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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 moreUS Treasury yields and the Dollar, perhaps unsurprisingly, have risen in the wake of today’s strong US labour market report. However, we think it would be a stretch to argue that markets have “hard-baked” in their view that the Federal Reserve will announce its tapering plans potentially as early as the Jackson Jackson Hole Symposium on 26-28 August. A case
Read moreIn the past fortnight US Treasury yields across the maturity spectrum have oscillated in reasonably wide ranges, with the highs coinciding with the release on 13th July of US CPI-inflation data. The shape of the yield curve today is almost the same as it was on 8th July. The US rates market has tentatively found its feet, for now at
Read moreThe Federal Reserve at its policy meeting on 16th June, whether inadvertently or by design, reset financial markets’ clocks. The dust has since settled somewhat, with US short-end and long-end yields, the US Dollar and S&P 500 trading sideways for the past couple of sessions. When looking at the past month, hawks, doves, bulls and bears can all claim at
Read moreTime and time again in the past five weeks US Treasuries and the S&P 500 have sold off and the Dollar rallied in the wake of hawkish US surprises only for markets to quickly unwind these moves. Volatility in US financial markets has ultimately remained subdued and directionality has been limited. In the month to 3rd June US Treasury yields
Read moreUS financial markets have had to contend with three “hawkish surprises” so far this month and on each occasion price action has been broadly the same. Initially the Dollar rallied, the S&P 500 sold off and US Treasury yields rose but these (modest) moves were very quickly reversed. Volatility and directionality have thus remained limited, although the Dollar NEER has
Read moreTreasury Secretary Yellen’s comments ten days ago were merely a temporary distraction. Perhaps more surprisingly, at first glance, the release on Wednesday of a much larger-than-expected increase in US CPI-inflation in April has not had much “sticking power”. Core CPI-inflation almost doubled to 3.0% yoy (the high since December 1995) and as a result the Federal Reserve’s “real core” policy
Read moreThe past week has seen a short-lived flurry of market price action, with daily volatility in the US Dollar and equities edging higher on 30th April and again on 4th May. However, volatility overall has remained subdued, particularly in the benchmark US 10-year Treasury yield. Moreover, the Dollar NEER and US 10-year yields – increasingly a bellwether for financial markets
Read moreThe Federal Reserve has in the past six weeks diligently stuck to its “patience until substantial further progress is seen” monetary policy mantra. Its “reward” has been range-bound US Treasury yields, a slowly depreciating Dollar and a metronomic rise in US equity indices, with all three financial markets exhibiting only modest volatility. Since 19th April the Dollar NEER has depreciated
Read moreThe US Dollar Nominal Effective Exchange Rate (NEER) traded in a narrow range of 1.8% between late-2020 and early March, according to our estimates. The Dollar then embarked on a 3-4 week rally, driven by rising US Treasury yields, the stretched valuations of other major currencies and still tepid global economic activity. Since end-March the Dollar NEER has depreciated 1.8%
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