General Market Commentary – Fri 16 Feb, 2018

Worst Week for the Dollar since 2015-2016, While Stocks Continue to Recover

I always read over Marc Chandler’s site when I get to my computer. The post below is a great example of the content he breaks down. I find it gives me a great overview of what is happening in a wide range of markets. This post more of an overview of currency and market moves for the week.

Click here to visit Marc’s website for more great content.

Nearly all the major currencies have risen at least two percent against the US dollar this week.  The Canadian dollar is an exception.  It has risen one percent this week ahead of today’s local session.  Sterling is becoming another exception after disappointing retail sales.  It is up just shy of two percent.  The Dollar Index is off 2.3% on the week, which would be the biggest weekly loss since 2015.  The dollar has firmed a bit on the European morning, but look for North American operators to see the upticks as a selling opportunity.
The greenback slumped to nearly JPY105.50 in Tokyo, which appears to have led this week’s decline.  It is the biggest weekly loss since July 2016.  Japanese officials are becoming more concerned.  Reports suggest a high level meeting today between the BOJ, MOF and FSA on the yen’s strength.  Although Finance Minister had said earlier this week that the yen’s movement did not require intervention, the MOF’s point man on FX, Asakawa, expressed greater concern for “one-sided” move that was “not in line with fundamentals.”
This still seems to be low level concerns.  Reiterating the G7/G20 boilerplate line about “excessive volatility” needs to be avoided, and hints that there are talks among G7 officials about the recent foreign exchange market developments, would be additional rungs on the escalation ladder.  Still, we suspect that the Japan’s cabinet submission to the Diet of Kuroda’s nomination for a second term (leaked in the media for the past several days) and the appointment of two deputies (Amamiya, a key Kuroda ally within the BOJ, and a dovish academic Wakatabe), is not really much of a yen protest.  It underscores the continuity of monetary policy.    Still nearly half of a Bloomberg survey expect the BOJ to tightened policy late this year.
The euro reached near three-year highs today near $1.2555.  It is the sixth consecutive advancing sessions.  The euro has appreciated 2.2% this week.  The dollar was sold through CHF0.92 to see its lowest level since June 2015.  Sterling has been dragged off its high near $1.4145 by the soft retail sales report.  It has advanced every day this week and is straddling the unchanged level today.  Headline retail sales rose 0.1%.  The median forecast was for a 05% gain after a revised 1.4% decline (initially -1.5%).  The 1.6% year-over-year pace makes it the weakest January since 2013.  But sterling has not been trading higher because the economy is booming.  Recall that the January PMIs were all weaker than expected.  Sterling may find support ahead of $1.4050.
The RBA’s Lowe was equally circumspect on Australian dollar, which is up 2% this week.  The Australian dollar has appreciated in 8 of the past ten weeks, and those two losing weeks were here in February.  The Aussie has approached the $0.7990 area that houses the 61.8% retracement of recent decline.  Lowe said that the trade-weighted index was manageable, and that although he would prefer a lower rather than higher exchange rate, “we are where we are.”
The US has a several economic reports on tap today, but none have the heft to change market sentiment.  January import prices were likely lifted by oil’s appreciation.  Excluding oil, import prices may have edged 0.1% higher.  January housing starts are expected to have bounced back from the weather-induced 8.2% drop in December.  University of Michigan’s consumer sentiment is expected to have edged fractionally lower.   The long-term inflation expectations may draw more interest given the sensitivities now.  In January, it stood at 2.5%, up from 2.4% in November and December, matching the 2017 low prints.
What a difference a week makes for equities.  After last week’s drop, this week has been up.  In fact, coming into today’s session the S&P 500 is up 5.8%, leading the major markets higher, and poised to record its best week since 2011.   A weekly close above 2743 would be seen as a constructive technical development.    The MSCI Asia Pacific Index rallied advanced every day this week for a 3.8% weekly gain.  The MSCI Emerging Markets Index is up 5.9%.  The Dow Jones Stoxx 600 is up 3%.  This week’s price action lends credence to our hypothesis that last week’s meltdown was more like the 1987 crash than 2000 end of the tech bubble or the 2008 financial crisis.
While US Treasury yields edged higher this week, there is a sense of consolidation ahead of the psychologically important 3.0%-handle.  On the week, the yield has risen three basis points, while the two-year yield is up eleven.  This likely reflect the shift in Fed views illustrated by the 10 bp increase in the implied yield of the December 2018 Fed funds futures contract this week.
The two-basis point decline in the US 10-year yield today is sufficient to encourage a decline in European yields, which are now slightly lower on the week.  The UK gilts are the notable exception, and the yield is a single basis point higher on the week, even with today’s 3.5 bp decline.

