Archives of “Expect” tag

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A look at the best/worst major currencies this week is worrisome

  
Analysis, Forex
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Swiss franc strength isn’t what you expect to see in a run-away week for stocks

Swiss franc strength isn't what you expect to see in a run-away week for stocks
It’s rare to see the Swiss franc and Japanese yen at opposite ends of the FX leaderboard. They generally move in the same direction because they’re both low yielders and safe-haven currencies.
So what happened? One argument is that this was a Swiss idiosyncratic move:
  • The US added Switzerland to the FX watchlist for manipulation. That diminishes the chances of large-scale intervention
  • Technical breaks in EUR/CHF and USD/CHF added to momentum
  • Russian political drama added to the bid for CHF
I wouldn’t disagree with any of those factors but it’s still a stark difference. The other argument is that this run-up in risk is driven by leverage from cheap money, retail chasing momentum and year-end effects.
Ultimately, the market will have to answer but I just can’t get behind this run in risk until we see a bit more alignment in equities with FX and bonds.
CHFJPY

The ECB adds to the growing list of central banks to have cut rates this year

  
  Analysis
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Expect the list to grow longer towards the end of the year

Rates

We had three rate cuts yesterday and two new entrants (highlighted) to the list this year. Turkey continued with their Erdogan-style rate cuts but it was the ECB that stole the spotlight as it reduced its deposit facility rate by 10 bps.
Joining them is the Danish central bank as they cut their key rate by 10 bps as well – mirroring the ECB – and that takes the tally above to 38 rate cuts this year.
Expect the list to expand further as we’re nowhere near close to the bottom just yet.
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