional and corporate clients with substantive research, high-quality analysis and insight on emerging and G20 economies and financial
Read moreThe drastic measures which governments across the world have taken so far to mitigate the spread of the coronavirus have few precedents outside of war times and therefore quantifying their economic, financial and social impact remains challenging. However, there is little doubt that economic activity in China, the epicentre of the epidemic, has slowed sharply. Disruptions and delays to international
Read moreIn reaction to the coronavirus epidemic governments across the world have enacted measures unprecedented in recent decades, including closing national borders, setting up quarantine zones, restricting travel and closing factories and schools. Economic activity in China has slowed sharply and disruptions to international supply chains are impacting global trade and production with the slump in tourism heaping further pressure on
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