Otmane El Rhazi's Fiscal Attorney

This is the last full trading week of the year and in many ways, the most anticipated, given that the US FOMC is widely expected to increase interest rates for the first time since June 2006. It’s not a done deal, with markets pricing in around a 75% probability of a move. There are no major hurdles on the data front likely to impact that between now and Wednesday evening and the focus will fall more onto the message from the accompanying statement. That could have more influence on the way FX

The Bank of England took a dovish stance yesterday expressing a more bearish outlook for inflation in the light of lower oil prices, causing a little softness in sterling. Crude prices continue their downward spiral with Brent heading to sub $40 a barrel levels again yesterday and we’re just there this morning. The recent weakness in the dollar has done little to help crude prices which you would usually expect to get a little support, meanwhile metals have seen some buying on the back of a

Dollar shorts continue to be squeezed as the dollar index looks to be going to record its second weekly decline in a row. Failure at resistance just above the 100.00 level for the second time this year has formed a big double top fuelling calls for further weakness as investors bake in the highly expected rate hike form the Federal Reserve next week. It’s the majors that are making the most ground against the greenback with stronger than expected Australian unemployment data giving AUDUSD a

A year of stimulus, interest rate cuts and most recently devaluations to its currency is finally having the desired effect on inflation in China as CPI data came in at 1.5%, slightly higher than the 1.4% expected. There are still wide spread deflationary pressures for producers who see continue to see prices tumble with PPI coming in as expected at -5.9%, but for consumers the stimulus measures have had a greater impact showing prices rising. However, for the PBOC inflation is still running

Further weakness in commodity prices is unsettling investors during this historically very bullish month for equity markets. December usually sees indices rally as Christmas cheer engulfs investors and half an eye looks into the crystal ball for what might be in store in the year ahead, however this time the future looks murky with commodities continuing their downward spiral. Nymex crude has been especially in focus as it smashed below the $40 a barrel mark yesterday and we’re now back to the

The market is now pricing in over an 80% chance that the Fed will raise rates next week. For those still in the minority camp of expecting a rate hike in 2016, last week’s nonfarm payroll was yet further evidence to suggest the Fed will move on 16th December. It’s hard to hold onto a view when the latest data is heavily supportive of a hike this month. Ultimately it is economic conditions that dictate what will eventually materialise and just as financial markets move constantly, forecasters

After the disappointment from yesterday’s ECB meeting that led to a big spike in volatility across all asset classes we’ve seen today’s major nonfarm payroll data announcement from the US which has come in at 211k, above the expected 200k figure and even November’s impressive release of 271k was revised upwards to 298k. Before the release Fed Fund futures were pricing in a 74% chance of tightening commencing in just under two weeks time, but this makes a rate hike from the Fed on 16th December

The price action yesterday in the wake of the ECB press conference illustrated the weight of expectations that had built up in the run up and the disappointment of the market in that the combination of measures fell short of expectations. That resulted in the mother of all short squeezes on the single currency, a move that has largely held in place in overnight trading. This largely came from the fact that the ECB did not expand the monthly pace of asset purchases in the QE program which was

There is no doubt that ECB President Draghi has to deliver today at the ECB’s policy meeting. Back in October, he said that the bank were not in “wait and see” mode but “wait and assess”. This, together with other and subsequent comments, have been pivotal in pushing the downtrend on EURUSD in recent weeks. To do nothing would see a strong short squeeze on the single currency that would tighten monetary conditions, so the ECB seems to have little choice but to deliver. There is no single lever

The week so far has seen some signs that the upward momentum to the US dollar is waning. This was evident though most of yesterday’s session and although we’ve seen some recovery overnight, it’s not been sufficient to overcome yesterday’s losses. The dollar has been rising pretty relentlessly for the past 6 weeks and the market having largely priced in a move from the Fed, there is not much more juice to be squeezed from that view. Note that Fed Chair Yellen speaks later today at 17:25 GMT,

The dollar has been in retreat overnight as the risk environment at the start of the new month is positive. The latest PMI data in China was largely shaken off, the headline manufacturing series falling marginally from 49.8 to 49.6. The best illustration of the better risk tone has been the Aussie, AUDUSD pushing levels last seen since mid-October above the 0.7283 level, as the RBA leaves rates unchanged after its latest meeting. As we’ve pointed out before, the Aussie has shown a lot of

Moving into December, it’s usually the time when markets start winding down for Christmas. As it is, there are two key events that will shape the month, the first of which arrives this week in the form of the ECB meeting on Thursday. The anticipated policy divergence between the ECB and the Fed has been a key driver on EURUSD since the middle of October, since when the dynamics on respective 2Y interest rates (which embody short-term rate expectations) have been moving firmly in favour of the

We’ve seen a nervous session in Asia as stocks in China were hit over fresh fears of the stability of the financial sector (more clamp downs from the regulator), the Shanghai composite down more than 5%. The yuan was also weaker, USDCNY moving up to the 6.3950 area. The impact on FX was mainly on the yen, with USDJPY moving below 122.40. Still, with the US Thanksgiving holiday yesterday also likely to keep volumes on the light side today, then overall ranges have been comparatively narrow. The

Thanks giving is seen by many as the beginning of the festive season and yesterday it was clear from the volumes that many investors were already preparing for the shortened trading week with many US markets closed today and not reopening fully until next Monday. With such thin volumes across all asset classes we could see some quite sharp moves and whilst European indices are set to open flat this morning, the FTSE 100’s mining sector might benefit from a rebound in metal prices on the back

Volatility remains subdued during this quiet trading week and yesterday was an example of how disengaged investors are at this moment in time. Better than expected US GDP and Case-Shiller House Price data balanced out the bad consumer confidence and slightly worse numbers on Monday leading to a little profit taking in the dollar, but the wider picture in respect to interest rates and the next FOMC meeting remains unchanged. With US Thanksgiving tomorrow and the shortened trading week, already

Investors remain cautious during this shortened trading week for the US markets as we near Thanksgiving celebrations and a week that is usually known for low trading volumes. Whilst this marks the build up to the festive season, markets are still shrouded by concerns over security in some of Europe’s major cities and at the same time focus remains on US data which disappointed a little yesterday with a lower than expected manufacturing PMI and new home sales. Meanwhile US Treasury 2 year

This week commences on a soft note for European indices following a good month that saw the best weekly performance from global stocks in just over a month. Increased security tensions across Europe and a continued downward spiral of commodity prices means we’re going to see a softer open for equity markets this morning and sentiment is likely to be tested further with a very quiet week ahead on both the economic and corporate data front, culminating in the two day Thanksgiving celebrations in