Gleanings from the US labor market report
08/07/2023

Gleanings from the US labor market report

"Forrest Gump says life is like a box of chocolates, because you never know what you are gonna get. I think the US labor market report is also like a box of chocolates, because there is something for everyone," Commerzbank Head of FX and Commodity Research, Ulrich Leuchtmann, said.

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Pound recovers after BoE rate hike
08/04/2023

Pound recovers after BoE rate hike

The pound was stronger on Friday afternoon, staging a recovery after slumping on Thursday in the wake of a 25 basis point interest rate hike from the Bank of England.

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Changed forecast on EUR/USD
08/04/2023

Changed forecast on EUR/USD

Commerzbank analysts have slightly changed their forecast for the EUR/USD exchange rate. However, one crucial part remains unchanged: they continue to expect a much stronger EUR/USD around the turn of the year, still around 1.14.

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ECB radio silence not helping the euro
08/02/2023

ECB radio silence not helping the euro

EUR/USD remains a dollar story and with the US data calendar about to pick up (ADP, ISM services, payrolls), the dollar leg should remain dominant given that most key eurozone data was already published earlier this week.

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US rating downgrade unlikely to be long-lasting driver for the dollar
08/02/2023

US rating downgrade unlikely to be long-lasting driver for the dollar

The dollar resilience was untouched by the soft block of data released yesterday, where the ISM manufacturing rebounded less than expected and remained quite deep in contractionary territory, and JOLTS figures showed a bigger than anticipated drop in job openings.

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OPEC pricing power
08/01/2023

OPEC pricing power

It’s been a positive start to the year's second half for many global asset classes, with a soft landing and peak rates being the dominant narrative.

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Are markets too dovish on the euro?
08/01/2023

Are markets too dovish on the euro?

Yesterday’s set of data releases in the eurozone showed the growth and inflation side moving in diverging directions. The euro area grew slightly more than expected, at 0.6% year-on-year (0.3% quarter-on-quarter) in the second quarter, while inflation slowed in line with consensus from 5.5% to 5.3% in July. Core inflation was, however, unchanged at 5.5%.

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Euro rises on back of promising eurozone data
07/31/2023

Euro rises on back of promising eurozone data

The euro was on recovery at the start of the week, after favourable eurozone data, while the pound was slightly on the back foot ahead of Thursday's Bank of England decision.

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Gleanings from the ECB
07/31/2023

Gleanings from the ECB

In the days following the ECB meeting, ECB officials always provide explanations and support in interpreting the decision. I find this game a little silly. But never mind. This morning the press seems to be particularly interested in an interview with ECB President Christine Lagarde.

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Don't Be Afraid Of The Bank Of Japan
07/28/2023

Don't Be Afraid Of The Bank Of Japan

There is no need to fear the Bank of Japan. In 2015 the market was surprised when the EUR/CHF peg broke, resulting in a significant VaR shock. However, this time around, the market has been anticipating the end of yield curve control for over a year. As a result, risk sentiment will likely return once the YCC adjustment has passed.

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No surprises from the ECB
07/27/2023

No surprises from the ECB

The ECB just hiked its main policy interest rates by 25bp. The deposit interest rate is now at 3.75%. What is more interesting, the accompanying policy statement kept the door for further rate hikes wide open and did not strike a more cautious note.

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Dollar largely lower ahead of expected Fed hike
07/26/2023

Dollar largely lower ahead of expected Fed hike

The dollar surrendered some ground heading against the pound and euro, with the latter looking set to end a six-day winning streak as attention turns to the US Federal Reserve's decision later on Wednesday.

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Eurozone bank lending falls again in June as ECB hikes take effect
07/26/2023

Eurozone bank lending falls again in June as ECB hikes take effect

Bank lending continued to trend down in June as higher interest rates and economic weakness weighed on business and household appetite to borrow. Annual growth in bank lending to non-financial corporates and households is trending down rapidly, for corporates down from 2.1% in May to 1.7% in June and for households down from 4% to 3%. Monthly changes are now negative for household bank borrowing, while corporate borrowing stagnated in June.

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Fed's 25 bps hike's a done deal on but set to be last
07/25/2023

Fed's 25 bps hike's a done deal on but set to be last

At its June meeting, FOMC members unexpectedly indicated in the bank’s ‘dot plot’ that two more 25 basis point hikes could be on the way during the remainder of 2023, a view echoed in Powell’s communications. Market participants, however, have not necessarily bought into the Fed’s rhetoric, with investors particularly sceptical at the possibility of further tightening following the sizable June CPI miss.

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China stimulus, here we go again
07/25/2023

China stimulus, here we go again

In quiet markets ahead of G3 central bank meetings, the FX market's focus has once again fallen on China. Having broadly disappointed investor expectations this year, China's economy is seen as enjoying a lift after China's Politburo yesterday promised 'counter-cyclical' measures.

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Eurozone PMIs signal rising recession risks
07/24/2023

Eurozone PMIs signal rising recession risks

Eurozone PMIs fell again in July, with the composite index dropping to 48.9 from 49.9 in June. The weakness was widespread across all sectors, with the manufacturing PMIs at its lowest level since early 2020. Service fell, but it remained in the expansionary territory. The recent disinflationary trend continued on the back of lower input costs, although prices in the services sector continue to prove stickier. Employment intentions increased only modestly, pointing to easing tightness in the labour market.

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A busy week has just started
07/24/2023

A busy week has just started

We're going to face a busy agenda this week. Today, we will be watching a series of flash PMI figures to get a sense of how economies around the world felt so far in July, then important central bank meetings will hit the fan from tomorrow.

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Dollar reconnects with short-term rate differentials
07/21/2023

Dollar reconnects with short-term rate differentials

The dollar has made a modest comeback as both US yields adjust higher and short-term rate spreads stay in the dollar's favour. In fact, one could argue that the dollar should even be a little higher given that two-year US yields have retraced about 50% of their drop in the first half of July and the DXY has only retraced one-third of its losses.

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A bit more room for a EUR correction
07/20/2023

A bit more room for a EUR correction

EUR/USD has slipped back to the 1.1200 level, but remains around 2.5% overvalued according to our short-term financial fair value model. A key input to the model, the two-year EUR-USD swap rate gap, has rewidened (in favour of the dollar) to pre-US CPI levels, now hovering around -115/-120bp. On Friday, it had shrunk to -100bp, the tightest since late May.

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Oil up on supply limit fears
07/19/2023

Oil up on supply limit fears

Oil prices were higher on Wednesday as the energy market gained traction despite concerns around an uncertain demand outlook.

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