The MUFG Global Markets Podcast: Recent Episodes
MUFG EMEA
Join the MUFG Global Markets Research Team for expert analysis of the week's most pressing topics impacting economies and the markets
Derek Halpenny, Head of Research Global Markets EMEA & International Securities sits down with James Roulston in FX Institutional Sales to discuss the FX and rates impact following the much weaker than expected US jobs report. Derek also outlines the implications for USD/JPY following the joint intervention last week and highlights using historic examples why joint intervention matters but policy and fundamentals matter more.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss the fallout for the FX market from this week’s Fed, BoJ and BoE policy meetings. How have the latest developments impacted the outlook for USD/JPY?
Elizabeth Wren, European Political Analyst, sits down to speak with Henry Cook, Senior Economist, to talk about recent developments in the UK economy. They discuss new PM Andy Burnham’s policy platform and how much fiscal flexibility there may be for his proposals, as well the outlook for the upcoming Bank of England meeting amid renewed energy price pressures.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss what has been driving a weaker USD over the past week. In addition, they discuss if recent GBP outperformance will continue now that Andy Burnham has been confirmed as the new Labour leader.
Derek Halpenny, Head of Research Global Markets EMEA & International Securities sits down to speak with James Roulston in FX Institutional Sales to discuss the latest FX/Rates themes. Derek discusses the implications of Japan Finance Minister Katayama ‘s comment on encouraging households and pension funds, including GPIF to invest in domestic markets. This marks a potentially significant shift in policy direction. The re-escalation of the Middle East conflict and next week’s CPI and semi-annual testimony of Fed Chair Kevin Warsh are discussed as well.
Lee Hardman, Senior Currency Analyst, and Henry Cook, Senior Economist, discuss what has been driving FX markets recently including UK political risk and diverging monetary policy expectations between Europe and the US. Will the USD continue to strengthen?
After a busy week of central bank meetings, Derek Halpenny, Head of Research Global Markets EMEA & International Securities sits down with Nico Jan Thiesen, Global Client Sales to discuss the implications for the FX markets. The Fed meeting impact on the dollar, the BoJ impact on the yen and the BoE impact on the pound are discussed as are the implications for EUR cross currency risks given the potential for moves in the US dollar.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss how building investor optimism over a US-Iran deal and Kevin Warsh’s first policy meeting as Fed Chair are likely to impact the USD. Will another BoJ rate hike be sufficient to trigger a reversal of JPY weakness?
The much stronger than expected US jobs report has had the obvious impact with front-end rates and the dollar stronger. Derek Halpenny, Head of Research Global Markets EMEA & International Securities sits down with Chris Jakubowski, FX Institutional Sales to discuss the impact of the data going forward. How does this impact EUR/USD with the ECB expected to hike on 11th June? Has ECB pricing become overdone given recent economic data and how will the BoJ respond given the increased upside risks in USD/JPY?
Reaching a deal to extend the ceasefire for 60 days and reopen the Strait of Hormuz is now largely priced. Brent crude oil is down close to 20% from the high on 18th May reflecting the optimism that a deal would be done.
Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to James Roulston in FX Institutional Sales about what this means for rates and the US dollar. Derek also talks to James about the intervention data from Japan and the biggest AUD/NZD drop since 2016.
Lee Hardman, Senior Currency Analyst, and Henry Cook, Senior Economist, discuss the latest Uk economic and political developments. How has it impacted the outlook for UK rates and the pound?
The US dollar is heading for its biggest weekly gain since the first week of the US-Iran conflict in early March. This week, Derek Halpenny, Head of Research Global Markets EMEA & International Securities sits down with Julie Ellert, Head of FraBeLux FX Sales to discuss the factors behind the dollar move and what it might mean going forward. Yields certainly look to be increasing in importance again as US yields move higher just as Kevin Warsh comes in to take the reins from Jay Powell. Derek also discusses the big sell-offs in fixed income in Japan and the UK and what these moves might mean for the yen and pound.
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka Fisher, Director in Japanese Customer Sales for EMEA in London, discuss what has been driving the USD lower over the past week . Is intervention from Japan likely to be successful in reversing JPY weakness?
At the end of a busy week in the markets, Derek Halpenny, Head of Research Global Markets EMEA & International Securities sits down with Simon Mayes, Head of UK, Ireland & Swiss FX Corporate Sales to discuss key developments and implications for the FX markets. Derek outlines the prospects for USD/JPY sustaining the move lower following probable intervention by the BoJ/MoF and delves into the implications following this week’s central bank meetings. What do the meetings mean for BoE and ECB policy rate views and what impact will a Kevin Warch Fed have on the dollar?
Lee Hardman, Senior Currency Analyst, and Henry Cook, Senior Economist, discuss how the FX majors have been performing ahead of the upcoming BoJ, Fed, BoE & ECB policy meetings. Wil the European central banks stick to more hawkish guidance than the BoJ and Fed?
News that the Strait of Hormuz has been reopened by Iran has helped push Brent crude oil back below the USD 90pbl level. Derek Halpenny, Head of Research Global Markets EMEA & International Securities speaks to Matthieu Gloux Head of Global Client FX Sales about the implications for the US dollar and monetary policy if this re-opening proves lasting.
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka Fisher, Director in Japanese Customer Sales for EMEA in London, discuss the initial FX market reaction to the ceasefire agreement between the US and Iran. Will the USD continue to weaken if military tensions in the region continue to de‑escalate?
We are entering week 5 of the conflict in the Middle East and this week Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to Chris Jakubowski, from FX Institutional Sales, about the potential for de-escalation versus a scenario of deterioration and what that would mean for the US dollar and G10 FX. Derek and Chris also discuss the ECB and BoJ reaction functions and what lies ahead for the markets next week which culminates with the NFP release.
Lee Hardman, Senior Currency Analyst, and Henry Cook, Senior Economist, discuss how major central banks are responding to the escalating conflict in the Middle East and its impact on global energy prices. With the Fed showing less urgency to tighten policy in response to the latest energy price shock, could this help moderate USD strength?
With the conflict in the Middle East set to extend into a third week, Derek Halpenny Head of Research Global Markets EMEA & International Securities talks to Andrew Mitola, Director in FX Corporate Risk Solutions in New York about three scenarios for how the conflict unfolds from here and what the implications for the US dollar would be based on potential future moves in crude oil prices. Derek also discusses the central bank reaction function to possible inflation pick-ups and what to expect from the central bank meetings taking place next week. With USD/JPY close to the 160-level is the MoF in Tokyo ready to intervene?
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss why the USD has rebounded in response to the Middle East conflict.
How does it fit with historical FX performance during energy price shocks?
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka‑Fisher, Director in Japanese Customer Sales for EMEA in London, explore why speculation over the Bank of Japan’s upcoming policy shifts has triggered a fresh wave of yen weakness.
They also examine how escalating tensions between Iran and the United States could shape the performance of the US dollar in the weeks ahead.
Derek Halpenny, Head of Research Global Markets EMEA & International Securities speaks to Simon Mayes, Head of FX Sales for the UK and Ireland about the moves of the dollar this week. Derek also outlines elements of PM Takaichi’s speech and the implications for the yen and JGBs.
Lee Hardman, Senior Currency Analyst, and Andrea Hayward, Vice President of the Japanese Client Sales Group for EMEA in London, discuss the fallout from the lower house election in Japan.
Will the USD extend its recent rebound on the back of the latest US employment and inflation data?
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss the outlook for the JPY ahead of this weekend’s Lower House election in Japan.
The GBP has also taken a hit in recent days, what have been the main drivers of the weaker GBP?
The US dollar is recovering into the end of the week after the announcement that Kevin Warsh is being nominated for the role of Fed Chair. Derek Halpenny, Head of Research, Global Markets EMEA & International Securities discusses the outlook for the US dollar with Julie Ellert, Head of FraBeLux FX Sales and whether the Warsh announcement changes the outlook for the dollar. Derek also discusses US dollar debasement risks and the impact on the yen from the upcoming snap election in Japan.
In this Podcast, George Goncalves, MUFG Head of Macro Strategy for the Americas discusses how January has been action packed, where isolating the signal from the noise means that the house view at MUFG hasn’t fundamentally changed. In our view, the US economy still looks to be setting down a path of a tale of two halves, with fiscal policies expected to mask underlying weakness in the first half of the year, and with stagnant labor demand being the dominant force in the second half that drags income and consumption growth down. We also discuss the upcoming first FOMC meeting of the year where the Fed may highlight the upcoming benchmark revision to nonfarm payrolls, that is expected to show even weaker jobs growth than previously thought, if they wish to project a more dovish tone, but markets are anticipating a relatively hawkish Fed that doesn’t cut again until June when Powell is out as Chair. Meanwhile the surprise factor for the global rates markets has been the large swing in JGB rates. George explores why this is happening and why what is taking place in Japan might be more moving than US data and the Fed, for now.
Lee Hardman, Senior Currency Analyst, and Sara Maki, an MUFG Graduate Analyst, discuss why the USD has corrected lower over the past week even as US yields have risen. They also discuss the pick-up in JPY volatility after the BoJ’s latest policy update.
Lee Hardman, Senior Currency Analyst, and Sara Maki, an MUFG Graduate Analyst, discuss risks for the JPY from a snap election in Japan. Lee and Sara also discuss President Trump’s latest attack on the Fed’s independence. What is the likely fallout for the USD?
Following the release of the first US nonfarm payrolls report of 2026, Derek Halpenny, Head of Research Global Markets EMEA & International Securities sits down with Sara Maki, an MUFG Graduate Analyst to discuss the implication of the jobs report for the dollar and Fed policy. Derek and Sara also discuss factors behind strong growth but weak jobs growth and the breaking news that Japan PM Takaichi is considering calling a general election in February. What will be the implications for the yen?