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Comments:
  1. On February 16, 2018 at 11:20 am,
    OOTB Jerry says:
    • On February 16, 2018 at 11:21 am,
      OOTB Jerry says:
        • On February 16, 2018 at 11:43 am,
          OOTB Jerry says:

          U.S. DEPUTY AG ROSENSTEIN SAYS AFTER THE ELECTION, RUSSIANS STAGED RALLIES BOTH TO SUPPORT AND TO OPPOSE TRUMP
          To summarize: in 2014, 13 Russians launched a campaign to interfere with the US political system by “disparaging” candidates. This continued until ultimately Trump was elected, meanwhile, “there is no allegation in this indictment that any American was a knowing participant in this illegal activity. There is no allegation in the indictment that the [Russians’] conduct altered the outcome of the 2016 election.”

    • On February 16, 2018 at 11:29 am,
      OOTB Jerry says:

      WHO IS ON FIRST…..Abbot and Costello
      https://www.youtube.com/watch?v=kTcRRaXV-fg

    • On February 16, 2018 at 11:52 am,
      OOTB Jerry says:
      • On February 16, 2018 at 11:52 am,
        OOTB Jerry says:

        Rosy is not going to get any extraditions…….What a moron

    • On February 16, 2018 at 12:18 pm,
      OOTB Jerry says:
      • On February 16, 2018 at 12:19 pm,
        OOTB Jerry says:

        DRAIN THE SWAMP……..

    • On February 16, 2018 at 1:57 pm,
      irishtony says:

      mueller indicts !!!! Is he of his fecking head, the guy is madder than a box of scorpians,i suppose the next thing he does, is order them to come to the US & give testemony before one of those crazy commities congress keep setting up in order for those sitting on said kangaru courts so they can pay themselfs extra in expensis………
      The crazy B*****D.

      • On February 16, 2018 at 2:10 pm,
        OOTB Jerry says:

        The Stars ******** are lining up on the B’s

  2. On February 16, 2018 at 11:23 am,
    spanky says:

    Meanwhile the gold miners are falling apart and are looking to totally collapse soon. Wow.

  3. On February 16, 2018 at 11:38 am,
    OOTB Jerry says:

    Dollar up…….Dow…less than a dollar up

  4. On February 16, 2018 at 11:57 am,
    spanky says:

    The sellof into mid february in the miners was just too steep and brutal to form a V off the first bounce. Nope we are going lower in the next 5 weeks and in all likelihood the recent low will be taken out by the end of it. I’m going to guess that the $HUI is going to hit 125 by then. And then it will be a long hard grind back up to current levels. No real rocket shots for another decade.

  5. On February 16, 2018 at 12:20 pm,
    spanky says:
    • On February 16, 2018 at 12:28 pm,
      OOTB Jerry says:

      Yellen does not carry the ball anymore……….. 🙂

      • On February 16, 2018 at 12:33 pm,
        spanky says:

        Please don’t insult Lucy like that.

        • On February 16, 2018 at 12:40 pm,
          OOTB Jerry says:

          Ok…..then we will just say……Charlie is a slow learner……. 🙂

  6. On February 16, 2018 at 12:32 pm,
    OOTB Jerry says:
  7. On February 16, 2018 at 2:16 pm,
    OOTB Jerry says:

    How about some pie in the sky….chem candy for Italy…..Could be Monsanto With Love
    https://www.youtube.com/watch?v=F5QmviTOTXc

    • On February 16, 2018 at 2:17 pm,
      OOTB Jerry says:

      Or INCREASED AIR TRAFFIC>>>>>>not

      • On February 16, 2018 at 2:40 pm,
        irishtony says:

        The “BASTARDS” are killing us . There has been a huge increase in cancer, menthal health problems, obesity, & all sorts of ailments…………….MONSANTO,BIG PHARMA< & CORRUPT POLITICIANS TAKING BACKHANDERS. A plague on all their houses.

      • On February 16, 2018 at 4:47 pm,
        CFS says:

        OOTB,
        You obviously don’t fly much.

        I don’t know if traffic is increased or flights are less, but the planes are often filled up now.

        • On February 16, 2018 at 4:53 pm,
          OOTB Jerry says:

          CFS…….U obviously did not watch the tape…… 🙂

          • On February 16, 2018 at 4:57 pm,
            OOTB Jerry says:

            The tape has nothing to do with the AMOUNT OF AIR TRAVEL…..

  8. On February 16, 2018 at 3:01 pm,
    irishtony says:

    Another ASSHOLE opens his mouth & spews SHIT….Why do these people think they rule the world, & everybody must bow down to them…..
    The US bullying empire is finished…GET OVER IT.
    https://www.zerohedge.com/news/2018-02-16/admiral-warns-us-must-prepare-possible-war-china

    • On February 16, 2018 at 4:02 pm,
      OOTB Jerry says:

      Ditto……..I was going to post that , but, I thought I had posted enough for the day…
      THANKS FOR POSTING>>

  9. On February 16, 2018 at 3:17 pm,
    Dick Tracy says:

    If Trump was not The President and Hillary was, who close to that administration, with secret knowledge would turn state’s witness against The Clinton Gang. A suicide would be arranged which would be no suicide at all. I wonder what the mortality rate would be for those who would be in on the secrets. Trump is up against all of this rascality that has been going on for years yet the media stills portrays him as being evil, just think of the robbery that has never been allowed to be published in the past.

