ATF Trading Room

Aug. 4, 2017 (Tempus, Inc.) – The U.S. looked to today’s economic docket to help stop its recent bleeding.  The Bloomberg Dollar Index fell for its fifth conservative month in July, its longest losing streak since 2011.  The same index is set for its 4th straight weekly decline as political risks have weighed on the greenback.  Yesterday, the news broke that Special Counsel Robert Mueller has convened a grand jury in Washington DC as the Russian tampering investigation continues to ramp up.  The dollar fell sharply as the headline hit the wire but quickly regained most of those losses.

The dollar is indeed rallying in early trading after jobs data impressed. Employers added 209K workers in the month of July, beating expectations of a 180K.  Last month’s print was also upwardly revised by 9K. The unemployment rate held at 4.3%.  A further breakdown of the data showed that average hourly earnings rose 0.3% month over month, after a 0.2% gain in June.  The uptick in earnings could help spur consumption, which is 70% of the American economy, and sustain growth.

The average jobs pace since January this year is 179K a month, still under that average of 187K a month last year.

EUR

The Euro remains elevated and within striking distance of it 20-month high against the U.S. dollar.  A day after German PMI gave traders cause for concern over the health of Europe’s largest economy, today’s data shows the PMI scare may be a one-off.  German factory orders for June rose 1.0% month over month, doubling expectations.

GBP

The British pound floated in no-man’s land overnight as traders continue to digest yesterday’s Bank of England meeting.  The central bank held its benchmark interest rate unchanged, which was widely expected.  However, they did downgrade their economic outlook for the remainder of the year and next in the face of Brexit challenges.  The sterling sold-off during yesterday’s session and looks to do the same today following better-than-expected U.S. jobs data.

 


USA 

July 21, 2017 (Tempus, Inc.) – The beleaguered U.S. dollar was unable to stage a meaningful comeback overnight after taking heavy losses during yesterday’s sessions.  The dollar has been hampered recently by slowing economic indicators and the failure of the U.S. government to pass any meaningful legislation which casts doubt on the ability to eventually pass pro-dollar initiatives like infrastructure spending or tax reform.

The straw that broke the dollar’s back came yesterday as Bloomberg News broke a story that claimed special prosecutor Robert Mueller has expanded his Russia investigation to include President Trump and his business associate’s business dealings from even before the President had serious political aspirations.   As the story broke, the U.S. Spot Dollar Index fell off a cliff and the greenback sunk to a 2.5 year low against the Euro.

Yesterday’s data was also disappointing with the Philly Fed manufacturing index falling.  There is no major economic data or Fed speakers scheduled for today.  Therefore, the dollar will hope to avoid new Russia headlines and head to the weekend licking its wounds.

EUR

The Euro was a train barreling down the tracks during yesterday’s session despite mostly dovish commentary from ECB President Mario Draghi.  The European Central Bank left interest rates unchanged, which was widely expected.  In a press conference following the decision, the central bank head reiterated that the bank’s easy monetary policy is still appropriate, throwing cold water on speculation that the ECB is close to tightening policy.

Nonetheless, the common currency benefited from breaking Trump/Russia news on the other side of the pond.  The Euro rallied and broke technical levels of the May 2016 high.  The Euro’s run ended with the currency at its strongest level since January 2015 against the U.S. dollar.

AUD

The Australian dollar was one of the only major currencies that failed to rise against the besieged greenback.  Reserve bank of Australia Deputy Guy Debelle said in a speech today that just because an increase in other central bank’s policy rates doesn’t “automatically mean” that rates in Australia need to rise. Aussie OIS show traders are now only pricing in a 20% chance of a rate hike by December of this year, down from 33% yesterday.

The Aussie rallied early in the week after minutes from the RBA’s July meeting suggested growth is picking up.  The currency has since given up some of those gains.