George Goncalves, MUFG's Head of US Macro Strategy, and Agron Nicaj, MUFG’s US Desk Economist, share their outlook for the 2026 US economy and markets. The team expresses their skeptical view on AI's ability to further drive investment and wealth effect spending this year, relative to the many lofty expectations. Presented with a more cautious tone, the first half of the year may experience a boost from the fiscal policies of 2025, but more labor demand is needed in the cyclical sectors of the economy for 2026 to be a year of sustainable economic growth. As an added risk factor, the economy is inextricably linked to markets, now more than ever, and given the starting point for valuations, growth is susceptible to financial shocks. Continued weakness in the labor market, the potential for more accelerated disinflation, and new Fed leadership should enable rates to come down to neutral, or below, in 2026.
Derek Halpenny, Head of Research Global Markets EMEA & International Securities is joined by Chris Jakubowski Head of FI FX Sales to discuss the fallout in the FX markets following the FOMC meeting this week and what this final meeting of the year means for the US dollar going forward. Derek and Chair also look ahead to the final full week of trading next week and discuss the BoE and BoJ meetings. Can the BoJ restore confidence to the JGB market with a rate hike and a message of more?
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss the impact on USD/JPY from the upcoming BoJ and Fed policy meetings. USD/JPY has dropped this week as BoJ rate hike expectations have intensified, but will it continue?
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Director from Japanese Customer Sales for EMEA in London, discuss the pound’s reaction to the UK budget. If the yen continues to weaken will it encourage the BoJ to bring forward rate hike plans?
Following the supplementary budget announced in Japan on Friday, Derek Halpenny, Head of Research Global Markets EMEA & International Securities sits down with Jack Greenslade in Corporate FX Sales to discuss the details of the package what it means for JGB issuance plans going forward and the possible impact on JGB yields and the yen. Looking ahead of next week Derek and Jack discuss the UK budget announcement scheduled for Wednesday 26th November and what will be key for Gilts and the pound.
Lee Hardman, Senior Currency Analyst, speaks with Simon Mayes, Head of UK, Ireland and Switzerland Corporate Sales (FX), to discuss what has been driving the GBP sell-off over the past week. Is the recent GBP weakness likely to continue heading into next year?
This week Derek Halpenny, Head of Research Global Markets EMEA & International Securities is joined by Henry Cook, Europe Economist to discuss the implications of the BoE MPC monetary policy decision this week. Henry and Derek discuss the key takeaways from the meeting and the financial market impact on rates and the pound. The upcoming budget implications are also discussed. The budget is crucial both from a political and markets perspective. The outlook for ECB monetary policy and MUFG’s ECB policy and euro forecasts are also outlined.
Lee Hardman, Senior Currency Analyst, and Jack Greenslade, Deputy Head | UK, Ireland, Swiss and Middle East Corporate Sales, discuss what’s next for the yen after it was by far the worst performing G10 currency in October. The pound has also underperformed alongside the yen recently, will this continue ahead of BoE’s upcoming policy meeting?
George Goncalves, Head of Macro Strategy for the Americas, shares our latest macro perspectives in light of the government shutdown and ongoing updates to US trade policy. However, the main focus was on the teams expectations for the upcoming FOMC meeting. In addition to expecting a 25bp cut, with reserves continuing to shrink and Chair Powell signaling that the Fed may be approaching the end of its quantitative tightening (QT) program, George believes this meeting could serve as a platform to begin mapping out a path to conclude QT by year-end.
This week Derek Halpenny, Head of Research Global Markets EMEA & International Securities sits down to talk to Shan Husain in FI FX Sales about the outlook for rates and FX ahead of a busy week. In Japan PM Sanae Takaichi’s speech in the Diet signals fiscal expansion. President Trump will be in Tokyo and then we also have the BoJ meeting on Thursday, following the FOMC meeting on Wednesday. The softer CPI print today leaves the Fed well placed to cut. Derek also discusses the implications for the pound after weaker than expected inflation data this week.
Lee Hardman, Senior Currency Analyst, speaks with Simon Mayes, Head of UK, Ireland and Switzerland Corporate Sales (FX), to discuss what has been driving a weaker USD over the past week. How important have political and trade risks been for FX market performance?
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss how the latest political developments in France and Japan are impacting the FX market. Heightened uncertainty has helped to lift the price of gold to fresh highs above USD4000/ounce, how have FX rates performed during periods of rising gold prices?
After easing twice this year, the Monetary Authority of Singapore (MAS) kept its policy unchanged in July. Since then, inflation has eased and export momentum is showing signs of weakness. The big question on everyone’s mind is whether MAS will ease again in October? Lloyd Chan, Senior Currency Analyst with the MUFG Global Markets Asia Research team talks to Jamie Tsukakoshi, Head of FX Sales, Global Clients Singapore, about the outlook for MAS policy and the trajectory of the Singapore dollar.
The US dollar is marginally lower this week (-0.5%) with the economic data that was released this week confirming still weakening labour market conditions. Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to James Roulston Institutional FX Sales about the LDP leadership election taking place on Saturday and the implications for BoJ policy and the yen going forward. In addition Derek discusses with James the implications of the ongoing government shutdown running into the FOMC meeting later this month.
George Goncalves, Head of Macro Strategy in the Americas, shares how our latest macro thinking has evolved, where our longstanding view that the weak labor market and ongoing large revisions would result in a Fed pivot and a restart of easing in September. There was a high level recap of the special topic from the latest monthly which covered Asia FX reserves. Our analysis shows that we’ve come full circle since the Asia financial crisis which was the catalyst for Asia to accumulate dollars, but with tariffs now in place, perhaps less dollar recycle occurs with clear implications for UST demand. Lastly, our podcast was recorded on the first official day of the government shutdown. George goes into what are the potential scenarios for the economy and how it could impact the way the team views rates and house view.
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Director from Japanese Customer Sales for EMEA in London, discuss how positive US economic data surprises have been encouraging a stronger USD. Will the divergence between weak US employment growth and stronger US GDP growth continue in the week ahead?
Following the FOMC meeting on Wednesday and the BoJ meeting on Friday, Derek Halpenny, Head of Research Global Markets EMEA and International Securities talks to Chris Jack Jakubowski, Hedge Fund FX Institutional Sales about the impact of these central bank meetings on USD/JPY and the dollar more generally. Derek discusses the BoJ decision and how the upcoming LDP leadership election could play and important role in BoJ policy decisions and the yen.
Lee Hardman, Senior Currency Analyst talks to Michael Owen, Head of Global Client Desk EMEA, discuss what has been driving the FX market over the past week.
Will the BoE’s upcoming policy meeting continue to provide support for the GBP?
Lee Hardman, Senior Currency Analyst, speaks with Simon Mayes, Head of UK, Ireland and Switzerland Corporate Sales (FX), to discuss the outlook for the USD after the release of another weak nonfarm payrolls report. Will political uncertainty in France and Japan help to dampen USD weakness?
Lloyd Chan, Senior Currency Analyst at MUFG Global Markets Research Asia, speaks this week about the outlook for the Indonesian rupiah amid political uncertainty. Lloyd also highlights that Bank Indonesia’s FX intervention and the government’s rollback of its controversial policy have helped stabilize market sentiment on the rupiah for now.
The US dollar has been broadly stable this week despite the escalation of uncertainty related to Trump's attempts to undermine Fed independence. This week Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to James Roulston from FX Institutional Sales about the US dollar implications going forward. Derek also discusses BoJ policy, Japan politics and the yen and whether the political uncertainty emerging in France will impact the euro.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst from London, discuss the FX market fallout from Fed Chair Powell’s keynote speech at Jackson Hole. Could diverging policies between the Fed and other major central banks drive the USD even lower?"
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Director in Japanese Customer Sales for EMEA in London, discuss how the latest economic data is shaping the outlook for BoJ and Fed policies. Will widening policy divergence put greater pressure on USD/JPY as we head into the autumn?
The dollar weakened again this week, though more modestly - slipping less than 1%. Derek Halpenny, Head of Research, Global Markets EMEA & International Securities, joins James Roulston from FX Institutional Sales to unpack the key themes likely to shape FX moves in the weeks ahead. They discuss the implications of Stephen Miran’s appointment to the Fed Board of Governors - what it could mean for Chair Powell’s position in 2026—and assess the impact of the latest tariffs, which came into effect on Thursday. With US CPI data due on 12 August, they explore what to watch for and how it could influence the market.
George Goncalves, Head of Macro Strategy in the Americas, takes us through one of the busiest macro week of the year, where we had the Fed, QRA, BoJ, tariff deadlines and announcements, and a slew of labor data. In the end, the biggest highlight of the week was the extremely weak employment report which also had large revisions to the previous two months. Judging by the markets reaction, the downside in jobs data came as a surprise to markets but was not a shock to our macro team which has been flagging how labor market data has been overstating reality for months.
Additionally, the team discussed the recently published Macro2Markets monthly titled, “At an inflection point or another macro head fake?” where we covered the idea of how risk markets are pricing in a goldilocks scenario and how tariffs can be utilized to pay for the Big Beautiful Bill and the potential changes in Treasury demand. George wraps up by suggesting to stay on guard ahead because risks are now more asymmetric to the downside as risk markets are due a pullback.
