The market has its doubts that the new German government is going to be able to proceed with the necessary economic reforms. People aren't going to be buying the euro on the basis of this result, because we need to see some evidence that the new government will deliver. |
The market is showing a textbook reaction, buying safe-haven currencies like the Swiss franc and euro and away from the dollar, |
The market is showing a textbook reaction, buying safe-haven currencies like the Swiss franc and euro and away from the dollar. |
The market may see this as just rhetoric, and it shows they're not leaving China with any agreement to strengthen the yuan. The yen is most sensitive to changes in expectations on the yuan. |
The market started thinking that the data were just too bad to be true and this helped the dollar. |
The message was consistent with what the market was already expecting. |
The payrolls data managed to change interest rate expectations -- the market was pricing in a March (U.S. rate) hike by about 75-80 percent before the payrolls numbers came out. Once they had come out that was pushed towards 90 percent. |
The situation with the yen is a very strong economic story which hasn't translated into a stronger currency. The one missing piece of the puzzle was the fact that Japanese investors were investing more abroad. Any sign that they're investing less overseas is good for the yen. |
There has been more aggressive rhetoric from the U.S., but rhetoric is not going to make the Chinese move faster. They're on the correct path with a gradual strengthening of the yuan. Gradual is the key word. |
There's a risk we get a bit of an overreaction to this result. We could still see reforms happening in Germany, and as the result becomes clearer the euro is likely to rebound. |
We're going to see significant sterling weakness this year. Although the Bank of England is on hold for now the pressure is building for rate cuts in the second half of the year. |