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Market Brief, North America

Market Briefing: Dollar Keeps Rising. We Don’t Know Why.

The dollar is climbing for a second day, but coherent explanations for the move are in short supply. One could argue that investors are clinging to safe havens as the prospect of a slowdown in the world’s second-largest economy darkens the outlook, but China’s peculiar growth model means it subtracts net demand from the rest of the world, and commodity-linked and growth-sensitive currencies appear to be holding ground so far. Europe is relatively quiet. The pound exhibited no discernible reaction earlier this morning on signs of cooling in the British labour market, and the euro remains under pressure on news...

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Market Briefing: Dollar Climbs on Big Trouble in Even Bigger China

Evidence of a deep and prolonged slowdown in the Chinese economy is taking a toll on global risk sentiment this morning, with safe haven demand sending the dollar higher amid parched liquidity conditions. Raw materials prices are falling, commodity-linked currencies are on the defensive, and North American equity indices are setting up for a weaker open. Treasury yields are essentially flat as some investors cling to bets on a “soft landing” — in which inflation decelerates but a deep recession is avoided — in the US economy. Consumer sentiment improved by more than expected in early August. According to estimates...

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Market Briefing: Dollar Weakens as Risk Appetite Grows

Sometimes, sentiment in markets can defy easy explanation, requiring lots of nuance and many caveats to describe. At other times, the mood be summed up on the front of a Hallmark card. Today, it’s a 50th birthday card that says “it’s all downhill from here”. Investors remain convinced a softening economy and weaker price pressures will convince the Federal Reserve to slow rate increases – leading to a loosening in financial conditions that supports asset prices. Long-term Treasury yields are down, and the trade-weighted dollar is headed for its steepest weekly loss in at least two months. Commodity prices are...

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Market Briefing: Markets Consolidate After Spectacular Rally

The most politically-incorrect word in economics is back. Mentions of “transitory” inflation have come into vogue again after yesterday’s data showed headline prices were unchanged in July after rising every month for the last two years, with the core measure also rising by less than expected. Market participants are increasingly convinced the Federal Reserve will slow the pace of hikes, lowering long-term rates and making monetary conditions more accommodative. Last week’s tightening in financial conditions has largely reversed, with yields back to pre-non-farm payrolls levels and the dollar dramatically weaker against most of its major rivals. The greenback slipped as...

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Market Briefing: A Calm Before the Storm Before the Calm Settles Over Markets

It’s quiet. Too quiet. Investors cut exposures ahead of this morning’s critically-important inflation print, leaving most major currency pairs unchanged in overnight trading. The dollar is modestly weaker, and the Treasury curve remains deeply inverted, with two-year yields exceeding their ten-year equivalents by almost 50 basis points – the most since 2000, and a sign that investors expect the economy to fall into a recession. Markets expect inflation pressures to subside somewhat, with the headline measure rising 8.7 percent year-over-year in July, down from 9.1 percent in June. The core measure is seen rising to 6.1 percent from 5.9 percent...

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