The release of a much weaker-than-expected U.S. non-farm payrolls report has triggered significant market movements, as investors increasingly position for a potential Fed rate cut in September. Derek Halpenny, Head of Research, Global Markets EMEA & International Securities, speaks with Jack Greenslade from FX Corporate Sales about the report’s implications for the U.S. dollar and Federal Reserve policy. Derek also explores how the softer labour data could influence U.S. tariff decisions and what this means for the Swiss franc.
Lee Hardman, Senior Currency Analyst, sits down with Simon Mayes, Head of Corporate Sales for the UK, Ireland, and Switzerland (FX), to explore the outlook for the Japanese yen following Japan’s Upper House election and the recent US-Japan trade agreement. With a potential policy shift on the horizon, could a hawkish Bank of Japan stance in the coming week give the JPY a boost?
After another week of Trump-driven financial market volatility, attention now turns to Japanese politics. Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, sits down with Chris Jakubowski, Head of Hedge Fund FX Sales, to discuss Sunday’s upper house election and its potential implications for the markets next week and beyond.
Upper house elections in Japan are typically low-impact events, but this one feels different. Could we see renewed JGB volatility? What might the results mean for USD/JPY, and is there a risk of a sovereign credit rating downgrade?
Derek and Chris also explore the “demise of US exceptionalism” narrative in light of the latest US capital flow data.
George Goncalves, Head of Macro Strategy in the Americas, takes us through a series of topics as a mid-month update: from tariffs, to the recent softer than expected inflation report, the optically better than expected NFP jobs data, and the passage of the One Big Beautiful Bill. Recently, George and the team pushed back their next Fed cut to September from July where they still believe that neutral rates are closer to the low 3% levels versus the current low 4% levels. They are also viewing the long-end as offering value in the midst of higher global rates.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst from London, discuss the FX market's reaction to President Trump’s recent tariff announcements.. They also explore whether rising political uncertainty in Japan ahead of the Upper House elections is playing a role in the yen’s recent weakness.
As markets await President Trump’s announcement on updated reciprocal tariff rates following months of negotiations, Derek Halpenny, Head of Research, Global Markets EMEA & International Securities, speaks with Julie Ellert, Head of FX FraBelux Corporate Sales, about the potential implications for FX markets.
With inflation in Japan remaining elevated, they also explore how the Bank of Japan might respond in the months ahead. Could another rate hike be on the horizon? With inflation coming in higher than expected, there’s a risk the BoJ could fall behind the curve.
George Goncalves, Head of Macro Strategy in the Americas, reviewed the economic backdrop and market sentiment heading into another critical week in the US. George made a comprehensive case that the jobs data will likely continue to soften with the unemployment rate notably moving much higher, maybe starting with the June NFP data release. George concludes by recapping his monthly report and noting the irony that uncertainty is lifting on the policy front in DC, yet the consumer is likely tapped out, arguing for the Fed to cut soon.
That said, George acknowledges everything has to go "perfect" for the Fed to cut in July. If the Fed doesn’t cut in July, George expects them to cut in September & argues the longer they wait, the more they will have to cut (which opens the possibility of a 50bp cut in September - 2024 Deja Vu).
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst in London, unpack the factors behind the sharp reversal in the US dollar after it hit new year-to-date lows. Is this just a pause in the downward trend, or the start of a broader recovery? Tune in for insights on what could shape the USD’s direction in the week ahead. Share your thoughts in the comment section.
Following some tentative signs of easing risks in the Middle East, which have helped weaken the US dollar, Derek Halpenny, Head of Global Markets Research EMEA & International Securities, talks to Simon Mayes, Head of UK, Ireland, and Swiss FX Corporate Sales, about the potential implications for the US dollar and the financial markets. Derek also highlights some key takeaways from the numerous central bank meetings this week, including the Fed and the BoJ.
George Goncalves, Head of Macro Strategy in the Americas recapped an action-packed month full of uncertainty. Weak US fundamentals with the jobs data remaining mixed while inflation continues to come in softer suggesting that the Fed is behind the curve. George then previewed our expectations for the June FOMC meeting where he notes that the US data has deteriorated enough that the Fed may use this meeting to pivot towards a more dovish stance to gain flexibility to ease at future FOMC meetings.
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Director from Japanese Customer Sales for EMEA in London, discuss the recent USD sell-off ahead of next week’s FOMC meeting. Will the escalating military conflict between Israel and Iran help to support the USD after hitting year-to-date lows?
Lloyd Chan, Senior Currency Analyst at MUFG Global Markets Research Asia, speaks this week about the outlook for Malaysia's economy and the ringgit amid lingering global trade uncertainties. Lloyd also highlights that Malaysia's economy is in a domestic-led investment upcycle, which could help cushion the impact of trade headwinds and support ringgit stability.
Lee Hardman, Senior Currency Analyst, speaks with Simon Mayes, Head of UK, Ireland and Switzerland Corporate Sales (FX), to discuss FX market developments over the past week. It has been a mixed week for the USD but will the weakening trend remain place?
George Goncalves, Head of Macro Strategy in the Americas, walks us through the latest developments in US macro and markets which was covered in the last monthly titled "The Great Whiplash". George highlights that the constant policy shifts, especially on the trade front, has led to tight trading ranges - even as we sit at local highs in both stocks and rates. Given the constant news flow challenges, and that it pays to be tactical in this environment, George previews the upcoming NFP jobs report and what to expect and what it will mean for Fed policy options ahead.
Following another week of debate over President Trump’s trade tariffs, Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, speaks with Shan Husain from FI FX Sales about the latest developments. They discuss legal uncertainties around reciprocal tariffs, the impact on the US dollar, and concerns about confidence in US assets. Derek also looks ahead to next week’s ECB meeting and growing sentiment in Europe that the euro could strengthen its role as a global reserve currency amid doubts about the dollar.
Lee Hardman, Senior Currency Analyst in London talks to Lloyd Chan, Senior Currency Analyst in Singapore, about the implications for Asian currencies from a second Trump Presidency.
Disclaimer: www.mufgresearch.com (PDF)
Concerns about energy reliability, green premiums and political polarisation in recent months – that have been magnified by the outcomes of the US presidential elections – are raising questions about sustainable investing’s ability to deliver both positive impacts and strong returns on investments (RoI).
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), delves into this pertinent theme. He believes that moves by investors towards long-term sustainable themes such as financial materiality, a broadened investable universe, and engagement over exclusions, have the potential to augment performance and keep sustainable investing on solid ground, independent of the political order of the day as well as certain narrowing in interpretations of fiduciary expectations.
Donald Trump achieved a decisive victory in the US election. Lee Hardman, Senior Currency Analyst talks to Michael Owen, Head of Global Client Desk EMEA, about the implications for the USD from a second Trump presidency.
Disclaimer: www.mufgresearch.com (PDF)
Donald Trump has won the White House and Republicans have won a larger-than-expected majority in the Senate. The outlook for the House is still unclear but leans toward a very narrow Republican majority and therefore a Republican sweep. This outcome is set to have significant reverberations on a plethora of ESG dimensions.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), examines the ESG implications from president Trump’s second term in office.
He believes that top of mind will be amendments to the US Inflation Reduction Act (IRA) – the largest piece of climate legislation in US history – with the focus on less of a full repeal (given the majority the surge of IRA investments and jobs created has predominantly flowed to Republican congressional districts), but rather targeted reductions on loan guarantee and grant programmes as well as consumer tax credits, such as electric vehicle purchases – particularly around foreign entity of concern (FEOC) requirements.
A broader risk is the formal US withdrawal from the Paris Agreement in early 2026 (akin to Trump 1.0), with a larger emphasis on fossil fuels, with decarbonisation efforts likely to become more nuanced and led by state policies as well as private sector initiatives.
Lloyd Chan, Senior Currency Analyst at MUFG Global Markets Research Asia, speaks this week about the potential growth, monetary policy, and FX implications on ASEAN from a Harris election victory and a Trump election victory. Lloyd also highlights which ASEAN economies and currencies would underperform in an adverse Trump scenario, where 60% US tariff is imposed on all Chinese imports while a 10% blanket tariff is imposed on US imports from all other countries.
Disclaimer: www.mufgresearch.com (PDF)
Following the release of the US jobs report Derek Halpenny, Head of Research, Global Markets EMEA & International Securities, discusses with Simon Mayes, Head of UK, Ireland & Swiss Corporate FX Sales about the potential implications ahead of the FOMC next week. Derek also outlines the FX implications on a Harris election victory and a Trump election victory and highlights some polling analysis from NBC News. The discussion also covers the GBP impact following the UK budget this week.
Disclaimer: www.mufgresearch.com (PDF)
The US presidential election will take place on 5 November and polls indicate a tight race. In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), examines the potential impacts on clean energy post US elections.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss why the JPY has weakened sharply this month. How are the political risks impacting JPY performance?
Disclaimer: www.mufgresearch.com (PDF)
Every two years, global leaders gather to negotiate agreements to preserve biodiversity and stop the destruction of nature. This week, representatives of 196 countries are gathering in Cali, Colombia, for the 16th UN Conference of the Parties summit, commonly known as COP16, which runs from 21 October through to 1 November.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), delves into the significance of the summit as well as contextualising what are the key watchpoints for corporates and investors.
Michael Wan, Senior Currency Analyst with MUFG Global Markets Research Asia, and Japinder Singh, Vice President Treasury Sales, MUFG India discuss key driving factors behind RBI monetary policy decision and INR in the context of US Elections and what that could mean for the Dollar and Fed policy.
(Please see link to Disclaimer: Disclaimer - MUFG Research)
Lee Hardman, Senior Currency Analyst, and Reza Nasehi, Vice President of the Japanese Client Sales Group for EMEA in London, discuss what has been driving the strong USD rebound this month and if the USD continue to strengthen ahead of the US election?