July 20, 2017 (Tempus, Inc.) – The U.S. Dollar is trading in wild ranges this morning as markets react to the European Central Bank’s decision to delay any monetary policy tightening. Shockingly, the Euro is up as ECB President Mario Draghi is explaining that QE will not be changed and that officials are still committed to expanding and extending the program as needed, yet none of this is having a negative effect.

In fact, he admits that inflation is dragging, but feels very confident on the strength of the economic recovery. Basically, it looks like Draghi and other members felt the fall will provide all the necessary data and analysis that provide enough confidence to act on increasing interest rates without jeopardizing the progress being made.

Overall though, the U.S. Dollar is faring better across the board with positivity built from good housing numbers. The greenback also was not affected tremendously by the Bank of Japan’s announcement in which they upgraded their GDP forecasts, but lowered their inflation expectations, again. It seems like tapering of easing measures will happen everywhere, but in Japan.

EUR

The Euro is trading in wild ranges, swinging within a 75-point range as markets gauge the ECB’s thinking. As expected, rates were not changed, but there seems to be a counterintuitive correlation between the dovish tone of delaying action and the Euro appreciation we are seeing. ECB’s Draghi sounds very cautious yet optimistic.

Furthermore, he said that tighter financing conditions are “the last thing” the ECB wants. As we interpret it, the Euro deserves credit and its value reflects the lack of political calamity that once seemed possible for the continent as well as the economic strengthening that has spread beyond Germany. The ECB just wants to keep enjoying the show and go on vacation.

GBP

The Pound weakened by over half a percent following a lack of agreement on the amount the UK must pay the EU with a now very intense French delegate’s demand that they pay big time. Prime Minister Theresa May is already under a lot of pressure, but now she must explain to Parliament that the EU is serious about payment of obligations before any trade deals is possible.

Bruno Le Maire, France’s Finance Minister, even went as far as quoting former British Prime Minister Margaret Thatcher in saying, “We want our money back.” The tensions play poorly for a Brexit team struggling to have a cohesive message in the face of EU lawmakers ready to make the divorce proceedings punitive.

 

Apr. 7, 2017 (Tempus, Inc.) – Global markets across all asset classes experienced heightened volatility as news broke that the U.S. launched a missile attack on Syria in response to the regime’s chemical attack on his own people earlier this week. Global equity markets shot lower and safe-havens, including gold, benefited. The Japanese yen and the Swiss Franc, traditional safe-haven currencies, also found knee-jerk support before reversing most of their gains. The quick reversal shows that markets expect the attack to be an isolated incident. However, the true fallout from the military action is unclear. Russia has already condemned the attacks as act of aggression against a sovereign state. Russia has been propping up the Assad regime in Syria for years and Russian soldiers are currently on the ground in Syria. The attack could also be seen as a warning to North Korea as the U.S. has shown it is willing to act unilaterally against rogue nations. Near-term headline risk and longer-term risk-off potential could spark more volatility.

Despite modestly benefiting from risk aversion trades overnight, the U.S. dollar found resistance this morning following poor jobs numbers. Payrolls rose by only 98K in March, failing to meet an already dismal 180K estimate. Adding insult to injury, last month’s print was also downwardly revised. In addition, wage growth slowed to 2.7% year over year, down from 2.8% in February. Some may see today’s number as an aberration or blame winter weather in March, but nevertheless, the poor reading will pour cold water on future interest rate projections.

Despite the dismal prints, the U.S. dollar has reversed course and is currently gaining across the board.

EUR

The Euro initially climbed overnight, benefiting from strong German industrial orders. However, the common currency has since succumb to general dollar strength and is about three-tenths of a percent weaker. German industrial production unexpectedly rose in February, led by the construction sector. Output rose 2.2%, beating expectations of a 0.2% drop.

GBP

The British pound was initially immune to Syria-related trades. But the currency came under pressure on reports that U.K. manufacturing and construction dropped. Manufacturing declined 0.1%, construction fell by 1.7% and industrial production dropped 0.7%. All of the prints were below expectations.

