Monday, January 8, 2018

RBC Capital Markets

Potentially higher euro rates volatility from "extremely low" levels at present and higher yields prompts RBC Capital Markets to recommend so-called payer swaptions: options to enter a swap and pay the fixed leg while receiving floating rates. Option premiums are cheap when volatility is low, as the underlying asset is less likely to move to in-the-money territory. And higher rates are beneficial for those paying fixed rate to receive floating

Thursday, January 4, 2018

pushes EUR/USD

A mix of upward revision of eurozone PMIs and higher than-expected U.S. jobless claims on Thursday pushes EUR/USD up 0.6% to 1.2087, just a shade below the September high of 1.2093, which would mark its highest in around three years, according to Factset. Eurozone December final composite PMIs were revised slightly upwards from the flash estimate to 58.1. And U.S. jobless claims rose by 250,000 during the last week of December, above forecasts in a WSJ poll for a 240,000 increase. Private sector jobs rose by more than expected, however, according to the ADP report.

Tuesday, January 2, 2018

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Thursday, December 7, 2017

Canadian dollar has posted losses in the Thursday session

 . USD/CAD is trading at 1.2832, up 0.36% on the day. On the release front, Canada will release Building Permits and the Ivey PMI. The US publishes unemployment claims, which are expected to tick up to 239 thousand. On Friday, the US publishes three key employment indicators – Average Hourly Earnings, Nonfarm Employment Change and the unemployment rate. The week wraps up with the release of UoM Consumer Sentiment.
The Bank of Canada did not pull any surprises on Wednesday, and maintained the benchmark rate at an even 1.00%. The Canadian dollar lost ground after the rate announcement, which was dovish in tone. The Bank said that there was slack in the labor market, and investors took this as a sign that a January rate hike was less likely. Another uncertainty facing the BoC is NAFTA, as a protectionist-minded US administration has threatened to torpedo the free-trade agreement unless Canada and Mexico make major concessions. An additional headache for the BoC is that the Federal Reserve is expected to raise rates in December and January. The BoC will have to follow suit with a raise of its own, or watch the Canadian dollar head lower against the greenback.

Wednesday, November 29, 2017

euro has edged higher in the Wednesday session

The euro has edged higher in the Wednesday session. Currently, EUR/USD is trading at 1.1857, up 0.14% on the day. On the release front, Germany releases Preliminary CPI, which is expected to accelerate to 0.3%. French data was a mix. Consumer Spending declined 1.9%, missing the estimate of 0.0%. Preliminary GDP in the third quarter remained unchanged at 0.5%. In the US, Preliminary GDP is expected to post a strong gain of 3.3%, and Fed Chair Janet Yellen testifies before a congressional committee. On Thursday, German releases retail sales and the eurozone publishes CPI Flash Estimate. The US will publish unemployment claims and personal spending reports.
The political vacuum in Germany has taken a twist, as President Angela Merkel continues in efforts to form a new government. Coalition talks will now center on Merkel’s conservative bloc (CDU) and the social democrats (SPD). After the election, the SPD announced that it would remain in the opposition. However, coalition talks imploded when the Free Democrats pulled out of the negotiations and there is pressure on the SPD to reconsider in order to avoid elections. The SPD is split on whether to join a coalition with Merkel, as many SPD members don’t want the SPD to be relegated to a junior party in the coalition, as was the case prior to the election. Although the SPD has agreed to exploratory meetings with the CDU, substantial talks of a “grand coalition” are not expected to start before 2018. The SPD is likely to take advantage of Merkel’s weak hand and press demands for greater government spending and a looser immigration policy. The SPD could even demand the powerful finance ministry.

Monday, November 27, 2017

Japanese yen has posted gains in the Monday

The Japanese yen has posted gains in the Monday session. In North American trade, USD/JPY is trading at 110.94, down 0.53% on the day. On the release front, SPPI edged lower to 0.8%, just shy of the estimate of 0.9%. In the US, the sole indicator is New Home Sales, which is expected to slow to 627 thousand. On Tuesday, the US releases CB Consumer Confidence, with an estimate of 123.9 points. We’ll also hear from Fed Chair Designate Jerome Powell and Treasury Secretary Steven Mnuchin.
The changing of the guard at the Federal Reserve starts this week, as Jerome Powell testifies before the Senate Banking Committee on Tuesday for his confirmation hearing. Will Powell be a clone of outgoing chair Janet Yellen? Powell inherits an economy that is in excellent shape, but persistently low inflation remains a nagging problem. Fed policymakers have differing views on what to do about inflation, with some members proposing that the Fed drop its 2 percent target, in favor of a “gradually rising path” for prices. The Fed remains confounded by low inflation and wage growth, despite a labor market that is at full capacity. Still, the Fed will likely pull the rate trigger next month, and could raise rates up to 3 more times in 2018 if the economy continues to expand at its current pace.

Wednesday, November 15, 2017

Gold prices have posted small losses

Gold prices have posted small losses in the Wednesday session. In the North American session, the spot price for an ounce of gold is $1278.34, down 0.14% on the day. On the release front, the focus was on consumer indicators. CPI and Core CPI matched the forecasts, with gains of 0.1% and 0.2%, respectively. Consumer spending reports were a mix – retail sales gained 0.1%, below the estimate of 0.2%. Core Retail Sales came in at 0.2%, beating the forecast of 0.0%. As well, the Empire State Manufacturing Index slowed to 19.4 points, well short of the estimate of 25.3 points. This reading marked a 4-month low.
Gold is showing volatility on Wednesday. The metal pushed to a high of $1289.50, its highest level since October 20. However, the metal has given up these gains in the North American session, after the release of retail sales and CPI. We could continue to see movement from gold, as investors keep a close eye on the tax overhaul bill which is on its way to Congress. If the bill gains steam, we are likely to see the dollar move higher, which could weigh on gold prices.
Although consumer price index numbers remain weak, there was better news from producer price index reports on Wednesday. Core PPI and PPI remained unchanged at 0.4%, beating their estimates. PPI increased at an annualized rate of 2.8%, its fastest gain since February 2012. Inflation levels are being closely monitored by the Federal Reserve, as stronger inflation levels would likely result in a rate hike in early 2018. The markets are very bullish on higher rates, with a December hike priced in at 93% and a January raise priced in at 89%.