Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
Access all our platforms from a single account.
BoE states the obvious
Michael O’Neill
FX Trader, Loonieviews.net
Summary: Neither sterling traders nor BoE governor Mark Carney appear to have any more knowledge about the Brexit outcome than do the rest of us.
Bank of England governor Mark Carney and his colleagues are no slouches when it comes to stating the obvious. Today’s monetary policy statement said, “The economic outlook will continue to depend significantly on the nature and timing of European Union withdrawal, in particular: the new trading arrangements between the EU and the United Kingdom; whether the transition to them is abrupt or smooth; and how households, businesses and financial markets respond.”
Carney earns £881,000 in annual compensation for such insight.
The BoE meeting wasn’t a factor for sterling traders. They were too busy smacking bids on rumours that the EU would deny Prime Minister Theresa May’s request for a three-month extension of Article 50. The EU reportedly isn’t interested; apparently, they won’t delay beyond May 22, due to EU elections the next day. GBPUSD dropped from 1.3170 to 1.3107 on the news. Prices fully retraced after May expressed hopes that the UK would not suffer a “no-deal” Brexit upon her arrival in Brussels to address the EU. Bids were hit a when French president Emmanuel Macron warned that if British MP’s didn’t back May’s plan, a “no-deal” Brexit would result. GBPUSD retreated to 1.3140.
Traders spurned the US dollar after the Federal Open Market Committee meeting but welcomed it back with open arms in New York today. Better than expected weekly Jobless Claims and Philadelphia Fed Survey data prompted renewed US dollar demand. Traders seem to have concluded that although the Fed is dovish, it remains less dovish than the other major central banks, making the greenback the best of a bad lot.
The Canadian dollar, however, cannot get any respect. Oil prices surged with WTI touching $60.30/barrel overnight and trading at $60.00/b as of 14:30 GMT. Despite that, USDCAD rallied from 1.3204 at the New York open to 1.3262 as of 14:30 GMT and is above pre-FOMC levels. Canada January Wholesale Sales were marginally better than expected and ignored.
USDCAD traders may be concerned about new government deficit spending of $22.7 billion, announced in the Liberal budget on Tuesday. Also, there are concerns about the increased political turmoil arising from speculation of political interference in the justice system. The scandal led to the resignations of senior and junior cabinet ministers, Trudeau’s number one assistant and the most senior bureaucrat.
Wall Street shrugged off opening weakness and punched into positive territory supported by today’s data suggesting the US economy is still chugging along without any danger of higher rates in the near term.
Carney earns £881,000 in annual compensation for such insight.
The BoE meeting wasn’t a factor for sterling traders. They were too busy smacking bids on rumours that the EU would deny Prime Minister Theresa May’s request for a three-month extension of Article 50. The EU reportedly isn’t interested; apparently, they won’t delay beyond May 22, due to EU elections the next day. GBPUSD dropped from 1.3170 to 1.3107 on the news. Prices fully retraced after May expressed hopes that the UK would not suffer a “no-deal” Brexit upon her arrival in Brussels to address the EU. Bids were hit a when French president Emmanuel Macron warned that if British MP’s didn’t back May’s plan, a “no-deal” Brexit would result. GBPUSD retreated to 1.3140.
Traders spurned the US dollar after the Federal Open Market Committee meeting but welcomed it back with open arms in New York today. Better than expected weekly Jobless Claims and Philadelphia Fed Survey data prompted renewed US dollar demand. Traders seem to have concluded that although the Fed is dovish, it remains less dovish than the other major central banks, making the greenback the best of a bad lot.
The Canadian dollar, however, cannot get any respect. Oil prices surged with WTI touching $60.30/barrel overnight and trading at $60.00/b as of 14:30 GMT. Despite that, USDCAD rallied from 1.3204 at the New York open to 1.3262 as of 14:30 GMT and is above pre-FOMC levels. Canada January Wholesale Sales were marginally better than expected and ignored.
USDCAD traders may be concerned about new government deficit spending of $22.7 billion, announced in the Liberal budget on Tuesday. Also, there are concerns about the increased political turmoil arising from speculation of political interference in the justice system. The scandal led to the resignations of senior and junior cabinet ministers, Trudeau’s number one assistant and the most senior bureaucrat.
Wall Street shrugged off opening weakness and punched into positive territory supported by today’s data suggesting the US economy is still chugging along without any danger of higher rates in the near term.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...