Mar. 17, 2017 (Tempus, Inc.) – The U.S. Dollar is trading in mixed ranges, mostly negative throughout the week after a more dovish outlook from the Fed and political developments in Europe that eased volatility. It is clear now that the Fed believes the economy is steady and that there are some uncertainties it wants to monitor such as sustainable wage increases and improved consumer spending.

Meanwhile in Europe, indicators have also kept the Euro-bloc on recovery, to a point where the European Central Bank can ease off the gas pedal when it comes to maintaining an accommodative approach. The greenback has weakened and the Bloomberg Dollar Spot Index is now at its lowest level since November 11th.

Treasury Secretary Steve Mnuchin is attending his first G-20 finance ministers meeting where he has already made headlines by working closely with his German counterpart Wolfgang Schaeuble and stating that the U.S. has no intentions of starting a trade war, but will not tolerate manipulation of currency fluctuations for unfair advantage. In terms of data, we’ll see if Industrial Production does anything to aid the “buck” when it’s released at 9:45AM. A 0.2% expansion is expected after it contracted last month.

EUR

The Euro strengthened by 1.3% throughout the week and it’s now at its best level in five weeks. The European Central Bank looks ready to step away from additional quantitative easing and some members are expressing optimism in their ability to hike the benchmark rate before the year ends. At 0.0% for main refinancing and negative overnight deposit rates, the central bank has exhausted its instruments in hopes of consistent growth.

Now that Spain is on the rise and inflation finally arrived, ECB member and governor of the National Bank of Austria Ewald Nowotny has spoken in favor of an end to loose monetary policy. He thinks the right time is now before prices go up too high.

There are downside risks in the horizon, politically especially, but the EUR may stay around current levels with some upside if data continues to impress in the next few months.

GBP

The Pound has rallied almost 2.0% this week bringing it to its strongest level against the dollar since the month started. Prime Minister Theresa May does have the power to invoke Article 50 to initiate the Brexit and polls in Scotland indicate a call for independence from the UK would not be welcome by an overwhelming majority. It would be a very tight race.

However, her determination and confidence could be tested once the process starts because the European side of the equation may not be so easy to solve. Scottish National Party leader and first minister Nicola Sturgeon warns that economic concerns in her nation are only going to be exacerbated if there is no access to the single market. She truly believes Scotland is ready for freedom.

On the monetary policy side of things, the Bank of England surprised us with lack of full consensus on their decision to keep rates unchanged. Kristin Forbes, who is leaving soon, dissented with her vote to hike. Although she may not influence any other meeting again, it looks like tightening is in the minds of more central bank officials than just in the U.S.

 

 

Jan. 27, 2017 (Tempus Inc.) – The U.S. Dollar is currently losing ground against most of its counterparts following disappointing data for the fourth quarter. Gross Domestic Product was expected to grow 2.2%, but instead the figure came at 1.9% making 2016 the worst year for economic growth since 2011. Adding to concerns of a slowdown were Durable Goods which did not expand an estimated 2.5%, but rather contracted at (-0.4%). The numbers are a contradiction to the positive momentum across global markets this week when we’ve witnessed record highs for the Dow Jones, NASDAQ, and S&P along with resurgence in commodities.

In addition to poor data, yesterday’s announcement of plans to build the wall and charge as high as 20.0% tariffs on incoming Mexican products left a nasty taste for economists. This represents a declaration of war on trade and the animosity in regards to Muslim as well as other immigration is fomenting not just uncertainty, but bewilderment. The U.S. Dollar is vulnerable to statements from the current administration as it pertains to global competitiveness, but also its tone in managing established relationships with neighbors and other nations.

JPY

The Yen had a tough week as a result of booming markets and policy divergence. The Bank of Japan will meet next week on January 31st to announce its policy decision, which could bring the currency down further. USD is rising after the BOJ increased its purchases of bonds this week, a sign that they may feel the need to provide an even more accommodative environment. Yen is down 2.3% for this week on the basis of market optimism and gains.