Disclaimer: www.mufgresearch.com (PDF)
The former ECB President and Italian PM, Mario Draghi, recently presented a study he has conducted on behalf of the European Commission, on how to strengthen Europe's competitiveness and close the productivity gap with the US and China. Electrification appears at the core of the plan with half of the incremental investments suggested by the plan (~EUR450bn of EUR800bn per year) in clean energy and electric mobility.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), delves further into the Draghi Plan which at face value should bolster increasing power consumption, lower the cost of capital for renewable activities and spur significant capex in power grids and clean energy.
USD/JPY continues it's advance toward the 150-level and this week Derek Halpenny, Head of Research Global Markets EMEA and International Securities talks to Simon Mayes, Head of UK, Ireland and Switzerland Corporate Sales about the prospects for USD/JPY in the context of a 60bp jump in 2yr US yields, the upcoming election in both Japan and the US, and the argument that the buying momentum may start to fade at these levels. Derek also looks ahead to the ECB monetary policy meeting next week and possible implications for the euro.
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At the COP28 UN Climate Change Conference in December 2023, governments agreed to work together to triple the world’s installed renewable energy capacity by 2030. According to the latest IEA assessment, renewables are set to generate nearly half of global electricity by the end of the decade, but the current growth trajectory is not fully in line with the UN goal to triple capacity.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), examines the IEA’s various scenarios and highlights two critical factors that are set to drive the global renewables expansion for the remainder of this decade.
This week George Goncalves, MUFG Head of U.S. Macro Strategy, provides an update to our latest house views on the Fed and US rates forecasts post the solid September NFP jobs report. Even though the team have doubts on the overall quality of the recent NFP reading and that one number does not make a trend. At face value it was a strong report and it will likely result in the Fed cutting at a slower pace. We are now expecting the Fed to deliver a 25bp cuts going forward and tweaked on our longer term rates forecasts.
Lee Hardman, Senior Currency Analyst and Seiko, Kataoka-Fisher, Director from Japanese Customer Sales for EMEA in London, discuss why the USD has staged a strong rebound over the past week. Recent developments add to their caution in forecasting further USD downside ahead of the US election.
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The conversations during Climate Week in New York, between 22-29 September, had a tone of realism that acknowledged the shortfall in political ambition to address climate change – both in government policies and finance. These deliberations are critical building blocks towards the next major destination for international sustainability discussions at COP29 in Azerbaijan.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), examines the key takeaways of Climate Week in New York, which top of mind included the continued commitment to solving barriers to an effective sustainable market, concern over higher power demand attributed to the rise of AI and the increased costs of climate impacts.
Following the LDP leadership election in Japan today Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to Seiko Kataoka-Fisher, Head of Japanese Client FX Sales about what the implications for BoJ monetary policy and the yen after the victory for Shigeru Ishiba. Derek also looks ahead to next week’s US employment report and the Fed and FX implications.
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Published on 9 September, the Draghi Report on “the future of European competitiveness” is a clarion call that addresses how the EU is trailing the US and China over the past two decades. To avoid what former ECB President, Mario Draghi, calls a “slow agony” the report calls for EUR750-800bn of investment per annum (~5% of GDP) to focus on three areas to reinvigorate growth – decarbonisation, digitalisation and defence.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), examines the key dimensions of this pertinent report that sets the stage for the EU Commission’s upcoming “Clean Industrial Deal”, advocating game-changing reforms to enhance European competitiveness.
Lee Hardman, Senior Currency Analyst, and Simon Mayes, Head of UK, Ireland and Switzerland, Corporate Sales, discuss the FX market implications from this week’s central bank policy updates. Will the USD continue to weaken after the Fed delivers a larger 50bps rate cut?
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On the back of a recently published FOMC preview report, this week George Goncalves, MUFG Head of U.S. Macro Strategy, walks us through what to expect at the September FOMC meeting and the rationale for why our house view is calling for the first cut to be 50bps. George also explores how this easing cycle may progress.
In George’s view, this is a historical event because this easing cycle is being launched as a preemptive move to avoid further cooling in the labor market and economy. In the last few easing cycles, the Fed has lowered rates in reaction to a specific event or catalyst (i.e. dot.com bust, GFC and the pandemic) that shocks and quickly weakens the economy (forcing the Fed into action). This time the Fed has seen the macro environment turn and is being cautious because recent data is likely overstating how healthy the economy truly is. Therefore, the Fed is trying to modulate rates with the goal of avoiding a hard landing due to macro reasons (driven by the impact of higher rates on consumer spending, small business activity and government finances). In our view, and as covered in the podcast and our FOMC preview report, there are plenty of reasons to start off with a 50bp cut.
From a risk management perspective, there are two points to make.
- If the Fed is behind the curve (we think they are, they should have eased this past summer), they should cut rates quicker at the start and then attenuate the speed later in the easing cycle.
- Although many surveys and forecasters are calling for 25bp cut, the market has priced in 50bps and to disappoint market pricing (which is embedded in all asset classes) runs the risk of acutely tightening financial conditions at the start of the easing cycle. That would be counterproductive and against the reason to cut in the first place.
Further down the road, as the Fed has a few cuts under its belt, at that stage is where we think there could be more push back from the Fed without triggering adverse market reactions. Lastly, we think the market has a lot of the potential cuts already priced-in for the overall cycle. Where one cannot definitively spell out at this point what is the right pace and final resting place for the Fed Funds rate. The election may have an impact during the early days of 2025 (as fiscal policy adjusts) too. We have been arguing the sooner the Fed starts, the less they may need to do. Its possible that we get pitstops along the way towards a neutral rate or it comes in a flash.
Bottom-line: We think 50bp is the best option in September. Post the first cut, the next moves from the Fed will come down to the outlook for the economy and markets.
Lee Hardman, Senior Currency Analyst, and Reza Nasehi, Vice President of the Japanese Client Sales Group for EMEA in London, discuss how the Fed’s decision to begin cutting rates is likely to impact the USD in the week ahead. Will the Fed play catch up with other major central banks and cut rates more quickly?
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The US economy is en route towards a soft landing. Inflation is trending towards the Federal Reserve’s (Fed) 2% inflation target, and growth is cooling (not collapsing). The cyclical context matters as commodities enjoy positive returns during a “good” cutting cycle (growth firm, declining inflation), and vice versa, suffer negative returns during a “bad” cutting cycle (growth decelerating, sticky inflation).
To put this into perspective, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), delves into MUFG’s latest thought leadership report, titled, “US Federal Reserve and commodities – Commodities outperform when the Fed cuts during soft landings” (see here).
There has been no shortage of the figures attesting to the cosmic transformation of the US Inflation Reduction Act (IRA) – the largest clean energy and climate legislation in US history since its passage in August 2022. Yet, two years on the IRA is at a critical juncture with the impending US elections potentially altering the contours of what has been a goldilocks era of clean energy regulation.
To put this into perspective, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), delves into MUFG’s latest ESG thought leadership report, titled, “US Inflation Reduction Act (IRA) two years on – How the US elections may alter the contours of the capex supercycle” (see here), in this week’s podcast.
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As the summer lull for the financial markets comes to an end, Derek Halpenny Head of Research Global markets EMEA & International Securities talks to Jack Greenslade in Corporate FX Sales about what lies ahead for the major currencies following some key developments in August and ahead of key central bank meetings. Are the financial markets correctly priced for the central bank easing cycles that have already started for some (ECB & BoE for example) and is set to commence for the Fed in September.
US Federal Reserve (Fed) Chair Powell’s remarks at the Jackson Hole symposium in August left no room for ambiguity on the direction for policy rates, with the Fed set to deliver the first non-recessionary interest rate cut on 18 September. From this, whilst it is acknowledged that an easing in interest rates will support sustainability-centric counterparties – as they tend to exhibit negative sensitivity to bond yields – the outperformance is not uniform across sectors.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), contextualises where investors could best position from a sectoral perspective to maximise returns across the sustainability complex as the US Federal Reserve begins to ease interest rates.
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, reviews the last major macro event that happened this past Friday, the Fed’s Jackson hole symposium. Specifically chair Powell’s opening speech acknowledged that the labor market cooling is unmistakably happening now (and in reality has been in our view for many quarters) and thus the Fed has pivoted to worrying about the jobs picture. As a result, chair Powell said the “time has come” to start adjusting policy rates lower (likely at the September meeting) to help combat further labor market weakness. Given that many of the conditions that have led up to this Fed pivot formed the basis for our house view for the better part of the year, we have not made major changes to our outlook for the Fed, economy, and markets. Prior to the event we already had increased our odds for larger rate cuts, where if the August NFP is weak, the Fed will likely start this easing cycle with 50bps. Meanwhile, this month has felt much longer than the typical August summer, George echoed back to another similarly long and volatile August, the August of 2007. George believes that the conditions are different to back then but the valuation setup is similar in terms of markets that are over-valued and sentiment very complacent. George argues that 2007 taught us to value liquidity and watch out for vol triggers.
Lloyd Chan, Senior Currency Analyst at MUFG Global Markets Research Asia, speaks this week on Indonesia's monetary policy, fiscal policy, and the outlook for the Indonesian Rupiah, following Bank Indonesia's policy meeting and the annual Jackson Hole symposium last week.
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This week, Derek Halpenny Head of Research Global Markets EMEA & International Securities discusses with Seiko Kataoka-Fisher Head of JC FX Sales, the initial market reaction to the Jackson Hole speech by Fed Chair Powell. The speech highlighted a new Fed focus on downside labour market risks. After this week’s Democratic National Convention in Chicago Derek provides an update on US politics and how the FX market could be impacted.
