Tag Archives:

US

The euro and the dollar: rates not driving performance. So what is?

Despite US rate hikes in December, March and another last week, the US dollar has depreciated back to pre-election levels.  All of the Trumpflation dollar premium has disappeared.  As the Trump dollar trade appears to have run out of steam, the Euro has however been climbing. Optimism around the Euro area growth comeback grew leading up to the ECB meeting earlier this month, with EUR/USD hittin…

Read the article

Premier League footballers are making currency calls, like rappers and models in 2007. Are they right to avoid GBP?

According to recent reports, leading foreign football players in the English Premier League are looking to get paid in euro rather than sterling. Since the UK referendum result in June last year, sterling has fallen by 12% against the euro, so it is unsurprising to see that some players have questioned the denomination of their salaries. It is not the first time that global stars have asked to …

Read the article

A problem with U.S. average hourly earnings, and why it may be understating the true picture

The last time the US had an unemployment rate below 5% and inflation expectations around 2%, the Fed funds rate was above 5% and had been aggressively hiked in the preceding period. Yellen’s Fed has been happy to let rates stay low amongst a tight and tightening labour market because wage growth has been lower than one would expect for a jobs market as healthy as this one. So, slow growth of wa…

Read the article

The Israeli Shekel: Flying under the radar

Though the recent US Treasury report did not name any country as a currency manipulator (see more details on this in Mario’s blog), the monitoring list centres on larger economies that meet the following criteria:

  1. The country has a significant bilateral trade surplus with the United States defined as more than USD 20 billion.
  2. The country has a current account surplus of at least 3% of GDP and …

Read the article

The US has not labelled Switzerland a currency manipulator, yet

Switzerland has made headlines of late as a potential candidate to be labelled a currency manipulator by the U.S. Treasury. For those countries at risk, a report recently published by the U.S Treasury sets out three key criteria the U.S. Treasury will use in order to assess whether a country is “pursuing unfair practices”. Firstly, the country would have a significant bilateral trade surplus wi…

Read the article

Canada’s increasingly divergent rate path

Yields on Canadian sovereign bonds have been dragged higher in recent months, with the yield on the 10-year bond recently reaching 2 year highs. This sell-off appears to reflect the US reflation narrative, rather than the economic fundamentals of the Canadian economy.

The market currently thinks the Bank of Canada will remain on hold throughout 2017, pricing in only one rate hike – a 20 basis …

Read the article

Five observations about Inflation

1. We are at the point of peak oil pass through: January and February 2016 saw oil prices reach their lows ($34.25 Brent January 20th and $26.21 WTI, February 11th), so this week’s inflation numbers will see some high year-on-year oil price base effects, as will February’s. This is one of the main reasons why we have been seeing significant rises in inflation in recent months.

2. The upward mar…

Read the article

Mortgages and monetary policy in the US and UK

The cost of new mortgage borrowing and payments on outstanding household debt can have a large impact on the rate of growth of an economy. For this reason, central bankers are interested in the transmission mechanism of monetary policy. It has been shown that interest rates can have a stronger influence on an economy where there are a high proportion of variable rather than fixed-rate mortgages…

Read the article

Research trip: Mexico & Trump – a key call in emerging markets

President Trump’s anti-Mexico rhetoric has made Mexican assets one of the key calls in emerging market debt. I have just returned from a research trip to Mexico where I met with local economists, analysts, and corporate bond issuers. Below are a number of observations from my time there.

Donald Trump won the election on a fairly protectionist rhetoric – with a special focus on Mexico – and the …

Read the article

New York research trip: a Bond Vigilantes quick video update

Corporate bond fund managers Stefan Isaacs and Richard Woolnough have just come back from New York, where they spent a couple of days meeting economists and bond market strategists. While they were there, they took the opportunity to film a short video. In it, Stefan and Richard discuss the US bond market, central bank intervention, and the lack of consensus on the outlook for corporate bonds.

 

Watch the video