    • On February 16, 2018 at 3:27 pm,
      irishtony says:

      DT…So long as the Zs” rule America, nothing will change, as i said years ago on this site, hitler went against the the “WRONG” part of the tribe.

      • On February 16, 2018 at 4:04 pm,
        OOTB Jerry says:

        Grand daddy BUSH……leader of the pack…..

      • On February 16, 2018 at 8:44 pm,
        BDC says:

        Stalin was purging them; then Hitler interrupted.

  10. On February 16, 2018 at 5:00 pm,
    james says:

    Billionaires never ( SAVE ) Ordinary People ! ! ! STRONG STUFF ! https://www.youtube.com/watch?v=-hLpjl4qcSM

  11. On February 16, 2018 at 6:06 pm,
    CFS says:

    Coming to a neighborhood near you in the future?

    SAN JUAN, Puerto Rico (AP) — Puerto Rico’s electricity utility said Friday it will dial down the power generation starting this weekend as a federal control board urgently seeks a $300 million loan for the troubled utility after a judge rejected a previous $1 billion loan request.

    The announcement comes as nearly 400,000 power customers across the island remain in the dark more than five months after Hurricane Maria hit the island, causing the longest blackout in U.S. history.

    Ernesto Sgroi, president of the governing board of Puerto Rico’s Electric Power Authority, said the reduction in power generation would start Sunday and was not expected to interrupt service. But he warned it could destabilize a power grid still being repaired after it was heavily damaged by Maria.
    A difference between the US and Puerto Rico is the ability to print money.

  12. On February 16, 2018 at 6:58 pm,
    CFS says:

    I read the things posted on this blog and am continually amazed.

    People seem to think the world is normal. Debt is high, but no big deal.
    Am I crazy, or are y’all crazy?

    I don’t see any way out of this economic mess……that most of the world is in.

    Banks are going to print their way forward, in order not to solve the problem, but merely to extend the status quo. (I can’t see them being able to spend and borrow indefinitely, however)

    As long as ALL the Central Banks print, the relative values of currencies can not change much.
    But there is a LIMIT to the amount of debt banks can hold on their balance sheets.
    The world currently exists in a metastable balance in which interest rates are held low.
    But it is only stable as long as all the Central Banks cooperate.
    Do you seriously think that if China is not given it’s desires over the S. China Sea there will not be a financial war?
    Do you seriously think that if the U.S. does anything seriously adverse against N. Korea, the financial system would not have problems.
    How about Iran?
    It seems to me the odds of financial turmoil, in the relatively near future, are great.

    It is not clear to me there will be surplus money around to buy precious metals.
    Just as in the great post 1929 depression, PMs may well drop, until the depression drives costs down low enough for miners to be profitable. I’m going to be re-reading “Human Action”, von Mises, this weekend to see if I can find any hope.

  13. On February 17, 2018 at 4:55 am,
    OOTB Jerry says:
  14. On February 17, 2018 at 5:30 am,
    OOTB Jerry says:

    Lifted from Chris M.
    Consider that, under the Greenspan/Bernanke/Yellen Federal Reserve, the following has occurred:

    Pension plans, both public and private have been ruined. Millions of future retirees and taxpayers will not have trillions of dollars they would and should otherwise have to support them in their later years.
    Income inequality is at the highest its been in over 100 years
    Wealth inequality is also at historical extremes
    Student debt is now nearly $1.5 trillion, up ~ $1 trillion since 2007
    More than a trillion dollars of interest payments on savings accounts has been forfeited — denying funds to the next generation for use in business creation, household formation, and education.
    Total debt in the US and globally is up massively since the 2008 Great Recession (itself a central banking accident), and now stands at more than $233 trillion worldwide.
    These are among a few of the destructive results of the Federal Reserve’s decision to lower interest rates to 0% in order to reward the big banks, well connected private equity firms, and unrestrained government borrowing.

  15. On February 18, 2018 at 10:47 am,
    Troubadours says:

    People think that rising inflation is bearish for the stock market. This isn’t true. The stock market goes up more than it goes down when inflation goes up.

    http://bullmarkets.co/study-rising-inflation-is-not-bearish-for-stocks/

    • On February 19, 2018 at 5:44 pm,
      Matthew says:

      Keep in mind that the CPI grossly understates inflation today and was much more accurate in the 1970s.
      Inflation is a big problem for stocks when interest rates are rising and the economy is weak. That was the situation in the ’70s and is the situation that is developing now. But, unlike the ’70s, debt is a problem that almost can’t be overstated.