Prime Minister Shinzo Abe has shown fondness of Trump and will be visiting soon at a date note yet determined. It’s possible that with Trump’s interest in bilateral agreements, some framework may come along this year in which the two countries align new trade terms as well as permitting Japan to increase its military capabilities. Now that the U.S. will not pursue the Trans-Pacific Partnership, the country must establish a way to maintain influence and good relations throughout the Pacific, where Japan may prove to be its only true ally.

 

EUR

The Euro was down as a whole for the week, but may recoup all losses by the end of today’s trading session. German confidence was as solid as expected, but more impressive is the lower unemployment rate in Spain, which fell to 18.6%.

Part of the troublesome PIGS (Portugal, Ireland, Greece, and Spain), the Iberian nation has improved its economic prospects practicing fiscal discipline and benefitting from economic pick-up in the region. Although downside risks have kept the Euro in familiar ranges for the last 3 weeks, indicators have been positive and we may face short-lived rallies as we enter February ahead of elections with potential to affect the Euro-bloc in March.

 

Dec. 23, 2016 (Tempus, Inc.) – The U.S. dollar reverted to its status as a traditional safe-haven in recent days as terrorist attacks in Turkey, Switzerland and Germany rattled investors.

The greenback has long benefitted in times or financial or geopolitical chaos for its perceived safety. The dollar also received a boost yesterday when Federal Reserve Chair Janet Yellen expressed optimism that U.S. wages were set to extend gains.

We expect the dollar to continue to take its cues from events abroad. There is a slew of data set for the second half of the week that will help dictate the dollar’s momentum over the last week of the year.

EUR

The Euro came under renewed pressure as geopolitical events are likely to put additional pressure on pro-Europe governments. A truck crashed through a Christmas market in Berlin yesterday, killing 12. German Chancellor Angela Merkel said that the act is “assumed” to be an act of terror. Merkel is up for re-election next year and a terrorist attack on her watch will add to the anti-European party’s arsenal. The rise of populism across the continent has market participants worried and widespread political uncertainty is sure to fan the flames.

JPY

The Japanese yen tumbled more than one percent against the U.S. dollar overnight. As expected, the Bank of Japan kept its policy on hold. Interest rates are currently at -0.1% and the central bank plans to continue to purchase 80 trillion yen of government bonds annually.

The central bank did upgrade its assessment on the overall economy, partly due to a weakening yen. The yen has weakened 11% against the U.S. dollar since the election of Donald Trump on November 6th. A weaker yen will lift import prices and could provide a much-needed boost to inflation.

Dec. 9, 2016 (Allthingsforex.com) – The initial results from the Italian referendum may have failed to add additional pressure on the EUR but the European Central Bank’s decision to expand its QE program until December 2017, did the job later in the week.

In the trading session today, the EUR continued its decline spurred by the ECB announcement. The single currency re-tested support at 1.0516 and once again bounced higher. This is the fourth unsuccessful attempt to break the 1.05 mark since November 2015, with the big long-term support level to watch still standing at 1.0469.

Will the Fed’s December 14 monetary policy announcement provide the catalyst for a bearish breakout below 1.0469, which could open the door to further EUR weakness?

For the last few weeks, Fed fund futures have been showing nearly 100% probability of a 0.25% rate hike next Wednesday, which means that such expectations may be already fully priced into the EUR/USD exchange rate.

However, should the Fed hint of a faster pace of rate increases throughout 2017, the market could consider it as a sufficient enough reason to send the EUR one step closer to parity with the USD.

The ball is now in the Fed’s court…

 

 

Nov. 10, 2016 (Tempus Inc.) – The U.S. Dollar is up against commodity-based currencies while staying relatively quiet against its major peers. Markets are acting in odds with what was predicted if Trump triumphed, but historically the business world prefers the prospect of Republicans who’ll likely come into power seeking less regulation and fomenting less intervention in the free market.

