The traditional connection on monetary policy is that easy monetary policy is an effective fuel for risk chasing. Those days are coming to a close however. It is only a matter of time until the Fed normalizes. In the meantime, investors are far more aware of the prices they are paying and the return they are earning - high and thin respectively...
While USDollar did drop in the immediate aftermath of the FOMC decision, the Fed is still heading towards an eventual hike while most other majors are backed by central banks either cutting rates or pursuing QE.
The USDollar stumbled sharply after the FOMC announced it was holding rates and lowered its forecasts for rates.
If we were looking at technicals alone, the S&P 500 nudged the upper end of the consolidation pattern over the past three weeks. If there were no major fundamental hiccups ahead, it would be a good signal. The problem is the fundamental seas are looking rougher than what this technical pattern is capable of navigating. I'll wait until after the Fed decision to...
According to the September Fed Funds futures contract, the market is pricing in little probability of a hike by the central bank at Thursday's meeting. That discount likely takes some of the pain out of a dovish outcome for the Dollar. However, it also leverages the 'surprise' of a hike and could drive the currency back to fresh 12-year highs.
There is a broad range on USDollar that is showing through in the majors. Clearing the congestion boundaries - much less fueling a meaningful trend - is nigh impossible to muster without the Fed providing the necessary drive to get the market moving.
It is likely that the Fed's turn to tighten the reins of monetary policy will lead to a further slump in speculative positioning - the mere anticipation has stalled the speculative reach on SPX and triggered preemptive tumbles in other assets classes. However, can the central bank afford to increase the weight of capital market performance while moderating the...
Emerging Markets are one of the risk-focused asset classes that have suffered heavily through the recent market selloff. The currency set - exotic carry trade favorites - is no different. Here is the performance of broader Emerging Markets and the top listed BRICS currencies for 2015 so far.
Utter capitulation. Few other terms can better describe the market currently. In a market that has grown so thin, dependent on perceived central bank support and has supported exceptional excess; a meaningful selling event would be akin to striking a match while neck deep in gasoline.
As volatility picks up, we have a greater sense of fear and a higher need for capital preservation. The Dollar is a last stop for liquidity demand.
This is a longer-term chart showing the correlation between the Dollar and one of the more rate-sensitive Treasury products. When the correlation is high, the market is more focused on timing rate hikes.
...but it still barely registers after the ETF lost 99.9% of its value from inception in 2009...
The USDollar and Treasury yields do rise as interest rate expectations build. However, when it is 'risk' at play, the relationship flips. The USDollar is bid for its haven appeal and Treasuries are bought as safety - which pushes yields down. When do we make this transition?
The S&P 500 suffered its biggest weekly tumble in four years. It is fitting that such a significant drop would take out a major head-and-shoulders pattern (8 months in the making after 6 years of climb) and the floor of an exceptionally consistent bull phase. How much more room is there to sink? From a technical, fundamental and exposure perspective - plenty.
The US Dollar is the prized 'liquidity' currency. So, why with the market turning to risk aversion is the Euro outpacing the Greenback? www.dailyfx.com
The S&P 500 suffered its biggest drop in 18 months today, but it has a long way to catch up to other risk benchmarks. Here we have High-yield, Emerging Market, Carry and Commodities.
Both the Dollar and S&P 500 advanced through the past few years. The positive relationship is fundamentally atypical for a safe haven like the USDollar and speculative benchmark like the equity index. That positive relationship has come under moderate 'risk' appetite that kept equities rising under on moral hazard while the Greenback climbed on shifting monetary...
The S&P 500 suffered its biggest one-day selloff in 18 months this past session. That was enough to push us to the lowest trading levels in six months and critically break the neckline on the head-and-shoulders that has formed through 2015. Is this THE move towards a market-wide deleverage that is long overdue? Big question and shouldn't be called on one day and...