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Lin Li, Head of Global Markets Research Asia, discusses USD/CNY pair’s recent movement and the forecast for next 12 months, the status of Chinese economy, and the potential policy support.
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The question of when markets will start “pricing in” climate volatility and the energy transition is a recurring theme amongst monetary policymakers and the sustainability community.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), delves into a recent European Central Bank (ECB) report which suggests companies that are emitting the most carbon are paying rates 14 basis points higher, on average, than those charged to the ones emitting the least. Notwithstanding the challenges in zeroing in on climate risks on a standalone basis, these conclusions have profound implications for lenders and asset managers in systematically pricing in energy transition-linked risks on the path towards net zero.
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, puts into context how risk market preferences and a buy the dip mentality has likely led to the bounce from oversold conditions that were present at the early start of August around the adjustments of positioning. George remains cautious and expects more episodic vol events over the end of summer into early Fall. Meanwhile, George highlights what to watch and what may change chair Powell’s message at Jackson Hole with the jobs data being the driver.
This week has seen a notable rebound in USD/JPY as risk appetite improves. Derek Halpenny, Head OF Research Global Markets EMEA & International Securities talks to Seiko Kataoka-Fisher, Head of JC FX Sales about the revival of yen selling and whether yen carry can return on a sustainable basis. Derek also looks ahead to next week with the Jackson Hole Symposium a key market risk event.
It has been another volatile week for financial markets. Lee Hardman, Senior Currency Analyst talks to Seiko Kataoka-Fisher, Head of Japanese Client FX Sales about what has been driving the FX market over the past week after USD/JPY briefly fell back below the 142.00-level. What are the key events to watch out for the week ahead?
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Michael Wan, Senior Currency Analyst with MUFG Global Markets Research Asia, and Japinder Singh, Vice President Treasury Sales, MUFG India discuss key driving factors behind the weakness in INR in the context of significant global market volatility, and also expectations for RBI policy later this week.
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The Fed decided to leave rates on hold this week but was it a policy mistake? Lee Hardman, Senior Currency Analyst talks to Michael Owen, Head of Global Client Desk EMEA, about the latest policy updates from the Fed and BoJ and their impact on the FX market.
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The limited return on investments (RoI) - rather than the access to capital is increasingly being cited as a leading barrier to scaling the energy transition. To put this into perspective, Ehsan Khoman, Head of Research: Commodities, ESG and Emerging Markets (EMEA), delves into MUFG’s latest ESG thought leadership report, titled, “Energy transition’s “shortage of returns”. Profitability (not capital) remains a critical barrier to decarbonisation” (read more here) in this week’s podcast.
Ehsan states that one of the most pertinent impediments to inadequate returns from the transition has been higher interest rates. In essence, renewables are fuel-free, but that means almost all of their expenditures are incurred upfront – financed with debt. That makes them more dependent on the cost of finance (which has been rising) than carbon-intensive alternatives. Encouragingly, as interest rates begin to ease, the dynamic reverses, which may likely accelerate the uptake in clean energy.
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, goes over the macro-olympiad of events from central banks to key data releases and concludes by saying that this week could set the tone for the balance of the summer for markets. In terms of the July FOMC meeting, we believe the Fed will need to converge with market expectations in regards to rate cuts. A dovish July FOMC would be consistent with the last 6 prior FOMCs, where rates rally. If that happens it should bring the curve even closer to dis-inverting before they actually cut rates in September. In the meanwhile, there is a lot of time until the September FOMC meeting, where the next focus will NFP, CPI and Jackson Hole in August.
Michael Wan, Senior Currency Analyst with MUFG Global Markets Research Asia, and Karina Ferreras (Kia), Vice President Treasury Sales, MUFG Philippines discuss key driving factors behind the underperformance of the Philippines Peso, the path for BSP policy, and also the risks to watch out for.
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The US dollar is closing out this week weaker with a heavy schedule of risk events next week. USD/JPY corrected 10 big figures lower high-to-low in July to date and hence there will be a lot of focus on the BoJ policy decision next week. That will be followed by the FOMC meeting later on Wednesday while the BoE meets on Thursday. The week ends with the US jobs report. Listen to Derek Halpenny, Head of Research, Global Markets EMEA talk to Seiko Kataoka-Fisher Head of Japanese Client FX Sales, about why the US dollar could weaken further through this busy schedule of events and beyond.
Lin Li, Head of Global Markets Research Asia, discussed the main takeaways from the Third Plenum of the 20th Central Committee of the Communist Party of China, the direction of property sector reform and the PBoC's surprise policy rates cut on 22 July.
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Director from Japanese Customer Sales for EMEA in London, discuss why the JPY has been strengthened sharply over the past week and whether it is likely to extend further. Will the BoC follow the ECB’s lead and leave rates on hold next week?
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Steel may exist as a critical product in today’s global economy, but it’s also a significant source of carbon emissions. What kind of a role could green steel play in the path towards net zero?
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), delves into this theme, wherein he discusses why green hydrogen-based steel – a market that already exists in Europe and will likely be made more attractive with the EU’s Carbon Border Adjustment Mechanism – may offer a key route for the monetisation of the Middle East’s unparalleled renewables prospects.
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, reviews recent market, macro and political events in the US. George and team have been focused on the lags of monetary policy, the lags in how long its been taking for sticky inflation to unwind and the data discrepancies in the true health of the US labor market. The latest CPI report showed a better than expected inflation reading, which was a welcome sign and consistent with our house view that the worst on the inflation front is probably over. We would be remiss in not discussing the market’s reaction to the assassination attempt on Donald Trump. Thus far this incident has been met with risk-on in the marketplace with the curve steepening and a major sector rotation in stocks, now being dubbed “Trump Trades.” We caution that a lot may be priced-in to the curve right now. Lastly we cover what to watch for before July month-end with PCE and jobs data revisions our main focus before we speak again ahead of the FOMC.
Lee Hardman, Senior Currency Analyst, and Jack Greenslade from the Global Customer Marketing Group, discuss the impact from the FX market from slowing US inflation. Has a turning point been reached for USD/JPY?
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, reviews a recent special topic from the latest Macro2Markets Monthly report, where the team has found that the last few years of higher nominal activity (boosted by higher prices given elevated inflation levels) has made the economy, company earnings, and market performance look better than what they truly are. George concludes by discussing the upcoming CPI report which should continue to point towards lower reading as the disinflationary trends in the economy seem to be on track. The key area that the Macro Strategy team is focusing on is the evolution of shelter costs and is there finally a catch up to more real-time measures of rental prices.
Lee Hardman, Senior Currency Analyst, and Simon Mayes, Head of UK, Ireland and Switzerland, Corporate Sales, discuss the FX market implications from the UK and French elections.
Will the USD continue to weaken in the week ahead following the release of the latest NFP report?
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As ESG’s contours and penetration increased in H1 2024, so too did the decibels of debate.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), contextualises why he believes the louder deliberations and pockets of pushback are still indicative of ESG’s burgeoning relevance and a natural (and necessary) step in its maturation.
Looking ahead, he views biodiversity, regulation and artificial intelligence’s role in catalysing power demand will be key areas of focus in H2 2024. In addition, the ongoing challenges to accelerate decarbonisation signals that climate will remain the anchored priority, which may present new investment opportunities for investors and companies. In this vein, climate finance is set to be the defining issue at COP29 in November 2024, with any failure to reach consensus on the new collective quantified goal (NCQG) limiting the conferences ability to serve as an effective bridge between the successes of COP28 in the UAE and the lead-up to COP30 in Brazil.
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As we come to the mid-point of the year Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to Seiko Kataoka-Fisher, Head of JC FX Sales about MUFG’s forecasts and where the biggest divergences have been relative to expectations at the start of the year.
Derek also talks through the scenarios for the French parliamentary elections ahead of the first round election on 30th June and what the implications could be for the euro. The political uncertainty also could be intensifying during a key week of US economic data.
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Climate negotiators met at their intersessional climate talks, known as SB60 (the 60th meeting of the Subsidiary Bodies), at Bonn, Germany, between 3-13 June. The deliberations were supposed to lay the foundations for progress to be made at COP29 in Baku (Azerbaijan) between 11 November – 22 November. Yet, they also highlighted the many gaps that still need to be bridged.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), highlights the key takeaways from SB60 and discusses whether they’ll be enough determination to (re)galvanise ambition to keep the global economy on an affordable, reliable and sustainable trajectory in the lead up to COP29.
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Lee Hardman, Senior Currency Analyst, and Jack Greenslade from the Global Customer Marketing Group, discuss the latest central bank policy updates in Europe. Will the policy updates alter European currency performance ahead of the upcoming French elections?
Notwithstanding the pivot to the right in France, Italy and Germany during parliamentary elections earlier this month, the EU Green Deal – the continent’s flagship framework in making Europe climate neutral by 2050, is alive and well (in aggregate).
However, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), believes that a new narrative and mindset shift is now needed to successfully implement the set of policy initiatives, as the shift to the right may witness an integration of the green agenda with other major economic and social considerations, such as industrial policy, competitiveness and affordability considerations. Whilst this could signal a more restrained approach to greening the European continent, it can equally help mitigate political resistance by encouraging more thoughtful public policy.
This week George Goncalves, MUFG Head of U.S. Macro Strategy, quickly reviews that first two weeks of June, which were macro event intense with various central bank meetings and inflation reports among other things. The more hawkish Fed event led to the strategy team pushing back their first Fed cut view to September from July. George believes the market becomes more technical-driven and less macro-focused into quarter-end.
