With the release of the US and EU GDP figures, Q1 is behind us. Amidst the great uncertainty, there is at least one thing that is clear. The current quarter is going to be worse, even if not for China. The good news is that with lockdowns gradually easing, the US and European Union, and parts …
Overview: Retail sales and industrial production disappointed in both the US and China prior to the end of the tariff truce, declared by the US in a series of presidential tweets on May 5. The reaction function of the US to the drop in equities was to play down tensions on three fronts. First, a …
It looks so easy on paper. China can sell its holding of US Treasuries and/or weaken the yuan to offset the tariffs and boost exports. It is the first and easy answer from strategists, journalists, and some academics. Often times, it is presented as a novel idea; as if diplomats, investors, and policymakers have not …
Why China Finds it Difficult to Weaponize the Yuan and US Treasuries Read More »
The information set investors have is unlikely to substantively change in the coming days. The important macro points are known. The first part of February may be about digesting and making sense of that information rather than an incremental increase. Investors had been concerned about what has become known as “quantitative tightening” or “QT”. …
The global head of Fitch’s sovereign ratings warned that the continued US government shutdown could jeopardize the AAA-status the rating agency grants America. It spurred little market reaction (and for good reason). First, the rating cut is not imminent, though some of the headlines suggest otherwise. Fitch’s McCormack though was clear: ” If the shutdown …
When trying to work through the impact of US tariffs on its trade balance, one ought to keep in mind Orson Welles caution that if you want a happy ending, that of course, depends on where you end your story. If one stops with simply the US tax on imports, it should reduce the quantity …
Why Tariffs will Not Reduce the US Trade Deficit Read More »
A survey of central banks and sovereign wealth funds by Invesco sheds light on their investment plans. The traditional separation of markets and the state may be helpful for ideological arguments, but the real situation is more complicated. Central banks and their investment vehicles (sovereign wealth funds) are market participants. In some activities, such as …
The US dollar has rallied against both the Japanese yen and Chinese yuan since the end of September. Through today, the yen has fallen 9.8% and the yuan has fallen by 3.5%. What they have in common is the rise in US interest rates relative to their own. Since September 30, the US 10-year yield …
Speculators turned more bearish the euro and less bullish the Japanese yen in the Commitment of Traders week ending October 11. The dramatic shift in US presidential polls and the continued rally in oil appeared to have spurred speculators to reduce short Mexican peso positions and add to longs. Speculators in the futures market added 20.1k contracts to their gross …
Speculators Turn More Bearish Euros and Less Bullish the Yen Read More »