U.S. Treasury funds recorded their first outflow since February in the week to Wednesday, as global investors shed $1 billion in the government bonds and piled into stocks, according to Bank of America and data provider EPFR on Friday. Investors snapped up $23.5 billion in stocks in the week to Nov. 15, marking the second largest weekly inflow into equities of 2023. The influx to stocks and flows out of U.S. Treasuries follows data on Tuesday that showed U.S. inflation slowing, boosting market hopes that the Federal Reserve is finished ...

USD: A glimpse of the future? The dollar has entered a consolidative phase, but yesterday’s price action gave us a glimpse of what could be more regular price action in 2024. US initial claims were a little stronger than expected, the US 2-10 year yield curve bull steepened by 3-4bp and DXY sold off around 0.4%. This is the kind of price action we expect to see more frequently next year as tight US rates finally play catch up with the US economy and employment trends start to deteriorate. Before ...

The dollar was on track for one of its steepest weekly falls versus major currencies this year on Friday, while the yen strengthened sharply to trade below 150 per dollar as concerns grow about the worsening global economic outlook. Cooler-than-expected U.S. inflation data on Tuesday helped reset market expectations for how quickly the U.S. Federal Reserve will cut rates and has weighed on the dollar, which is on track for a 1.6% weekly fall – its biggest drop since mid-July. The index was down 0.2% on the day at 104.14, ...

Investors maintained bearish bets on most Asian currencies as prospects of a buoyant U.S. dollar pushed them away from riskier assets after Federal Reserve officials seemed uncertain whether interest rates were high enough to tame inflation. Short positions in the Indonesian rupiah eased after bears on the currency firmed to their highest since November 2022, with those on China’s yuan, Indian rupee and Malaysian ringgit also easing. Investor confidence in the rupiah has taken a hit amid U.S. monetary policy tightening and rising geopolitical risks that prompted the country’s central ...

The dollar edged lower on Thursday after U.S. jobless claims rose more than expected last week, indicating a cooling labor market that could prompt the Federal Reserve to cut interest rates in early 2024 and engineer an economic soft landing. The dollar index , a measure of the U.S. currency against six peers, fell 0.19%, while the euro strengthened 0.34% to $1.0883. Initial claims for state unemployment benefits rose 13,000 to a seasonally adjusted 231,000 for the week ended Nov. 11, the Labor Department said. Economists polled by Reuters had ...

USD: Bouncing around The dollar is drifting higher as investors continue to assess whether the large drop on Tuesday was the start of something meaningful or just more noise in an uncertain environment. We have heard a couple of Federal Reserve speakers still holding out the risk of a further hike, but for the time being, US money markets seem pretty confident that the Fed cycle is over and have now priced 90bp of easing in 2024. Yesterday’s release of US October retail sales failed to kindle this week’s dollar ...

The dollar held its ground on Thursday after a volatile two days that saw sharp declines followed by a rebound as traders took incoming economic data as signalling the Federal Reserve will wait longer before cutting interest rates. The dollar index – which tracks the U.S. currency against six other units – was steady at 104.33. It gained 0.31% on Wednesday, following a 1.51% plunge the previous day – its largest drop for a single trading day in a year. The euro was up around 0.1% at $1.0857, as was ...

The fate of Asian FX in 2023 was largely a function of US dollar strength, overlaid with a myriad of local economic factors, which saw some currencies perform better than others at different times, though the broad theme was Asian FX losses against the USD. The Malaysian Ringgit came bottom of the pack, losing more than 5.5%, while Indonesia’s rupiah, India’s rupee and the Phillippine peso all made smaller losses, weakening by around 0.5%. All currencies have nevertheless lost ground to the US dollar in 2023 year-to-date, and we would ...

Sterling eased on Wednesday after data showed British inflation cooled at its fastest pace in more than 30 years in October, reinforcing expectations that the Bank of England (BoE) will be cutting interest rates by the middle of next year. The British consumer price index (CPI) rose by 4.6% in the 12 months to October, from September’s 6.7% increase, according to the Office for National Statistics. It was the lowest reading in two years and below forecasts for a reading of 4.8%. The drop to 4.6% from 6.7% was also ...

Executive summary This time last year we were forecasting fewer trends in global FX markets and more volatility. In fact, 2023 has proved a year of two halves: the first half more trendless and the second half characterised by a very orderly and powerful dollar bull trend. This dollar rally has been built on the exceptionalism of the US economy – registering an incredible growth rate of 4.9% quarter-on-quarter annualised in the third quarter. And despite headline inflation dipping, there is really not enough evidence, yet, for the Fed to ...

The head of the International Monetary Fund has urged countries to make a more proactive push to develop central bank digital currencies (CBDC). Eleven countries, including a number in the Caribbean, and Nigeria, have already launched CBDCs. Around 120 others are exploring them, although progress and approaches differ widely and a few have even abandoned the idea altogether. “We may be at a point where the public sector needs to offer a little more guidance,” IMF Managing Director Kristalina Georgieva said in a speech in Singapore. “Not to crowd out, ...

USD: Dollar slump looks overdone We had pointed to the risk of a USD correction yesterday given the chances of a soft CPI reading, and the tendency of the dollar to underperform after key US data releases/events. The move was, however, quite extreme. If position-squaring did play a role in exacerbating the size of the dollar correction, the depth of the drop in Treasury yields means the FX shifts have taken their cues from a substantial repricing of monetary policy expectations. The Fed funds futures curve erased any residual bet ...

The dollar edged up on Wednesday after its biggest drop in a year the day before when cooler U.S. inflation data added to investor conviction that the Federal Reserve may not raise rates again, while the pound fell after slower UK inflation figures. Tuesday’s steep drop in the dollar was sparked by data showing U.S. consumer prices were unchanged in October, with the annual rise in underlying inflation the smallest in two years. In the 12 months through October, the CPI climbed 3.2% – below economists’ estimates – after rising ...

The pound trod water on Tuesday as traders held their fire ahead of U.S. inflation data that could be key in dictating the near-term direction of the dollar against other currencies. British data earlier in the day showed UK workers’ wages grew slightly less quickly in the three months to September, but remained close to their record pace. The figures will likely do little to ease the Bank of England’s concerns about inflationary pressures and did nothing to change market-based forecasts for a UK rate cut in June 2024 at ...

USD: Watch for the key data correction event Most action in the FX market today should revolve around the release of the October inflation report in the US. Consensus expectations are for a month-on-month increase of 0.1% in the headline and 0.3% in the core, with yearly rates falling to 3.3% (headline) and steadying at 4.1% (core). Our US economics team’s view is broadly in line with consensus, although they highlight how the big drop in gasoline prices could allow headline MoM CPI to print a 0.0% or even a ...