Heightened political uncertainty in France has emerged as important driver of FX market performance over the past week. Lee Hardman, Senior Currency Analyst talks to Michael Owen, Head of Global Client Desk EMEA, about how election risks in France and the UK are impacting the outlook for the FX market alongside the latest policy updates from the BoJ, BoE and Fed.
Last weekend’s EU elections marked the end of the bloc’s greenest parliament ever with the overall “shift to the right”, though centrist parties still retained the majority.
Whilst the post 2030 climate agenda could be weakened in ambition, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), believes that there is unlikely to be any major overhaul on sustainability, but rather there may be fresh emphasis on integrating economic attractiveness and sovereignty components into the existing European Green Deal, with a focus on regulatory simplification.
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With the rupiah falling to a four-year low, it's perhaps timely for us to re-assess our short-term outlook for the currency. We also delve into how the long-term appeal of the rupiah has improved, led by EV.
The US jobs data was much stronger than expected today and Derek Halpenny, Head of Research Global Markets EMEA & International Securities, speaks to Shan Husain, Institutional FX Sales about the implications of the data for the dollar and ahead of the FOMC meeting next week.
Derek also discusses the possibility of the BoJ altering its policy on JGB purchases at the meeting next Friday.
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The International Energy Agency (IEA) released its 2024 iteration of its flagship World Energy Investment (WEI) report this week, with a wealth of insights into the latest investment trends across the global energy landscape that aims to support corporates and investors in assessing risks and opportunities across the energy ecosystem.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), evaluates the key findings of the WEI 2024 report with specific reference to transition finance tools that are emerging as a promising means to drive more capital into hard-to-abate sectors.
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Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President from Japanese Customer Sales for EMEA in London, discuss what to expect from next week’s BoC and ECB policy meetings. Will the FX market impact from the policy updates be overshadowed by next week’s NFP report?
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The power grid – arguably the backbone of the global economy – is the backbone of the energy transition but also its main bottleneck. We are at a critical convergence of the demand ramp-up of an increasingly electrified economy – driven by the rise of electric vehicles, datacentres and artificial intelligence (AI) – and an aging power grid that requires significant upgrading (particularly in a world of more renewable but intermittent energy).
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), delves into the obstacles to grid modernisation and explores potential hardware and software solutions, including the greater use of long duration energy storage, wider applications of demand responses as well as the adoption of automation and AI.
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Michael Wan, Senior Currency Analyst with Global Markets Research Asia, discuss three key things to watch in India - 1) the upcoming General Elections, 2) RBI policy on 7 June, and 3) the impact of larger than expected dividends from RBI
This week Derek Halpenny, Head of Research Global Markets EMEA and International Securities talks to Abdul-Ahad Lockhart, currency analyst, about safe-havens in the FX market.
What determines safe-haven currencies and what other factors need to be considered in anticipating currency performance during a bout of risk-off? Derek argues that while the US dollar is the obvious safe-haven choice in the FX markets there are scenarios when that might not be the case and other currencies could take precedence.
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The European Securities and Markets Authority (ESMA) has released its long-awaited final report on the guidelines on funds’ names using ESG or sustainability-related terms, which are set to significantly impact the ESG fund market.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), delves into the key elements of ESMA’s final report, contextualising their impact on corporates and offers perspective on what may be next for the European sustainable finance market.
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Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President from Japanese Customer Sales for EMEA in London, discuss why the USD has been weakening in recent weeks and whether it is likely to extend further.
Will Biden’s decision to impose fresh tariffs on imports from China derail strengthening growth momentum outside of the US?
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With six months to go, the outcome of the US presidential elections – along with control of the Senate – is likely to have a profound impact across environmental, social and governance (ESG) issues.
Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), assesses the key policies that could change under a new administration and the reverberations that may transpire within the ESG ecosystem.
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, recaps what he has learned from the various trips he has been on while visiting investors and how it compares to our house view. He also goes over his short-term views on inflation ahead of the all-important CPI report. In George’s view, just like the last NFP report captured some of the concerns that have been forming for quarters now (and something we have been flagging), what if shelter cost declines show up now and actually start driving CPI lower, just in time for a Fed that needs greater confidence before thinking about when to ease rates ahead.
From the best performing G10 currency last week, the yen has turned and is the worst performer this week. Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to Simon Mayes, Head of UK Ireland and Switzerland FX Corporate Sales about the shift in tone from BoJ Governor Ueda who turned a lot more hawkish with concerns increasing over yen weakness. Derek also discusses the potential for the BoE cutting rates in June following the MPC meeting this week and the stronger GDP data today.
Lee Hardman, Senior Currency Analyst, and Andrea Hayward, Vice President of the Japanese Client Sales Group for EMEA in London, discuss the fallout from a volatile week for USD/JPY.
What have been the main drivers behind the sharp correction lower for USD/JPY?
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EU parliamentary elections in June are fast approaching and the decibels of debate surrounding the Green Deal legislation are rising. Certain investors have suggested that a shift in political attention away from the Green Deal and that recent pushback and watering down of some regulation is negative for climate action in Europe.
Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), discusses this shift in focus and whether this is a reflection of a broader ESG pushback, or whether a shift in narrative mindset is warranted to ensure a successful implementation post June’s EU parliamentary elections.
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, walks through what to expect at the May FOMC meeting. We believe that QT will be tapered while the Fed will start to acknowledge that real rates are too restrictive. Our base case is that Chair Powell will say tightening is working, but they are being mindful of the long and variable lags. Also, on the slightly more hawkish side, Chair Powell will likely reiterate that the FOMC lacks confidence on future inflation path and is not ready to commit to the timing on rate cuts. Lastly, George briefly highlights why we are still focused on and worried about the ongoing macro divergences in U.S. economic data and that the economy looks stronger due to fiscal policy.
After today’s BoJ policy meeting and the heavy yen selling, Derek Halpenny, Head of Research Global Markets EMEA & International Securities, talks to Chris Jakubowski, Director – Institutional FX Sales, about the BoJ policy outlook ahead following the meeting and the fallout in the FX market with the yen hitting new lows.
Why has the MoF not yet intervened to halt yen selling? Tune in to listen to Chris and Derek’s discussion.
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Heightened geopolitical risks in the Middle East have been an important driver of the FX market over the past week. Lee Hardman, Senior Currency Analyst talks to Michael Owen, Head of Global Client Desk EMEA, about how geopolitical risks are impacting MUFG’s outlook for the FX market and how the BoJ’s upcoming policy meeting could impact JPY performance in the week ahead.
It has been a tense week in the Middle East following the attack on Israel by Iran in the early hours of 14 April.
Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), contextualises the current level of geopolitical risk premium that is currently priced into global markets, and how this could evolve with the various scenarios that may transpire from the crisis.
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This week saw the FX markets come back to life after a long period of lull with a sharp appreciation of the US dollar. Derek Halpenny, Head of Research, Global Markets EMEA & International Securities talks to Simon Mayes, Head of UK, Ireland and Switzerland Corporate Sales about the implications for the US dollar outlook following the US inflation data and the ECB policy announcement. Derek also discusses the JPY intervention prospects next week and beyond and provides an update on MUFG FX Research trading views.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss the recent performance of the USD which has benefitted from the paring back of Fed rate cut expectations.
Will the release of the latest US inflation data for March encourage the Fed to delay rate cuts until 2H of this year?
This week George Goncalves, MUFG Head of U.S. Macro Strategy, walks through the ever evolving reaction function from the Fed, where George isn’t terribly concerned about the recent Fed hawkish comments. George feels that this has been standard operating procedure, where the Fed tries to calibrate their message after a FOMC meeting.
What we learned at the March FOMC is still important, the Fed is increasingly focused on their dual-mandate and will react to labor market weakness just as it would to changes for the path for inflation. George also walked through a special topic theme from the latest Macro2Markets Monthly report, the topic being how healthy is the consumer and are there signs of the wealth effect at work post the recent large rally in financial assets. Lastly George gave a mini-NFP preview.
At the end of an event-filled week for the financial markets Derek Halpenny, Head of Research Global Markets EMEA & International Securities runs through with Shan Husain, Vice President Institutional Investors FX Sales EMEA, the key takeaways for the US dollar and other FX pairs.
Derek also looks ahead to what will be in focus for the markets going forward. Derek also provides an update on MUFG Research trade views.
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CERAWeek is arguably one of the most important annual events in the energy calendar. Under the theme of a “multidimensional energy transition”, the energy community is deliberating how best to navigate the “energy trilemma” of (i) affordability; (ii) security; and (iii) sustainability, in harnessing a just-and-orderly transition to net zero.
Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), contextualises the key messages of what transpired behind the scenes in Houston which mattered just as much as what got said on stage.
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, gives us an update on his latest view since his last podcast and highlights what is driving market sentiment and views lately. George then walks us through the March FOMC preview report, focused on what is our base-case and risks around our views into and out of the Fed meeting. George believes Chair Powell will aim to sound neutral as the market has already priced-out a lot of the recent cut expectations and the data trends remain mixed.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss how higher US inflation and stronger wage negotiation results in Japan have impacted the FX market over the past week.
Will the BoJ and Fed policy updates in the week ahead prove to be an important turning point for USD/JPY?
Lee Hardman, Senior Currency Analyst, and Elizabeth Foster, Research Analyst from the Economic Research Office, discuss what has driven the sharp move lower in USD/JPY over the past week. Will downward momentum for the pair continue ahead of the BoJ’s upcoming policy meeting?
FX volatility has fallen sharply – for some currency pairs to levels not seen since before the Global Financial Crisis.
Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to Seiko Kataoka-Fisher in Japanese Client Sales about events in the week ahead that might shake the FX market out of this volatility lull, including the semi-annual testimony to Congress by Fed Chair Powell and the ECB policy meeting.
