Looking at the British pound today, concerns regarding Brexit and the stock market rout are outweighing the Bank of England’s positive economic outlook. As a currency that benefits from rising risk appetite, pound sterling has been selling off sharply in February thanks to fears regarding elevated asset prices. While Bank of England Governor Mark Carney helped the pound last Thursday after saying…

Published 

Looking at this week’s Commitments of Traders report, bullish extremes continue in the euro, British pound and crude oil. Looking at net speculator positions as a proportion of open interest, long crude oil positions are the most at risk. While euro and British pound net positions are elevated relative to historical averages, open interest has also grown over time. Thus neither currency look exte…

Published 
Tags: Euro

In 2013, when shale oil was in its relative infancy, Saudi oil minister Khalid al-Falih asked reporters to stop asking him questions about shale oil. “Leave us alone and leave all these issues. We had enough of shale oil and talks of shale. Please talk about anything else,” he snapped in response to a question about OPEC’s response to shale. Looking at 2017, accelerating US production failed to d…

Published 
Tags: Crude oil

For a currency that strengthens when global growth accelerates, recent moves in the Australian dollar have been fairly disappointing. While the currency rocketed higher between mid-December and late January, the Australian dollar has sold off sharply in recent weeks. The currency first began weakening against the Japanese yen, which led us to downgrade our short-term AUD/JPY outlook to neutral on…

Published 

The US dollar currency index, a measure of USD against six major peers, declined by 9.9% in 2017. Last month, the currency index continued declining and fell by another 3.3%. Given the speed of the recent decline, the US dollar started looking oversold according to technical indicators around mid-January. While we warned that the currency was looking oversold in several recent editions of our US …

Published 
Tags: US dollar

When will the Canadian dollar rebound? We take a closer look at the Canadian dollar future forecast and what the latest Commitments of Traders report says about the currency. Bank of Canada remains cautious - impacting trader optimism, but better data has us rethinking an earlier prediction.

Published 

Following yesterday’s statement from the Federal Reserve, the odds of a rate hike are soaring according to the CME’s FedWatch tool. The current market-implied probability for a hike on March 21, 2018 (the next Fed meeting) is 83.1%. One month ago, on December 29, 2017, the odds of a March hike were just 50.7%. According to prevailing wisdom, the Federal Reserve has significant control over moneta…

Published 
Tags: Gold

In early 2017, doubts regarding the integrity of the Eurozone led many to take refuge in the Japanese yen. Unlike the euro, the Japanese yen exhibits classic safe haven characteristics and tends to strengthen during downturns. Following the Brexit referendum vote and US presidential elections, few were willing to bet on opinion polls that predicted Macron’s victory. Similar to political events in…

Published 

In our last take on the British pound in early January, we wrote that the currency was set to keep strengthening thanks to strong regional growth, moderate sentiment and the historically low value of the pound. More specifically, the currency looks cheap based on broad nominal effective exchange rates (a measure of the pound relative to other foreign currencies). Looking at GBP/USD since our last…

Published 

Japan has suffered from weak growth and inflation since the global financial crisis, and the Bank of Japan has frequently experimented with unorthodox monetary policies. In September 2016, the BoJ decided to directly target long-term interest rates. The so-called “yield curve control” (YCC) program fixed 10-year Japanese government bond (JGB) yields at 0%. If yields deviated from the BoJ’s target…

Published 
Tags: Japanese yen