- Jan-worst opening month for global equities in 7 years
- Feb 3-worst day for the dollar in 7 years
- recent movement in the dollar would usually associated with a change in policy by the Fed
- is that the price of market in an error of Fed policy?
last week saw the biggest weekly decline "buck" against the dollar index in seven years (-3%). Even US Treasuries rallied, pushing 10-year yields to print + 1.79% at one point, its lowest level in a year and within touching distance of its record low yield of 1.38 + % witnessed in 2012.
It seems that the dealers and some analysts were recalibrate their forecasts on the Fed moves the policy. Finished the four "dots" conspiracy hikes the Fed refers too. Now it appears that many prefer to suggest one or two rate hikes may be possible this year.
Moving the lower U.S. yield curve has hurt financial stocks U.S. (new yearly lows). Lower yields were able to give a temporary boost to commodity prices. Gold moved above its moving average of 0 days for the first time since November ($ 1.1172), while mining stocks have seen double performance. However, weak earnings results from a number of oil and technology names is again provide little relief for some of the major North American stock exchanges.
global recalibration yield curves
a US rate few 'falcon seem to have cold feet now that some members of the Fed themselves contemplating last week. New York, Fed Governor Dudley acknowledged that conditions were "worse now than they were in December" when the Federal Open Market Committee (FOMC) issued its first increase rate in a decade. He also said that the FOMC was "not prepared to take very many conclusions" on US monetary policy at the moment. Some of these "back and frowning" rhetoric Fed the market pushing the next rate hike 'Fed interest to June from March, while lowering its view for the number increases this year.
However, it was not only rhetorical pressure on the dollar. A US January number of key data raises difficult questions about the state of the domestic economy in the US
US ISM manufacturing PMI print last week remains in contraction territory for the third month consecutive (the employment component fell to its lowest level in seven years 45.9). Even the services PMI managed to deteriorate to its weakest in two years. non-farm payrolls ( NFP) Friday's report was a mixed bag: the title of printing came well below market expectations (+ 151k vs. + 180k), and was the lowest total in four months.
On the positive side, the unemployment rate fell, breaking the psychological grip + 5% (+ 4.9%), pushing the U.S. economy to full employment. Hourly earnings were substantially higher, which should eventually give the Fed a portion of wages to inflation, it was sought.
Bank of Japan (BoJ)
short-term returns from a number of Tier 1 banks plants have been under pressure since the Bank of Japan move to negative interest rates in late January (German yields to two years fell to -0.5%, -0.2% in Japan). The drop surprised by the governor Kuroda was not considered a direct effect of economic stimulus, but direct manipulation of monetary policy.
Nevertheless, it seems too have the opposite effect on the governor for now. The weak yen dissipated fairly quickly - USD / JPY fell to ¥ 121.50, return to ¥ 116-118 area it occupied before the announcement of the BoJ. Kuroda talked a lot about the decision, saying that just because negative rates were adopted does not mean the bank ammunition to expand asset purchases. Kuroda said he is concerned that inflation expectations weaken in the medium term, but for now saw moderate economic recovery. He reiterated the BoJ is ready to push further into negative rates if necessary.
Bank of England (BoE)
Last week the Monetary Policy Committee of the BoE returned to "unanimously "for the first time in seven months, the 9-0 vote to keep interest rates unchanged at its lowest. McCafferty, only real hawk MPC changed its majority vote and has conceded to the data, noting that the resumption of wage growth was more moderate than expected. The 'Super Thursday' the Committee reduced its economic growth outlook on concerns of global growth, indicating that a rate rise would "most likely" during the forecast period. Governor Carney insisted that the committee has not discussed the negative interest rates, and reiterated that the MPC believes that the next rate move would likely be higher, not lower. Sterling managed to retest its highest in a month after the decision (£ 1.4650) before declining to current levels (£ 1.4470).
Market to focus on Yellen
investors will focus on the testimony Yellen of the biannual Congress this week for clues on rate policy prospects for the Fed. His testimony before Congress could either strengthen or reconfigure, market expectations through the potential pace of Fed tightening.
Fundamentals have not changed for oil
crude prices continue to be volatile. The current price action suggests that the fundamentals have not changed for the product. Despite the snapback on the recent weakness of the dollar, crude bulls still nervous, that the goods have not been able to make a significant assault on this year's high prices despite dollar weakness.
At the beginning of last week, crude prices dipped on the back of weak manufacturing numbers in China and a series of denials that an emergency OPEC meeting would take place. WTI sank 11% to less than $ 29.50 and Brent fell 10% to $ 32.30 as hopes for coordinated production cuts were rejected. The dollar plummeting only managed to briefly revive crude prices. Oil prices began a new week again on the back foot when the stock resumes its soft tone.
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