Today MUFG Research also releases its monthly Foreign Exchange Outlook and Derek outlines some key highlights, including the prospects of a BoJ rate hike in March.
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Whilst US exceptionalism and sticky inflation may delay Fed easing into mid-year (and limit its scope), Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), believes that the current set up is increasingly reminiscent of the soft landing Fed easing cycle of 1995 – a period when commodities surged more than 20% within the first nine months.
Yet not all commodities outperform and Ehsan breaks down which sub-commodities are best positioned to experience the strongest gains as the Fed eventually cuts rates.
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Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst, discuss the performance of G10 FX carry trades at the start of this year.
What are the main downside risks for carry trade performance in the near-term?
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Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), examines the potential implications of this year’s most important elections and contextualises as to whether 2024 may turn out to be a “preparation year” until crucial election outcomes are known for ESG policy direction.
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The US dollar hit its highest level of the year this week and Derek Halpenny, Head of Research, Global Markets EMEA & International Securities talks to Jack Greenslade in FX Corporate Sales about the FX implications following the US inflation data and GDP data from Europe and Japan. Derek also discusses the return of USD/JPY to the “intervention zone” above the 150-level and whether these levels are sustainable.
The European Commission published its communication on the EU climate target, proposing a 90% cut in emissions by 2040, and a separate communication on its Industrial Carbon Management strategy.
Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), examines whether the plans provide a clear and stable investment signal necessary to drive forward net zero aspirations.
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George Goncalves, MUFG Head of U.S. Macro Strategy, and Glenn Schultz, MUFG Head of Prepayment Modeling and Strategy, discuss the January 2024 remittance data as well as the 2024 outlook for prepayment and turnover. They also go over how prepayment turnover is likely to evolve in 2024 and how dislocation in demographics is both observed turnover rates, in addition to home price appreciation and its potential implication on monetary policy going forward.
This week George Goncalves, MUFG Head of U.S. Macro Strategy, discusses the price action since the hawkish FOMC, stronger than expected NFP, hawkish chair Powell 60 minutes interview, and lastly, a higher than expected inflation report. In George’s view the macro and market conditions pre-CPI release were looking too good to be true. George believes that markets were priced for perfection and overdue some level setting after months of nonstop rallying. In the end, the higher CPI sends the Goldilocks crowd a rude reminder that this year will not be a linear progression to a soft-landing outcome, there will be bumps along the way, in our view. This will result in episodic vol.
The USD has continued to rebound over the past week although it’s performance has been mixed against other G10 currencies. Lee Hardman, Senior Currency Analyst talks to Michael Owen, Head of Global Client Desk EMEA, about what have been the main drivers of FX performance over the past week. Will the JPY weaken further after hitting fresh year to date lows?
Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), examines efforts to promote convergence between different green classifications and offers perspectives on what the reverberations are should policymakers make the decision of making taxonomy reporting mandatory in their jurisdictions.
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In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), examines 5 key questions this year on the implications of ESG on corporate strategies, operations, governance processes and investor sentiment across the EMEA region.
Ehsan breaks down environmental, social and governance dimensions, particularly in the context of the energy complex within EMEA, to garner a deeper comprehension of how ESG factors can affect the future of a company or sector.
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Lee Hardman, Senior Currency Analyst, and Reza Nasehi, Vice President of the Japanese Client Sales Group for EMEA in London, discuss what has triggered a more volatile USD this week. Will renewed US regional banking concerns threaten to derail the USD’s rebound?
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, reviews the key developments in the market as January comes to a close and February begins. We provide our view on the latest changes in government financing estimates and the upcoming jobs report. George walks us through the team’s FOMC preview for the January meeting where we believe that after the December pivot, they are sequencing toward starting an easing cycle soon, in our view.
Derek Halpenny. Head of Research, Global Markets EMEA & International Securities talks to Michael Owen, Head of Global Client Desk EMEA, about the implications of the FOMC meeting and the US jobs report for the US dollar next week and beyond.
Derek also discusses the potential pound impact from the Bank of England meeting and why MUFG Research are highlighting the potential for EUR/GBP to continue breaking lower.
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Pan-European funds claiming to invest on a ESG basis may need to sell all their fossil fuel holdings following a ruling by the French government.
Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), contextualises the update to France’s ISR fund label rule that restricts fossil fuel investments and aims to address greenwashing concerns.
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Lee Hardman, Senior Currency Analyst, and Simon Mayes, Head of UK, Ireland and Switzerland, Corporate Sales (FX) in London, discuss what have been the main drivers behind the US dollar’s rebound at the start of this year.
They also discuss the latest policy meetings from the BoJ and ECB in the week ahead.
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Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President from Japanese Customer Sales for EMEA in London, discuss the key drivers of FX market performance so far this year.
Will market expectations for earlier and deeper major central bank rate cuts be met?
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Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), contextualises the 2024 outlooks on commodities, energy, emerging markets and geopolitics, offering perspectives on how clients should position their portfolios in an era of heightened uncertainty and ongoing stress in global markets.
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George Goncalves, MUFG Head of Macro Strategy, discusses the 2024 outlook for U.S. credit markets with IG Desk Analyst Andrew Myers and HY Desk Analyst Bill Matthews. They cover topics from the recently published 2024 Desk Strategy Outlook, ranging from corporate bond issuance, key credit themes to watch ahead, and potential credit spread ranges.
George Goncalves, MUFG Head of U.S. Macro Strategy, discusses the 2024 outlook for the agency MBS sector with Glenn Schultz, MUFG Head of Prepayment Modeling and Strategy and our resident subject matter expert on mortgages. They cover topics from the recently published 2024 Desk Strategy Outlook, ranging from agency MBS issuance, prepayments, and the mortgage basis. They also discuss if "the second golden age of MBS" is still a relevant theme for investors and the agency MBS market.
This week George Goncalves, MUFG Head of U.S. Macro Strategy, discusses our Macro thesis around the economy and Fed policy. With unemployment low, inflation declining, and spending solid (helped by fiscal policy mid-year), all this resulted in stronger than expected GDP in 2023. The markets also embraced the soft landing narrative in the last two months of 2023. In George’s view, this makes for a hard comparison at the start of 2024. In our view, the long and variable lags from one of the fastest Fed hiking cycle catches up in 2024. This will put the riskier side of the credit spectrum in scope for further adjustment. Net, we are not calling for a hard landing recession but instead something more like a bumpy landing which is short-lived. In fact, a recession altogether could be avoided if the Fed meets or beats what is priced-in for cuts and bank lending rebounds. Yet, due to lags in the recession dating process, we won’t know we’re in one until after the fact. In the end, we stick by our view that the Fed will be starting an easing cycle soon (our base-case is for a 25bp March cut) where they will attempt to soften the decline in economic activity as the year progresses.
The first week of 2024 is coming to an end and following the release of the US employment report, Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to Michael Owen, Head of Global Client Desk about the impact of the jobs data on the financial markets and why the data is not as strong as it first looked. Derek also outlines MUFG’s Themes of the Year pieces in the January FX Outlook publication and explains the MUFG US dollar view for 2024.
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Lee Hardman, Senior Currency Analyst, discusses the impact on the FX market from building evidence of slowing inflation in the UK & US. How does the BoJ’s reluctance to signal a shift away from negative rates alter the outlook for the yen?
The core to our 2023 ESG outlook has been anchored on the energy trilemma of (i) affordability; (ii) security; and (iii) sustainability, in harnessing a just, and orderly transition to net zero. As we look to 2024, we permutate the conversation to the corporate trilemma of (i) growth; (ii) profitability; and (iii) sustainability.
Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA), believe that whilst ESG as an ecosystem is still maturing, the direction of travel in our view is crystal-clear – not only can you do well while advancing ESG, you can outperform.
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Lee Hardman, Senior Currency Analyst, and Reza Nasehi, Vice President of the Japanese Client Sales Group for EMEA in London, discuss the FX market implications from this week’s major central bank policy updates.
While the Fed opened the door to rate cuts, will the BoJ prepare the ground for a rate hike in the week ahead?
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The 28th annual UN Climate Summit – known as COP28 – ended on 13 December with an agreement that’s being declared as both historic and full of loopholes.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), examines what success looked like at COP28 and what corporates and investors can look forward to at COP29 as well as other climate priorities in 2024.
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, marks to market the price-action since our last podcast in late November as well as how markets are setup ahead of a key week for central banks. With markets getting ready to closing out another year, how the FOMC event is received will likely set the stage if the risk-on continues into year-end or not. We expect the Fed to push-back on the recent easing of financial conditions and avoid saying anything that might come across as under-writing rate cuts, something that the market is pricing in spades for 2024. With a recent goldilocks jobs report and a slightly higher than expected CPI print, especially with a higher super-core reading (one of chair Powell’s preferred inflation metrics), we do not believe that the Fed will convey a dovish message at the last FOMC meeting of 2023. Lastly, George gives us a glimpse into the themes and framework the team is using in order to setup for the 2024 macro world.
The yen surged this week and Derek Halpenny, Head of Research, Global Markets EMEA & International Securities talks about the yen move, whether the BoJ will hike rates this month and what lies ahead for the yen.
Derek also discusses the heavy schedule of central bank meetings next week, including the Fed and the ECB and what this means for G10 currencies.
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Several announcements coming out of the first days of COP28 demonstrate the seriousness that stakeholders are aiming to adopt the summit's agenda. This may sound trivial, but such wrangling typically takes up a considerable amount of negotiation time at climate talks, such as the mid-year intersessional gathering in Bonn, where countries couldn’t agree on the agenda until the penultimate day.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses the major takeaways from COP28 thus far and what success may look like as the summit draws to a close on 12 December.