Trump’s trade, or rather anti-trade rhetoric, during his campaign has economists concerned, but thus far markets are rebounding, big league, after dropping for eight consecutive days. The greenback’s strength is due to data releases that satisfy the Fed’s requirements ahead of a gradual hike.

Jobless Claims were slightly lower than expected; helping to solidify the labor market’s strong run. Commodity prices are rising, stocks are thriving, and USD is appreciating. How long this will keep up is hard to tell, but the “buck” is holding steady for now. Populism succeeding is morphing how we gauge economic performance, so things could change quickly.

JPY

The Yen fell by over 5.2% in value since the U.S. election results showed Trump succeeding. The move was a surprise because Yen forecasters estimated the currency propelling as a safe-haven to a Trump win that would dismantle global markets. This didn’t happen.

Equities flourished and thus Yen declined as it usually does when risk-appetite grows. Japan’s economic situation is not great as deflationary pressures remain and wages remain stagnant, but experts foresee Yen rising by 17.0% by the end of Q1 2017 if Trump delivers on his message of upending globalization and outsourcing.

EUR

The Euro kept trending downward yesterday, losing ground in the midst of a shocking result in America and poor data out of the EU’s second largest economy. France produced some underwhelming figures as Industrial Production revealed contraction of 1.1% and payrolls grew at a measly 0.3% pace.

Now that the campaign in the U.S. is over, the spotlight may be on the Italian referendum coming in December in which the people will decide changes to the constitution and balance of power between executive and legislative branches. The political red-tape in Italy played a role in preventing much-needed bank and fiscal reform after the 2008 crisis negatively impacting the “old boot’s” ability to recover since then.

Nov. 4, 2016 (Tempus Inc.) – The U.S. Dollar stayed quiet overnight, but found some strength following the release of upwardly revised and steady employment data. October saw an actual increase of 161K jobs to the economy, coming in slightly under the expected 173K, but the previous month’s figures had an additional 35K.

Average Hourly Earnings also improved with year-on-year growth of 2.8% over the forecast 2.6% plus a revision of the month prior also registering higher. Unemployment stayed at 4.9%. The surging labor market has been a pillar of strength for the greenback this year and these numbers certainly help the odds of a hike in December when the Fed last meets.

Election woes are the main headline as we go into the last weekend before the year’s biggest risk event. Global indexes are still on the red and the streak of losses in equities is now eight days old. Mexican Peso and CAD remain on the decline as oil prices finish their worst week in 10 months. The positive indicators shall keep the dollar afloat, but the gains may be limited considering the risk-averse approach investors and traders are taking at the moment.

GBP

The Pound is closing the week about 2.0% stronger as it recovered with the help of a less dovish Bank of England. Pro-Brexit parliamentary lawmakers had accused BOE Governor Mark Carney of spreading too much pessimism post-Brexit referendum, but his confirmation as governor for the next 2 years calmed market fears as Carney holds a reputation for keeping things in order and being right about Brexit effects on the global economy.

More importantly, the official Brexit process is under threat as the UK’s High Court decided that an approving parliament vote will be needed prior to invoking Article 50 to start the British departure from the EU. The UK’s economy is keeping it together thus far, but we feel the pressure is still on and a determined EU will make the divorce very difficult to send a message to other potential dissenters.

EUR

The Euro lost ground this morning after U.S. NFP and wage prints boosted the chances of a Fed hike in December. The shared currency started November with a bang, appreciating by over 1.0% during the week. Euro-zone troubles are dissipating with economic data demonstrating that European Central Bank measures have worked, although slowly, to bolster growth.

Spain, the fourth largest economy of the EU, seems to be getting its act right by finally forming a coalition government that will enable it to push for further fiscal reforms. Unemployment going down is a big deal and the uncertainty holding markets down is likely going to keep EUR/USD pair in tight ranges.