Dollar Confirms Longest Tumble in 3 Years After Yellen Testimony
Over the past week, we have seen the S&P 500 mount an impressive rebound from its 6 percent correction while the dollar has sunk over 1 percent. While reviving a negative correlation between the two that follows the lines of 'risk trends,' the momentum is as yet unconvincing of robust trend development. This seems to have its roots in the market's acclimation to the reality of a steady Taper and the reality that the downshift in stimulus itself is not the panic-level event that would set off a risk unwind. Yellen promoted both the Taper and calm at the House leg of the Humphrey-Hawkins testimony. Among the highlights, the central banker said she expected the Fed to continue with the measured steps of the Taper. On the other hand, with the FOMC's 6.5 percent unemployment target (offered last June) in sight, Yellen reiterated the objective was a 'threshold' and not a 'trigger'. To ease the pressure this disparity would have with each economic update, went on to say the Fed will look at a broad range of labor data. The market will eagerly look to establish what those measures are.
So, where do we look for the dollar's bearings moving forward? Risk trends. US equities (a benchmark for investor sentiment) are approaching record highs as the VIX Volatility Index is quickly returning to a natural floor around 12 percent. Reversing the 'risk' premium is one thing. Initiating a new and lasting speculative drive is another. It requires commitment and capital inflow these markets will struggle to produce.
British Pound: BoE to
Where even the FOMC's Taper announcement fails to develop lasting volatility - much less meaningful trend - the market's resilience to scheduled event risk is high. Yet, the upcoming
In the August Quarterly Bulletin (
Euro Outlook Mixed between Growth Forecast Growth Upgrades, Risk Appetite
A number of financial and economic report cards were released this past session for the Eurozone, and the all offered the same degree of optimism. Spain's Finance Minister Luis de Guindos remarked that the government is more likely to raise its 2014 economic forecast at the April review. The Troika's third review of
Yen Crosses Advanced on Fading Volatility, Where are the QE Threats?
With the fear of an imminent deleveraging of risk and carry fading alongside volatility indexes, the yen crosses were encouraged higher this past session. Yet, with each attempt to rebound, there is something tangibly absent behind the drive - where is the pressure for a stimulus upgrade? Few policy officials have kept the verbal assault up. Adding to these concerns this morning, the IMF stated the BoJ doesn't need more QE.
Australian Dollar: Yields on Cusp of Pricing First RBA Hike, Data Ahead
The 12-month interest rate forecast for the RBA has yet to overtake the multi-year high in hawkish sentiment set this past November - but it is very close to it at 17 bps. A positive rate forecast is particularly important to a carry currency like the AUD. Looking at the market, two-year government bond yields have advanced to a 10-month high 2.87 percent. For an added push,
Emerging Markets Rally, South African Rand on Verge of Breakout
The more liquid and volatile emerging market currencies gained significant ground against the safe haven dollar Tuesday. The South African Rand (1.6 percent), Turkish Lira (1.0 percent) and Brazilian Real (0.4 percent) were all notable gainers on the day. Meanwhile, the MSCI EM ETF jumped 2.2 percent on a swell in volume. The next stage of gains will likely require dedicated yield reach.
Machine Tool Orders (YoY) (JAN P)
These are levels not seen since 2011.
French Current Account (euros) (DEC)
Positive figure only twice since 2004.
Spain House Transactions (DEC)
The housing sector remains one of the troubled points of Spain's uneven recovery
Consumer Price Index (MoM) (JAN)
CHF strength continues in the wake of uncertainty despite deflationary price level environments.
Consumer Price Index (YoY) (JAN)
Consumer Price Index- EU Harmonized (MoM) (JAN)
Consumer Price Index- EU Harmonized (YoY) (JAN)
Euro-Zone Industrial Production s.a. (MoM) (DEC)
November's MoM figures was the best since 2010.
Euro-Zone Industrial Production w.d.a. (YoY) (DEC)
MBA Mortgage Applications (
We may see further consolidation ahead of Yellen on Thursday.
Monthly Budget Statement (JAN)
Business NZ Manufacturing PMI (JAN)
July saw the highest reading since 2004.
Domestic Corporate Goods Price Index (MoM) (JAN)
Despite a strong rise since the -2% lows in 2012, we are seeing the YoY figure flatten as of late.
Domestic Corporate Goods Price Index (YoY) (JAN)
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