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President from Japanese Customer Sales for EMEA in London, discuss the FX market implications from the ongoing dovish repricing of central policy expectations. Will the USD sell off extend further in the week ahead?
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COP28, the United Nations’ annual climate change conference, kicked off on 30 November, with tens of thousands of delegates congregating in the UAE to further the global climate process.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), provides an examination into what corporates and investors need to know during the conference and what may transpire in 2024.
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Derek Halpenny, Head of Research Global Markets EMEA & International Securities, talks to Shan Husain, Vice President - Institutional Investors FX Sales EMEA, about the factors behind why the euro has underperformed this week – it was the second worst performing G10 currency this week. Derek also looks to next week with the RBNZ meeting, data from the US and updates on trade views.
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, walks us through some of his latest special topics in the Macro2Markets Monthly Outlook report. As the title suggests, we first explore the risk-on mood on Wall Street and what is driving it. In George’s view, he believes it is a bit premature that some market participants are reading the weaker data and the market-based interest rate declines as a good thing. George wraps up by providing his views on the current developments in bank lending and general credit conditions overall. He also takes us through the big moves that are happening on the U.S. government deficit front and their implications.
Lee Hardman, Currency Analyst, and Reza Nasehi, Vice President of the Japanese Client Sales group for EMEA in London, discuss the impact on the FX market from further evidence of slowing inflation in the UK and US. Has the tide turned against the US dollar?
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The US dollar has recovered some of last week’s losses and Derek Halpenny, Head of Research Global Markets Research & International Securities talks to Michael Owen Head of Global Client Desk EMEA about what helped prompt a recovery of the US dollar this week.
With no single clear driver of FX and rates this week, Derek looks ahead to next week and the key inflation data from the US and employment and inflation data from the UK. Derek also provides an update on Global Market Research’s trade views.
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In today's episode, George Goncalves, MUFG Head of U.S. Macro Strategy, and Glenn Schultz, MUFG Head of Prepayment Modeling and Strategy, discuss October's remittance data, relative value against the backdrop of slower seasonal prepayment, and the outlook for the current coupon basis against the headwinds of 2023's never ending conga line of black swan events.
Lee Hardman, Senior Currency Analyst, and Jack Greenslade from the Global Customer Marketing Group, discuss the main drivers behind the sharp adjustment lower for the USD and US yields over the past week.
Have we now passed the peak of US exceptionalism priced into FX markets?
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This week George Goncalves, MUFG Head of U.S. Macro Strategy, takes us around the world and back, discussing the latest changes from the Bank of Japan (BoJ), ahead of October month-end trading and the critical double-header events on November 1, when the Treasury releases its quarterly refunding announcement (Q.R.A.) for its Treasury supply needs. Then in the afternoon, the FOMC meets for its second to last meeting of calendar year 2023.
In George’s view, so long as term premia stays elevated and 10yr rates do not decline back towards the low 4s, these higher long-term rates are doing the tightening for the Fed, and thus the Fed hiking cycle is likely over (where the July hike may end up being the last hike of this cycle). In addition, what is frightening about October 31, other than the spooky Halloween scenes, is that this means there are only two months left in the year and liquidity probably gets worse for markets from here on out. Lastly, George wraps up by providing his views for Fed day, expecting another “hawkish skip”, the second in a row, and that chair Powell will refrain from saying they are done by keeping December in play.
Swings in the 10yr UST bond yield reverberated into the FX markets this week with the EUR/USD intra-day high-low weekly range the widest since mid-July. Derek Halpenny, Head of Research, Global Markets EMEA & International Securities, talks to Simon Mayes, Head of UK, Ireland and Swiss Corporate Sales, about the continued resilience of EUR/USD and what might be behind it. Derek also looks ahead to next week with the BoJ, FOMC and BoE all meeting and explains why the BoJ needs closest watching after USD/JPY broke higher through 150 this week.
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Lee Hardman, Senior Currency Analyst, and Andrea Hayward, Vice President of the Japanese Client Sales Group for EMEA in London, discuss how rising Middle East tensions and higher US yields are impacting the FX market. Will the upcoming BoC and ECB policy meetings prove to be market-moving in the week ahead?
Our thoughts continue to be with those affected from the conflict in Israel and Gaza.
In this week’s podcast, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA) at MUFG, draws on historical lessons learnt in order to contextualise the current elevated level of geopolitical risk premia across sovereign spreads.
This week in a special edition podcast episode, George Goncalves, MUFG Head of U.S. Macro Strategy, is joined by Glenn Schultz, MUFG Head of Prepayment Modeling and Strategy, to go over a recently published and comprehensive Desk Strategy Report called “The State of Housing” where they explore the impact of high mortgage rates and affordability issues that are impacting the U.S., as well as the potential lasting effect on housing and mortgage macro fundamentals ahead.
George walks through how these higher rates are unsustainable for a viable housing and mortgage financing market and unless incomes were to rise, and rise at a much faster rate, that something has to give (either house prices decline, and/or rates decline). Glenn threads in the implications to MBS issuance, CPRs, and how the market might be the most negative convexity it has been given the larger loan balances. George wraps things up by discussing how this might influence the Fed rate views and their MBS portfolio.
The week is coming to a close with signs of risk aversion with the focus on the Israel conflict and the risk of this broadening in the region. Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to Michael Owen, MUFG's Head of Global Client Desk for EMEA in London, about the possible consequences for the markets and why recent signs of a pick-up in economic activity in China could prove important for the US dollar.
The movements of global markets are of trivial importance compared with the value of human life and our thoughts are with those affected by the conflict in Israel and Gaza.
In this week’s podcast, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses the global market implications of the developments unfolding in the Middle East and what could come next.
It has been a more volatile week in the FX market. Lee Hardman, Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, discuss how the sharp sell-off in the US bond market is spilling over into the FX market.
Will the USD continue to head higher alongside US yields in the week ahead?
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It is exactly 50 years since the Organisation of the Petroleum Exporting Countries (OPEC) imposed an oil embargo on America, turning a modest inflation problem into a protracted bout of soaring prices and economic misery. Now the stagflation of the 1970s – portmanteau of slowing growth and elevated inflation – is reawakening.
In this week’s podcast, Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA) at MUFG, discusses MUFG’s latest commodities thought leadership report that provides a comprehensive examination into the commodities outlook alongside our updated forecasts – see here for the full report.
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George Goncalves, MUFG Head of U.S. Macro Strategy, walks us through the latest price action where the normalization of rates out the curve has finally caught the attention of broader markets like stocks and credit. The so-called bear steepening of the curve (when long-term rates move higher in yields and in a quantum larger than short-term rate movements) is driving some serious financial conditions tightening. As George says, the bond market is tightening for the Fed. George still believes that the last Fed hike was in July and that all of these volatile market moves will result in them no longer hiking in 2023. That said, until long-term rates find stability (and better yet consolidate into a tradeable range) and until the U.S. dollar stops going up, these major swings may continue in his view. In the past, to see a quick reversal in U.S. Treasuries, there would need to be a much larger and deeper risk-off in stocks and credit. Overall George remains cautious and reminds us that it’s been “the same as it ever was”, higher rates do matter.
The US dollar has corrected weaker into the end of the week. Derek Halpenny, Head of Research Global Markets EMEA & International Securities, talks to Michael Owen, Head of Global Client Desk EMEA, about the factors behind the correction weaker for the dollar and why the government shutdown could reinforce the move over the short-term.
Derek also discusses the latest trade ideas published in the FX Weekly.
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Climate negotiators met during New York Climate Week between 17-24 September with the central focus on validating tangible progress on the UN Sustainable Development Goals (SDGs).
After a recent official stocktake confirmed that progress is only on track for 15% of related targets and indicators, the sense of urgency of alignment between businesses, investors and NGOs to future-proof decarbonisation efforts ahead of COP28 in Dubai between 29 November-12 December, was clear in New York.
In this week’s podcast, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses the key takeaways from New York Climate Week. He believes that whilst there remained large differences of perspectives on tackling the net zero equation in New York, commonalities emphasising value chain partnerships, infrastructure building and quality reporting were a step in the right direction in working collectively through tackling some of the most pressing climate change challenges.
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Today’s episode is an excerpt from a recent MUFG webinar hosted by Ehsan Khoman, Head of Research for Commodities, ESG and Emerging Markets (EMEA), and Dr. Tobi Petrocelli, MUFG Head of Sustainability & Transition Finance Strategy for the Americas. Tobi and Ehsan discuss the recent report about AI’s influence in scaling ESG’s maturation. Overall, MUFG holds conviction in the merits of the evolution of AI to solve an array of ESG trade-offs. On aggregate, this has the potential to transform the way we approach sustainability to foster a more equitable and just society.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst in London, discuss the main takeaways from this week’s G10 central bank policy meetings.
Has the case for a stronger USD been reinforced?
Global oil prices are teetering close to 100 dollars per barrel which risks fanning the flames of global inflation, strengthening the case for higher for longer rates and adding backbone to the dollar.
Conversations in the energy market are increasingly fixated on when, rather than if, oil prices will breach the 100-level threshold. In this week’s podcast, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), contextualises the current state of affairs and offers his perspectives as to why most of the oil rally may be behind us and prices are unlikely to sustainably exceed 100 dollars per barrel.
George Goncalves, MUFG Head of U.S. Macro Strategy, returns to review the price action since the summer break and what to expect from the FOMC at the upcoming meeting. George views the current environment as the most challenging for bond bulls, as the longer the Fed stays on hold with all this additional Treasury supply hitting the market, the pull toward higher rates will remain a powerful force. Granted, George does not believe that the window that will be afforded to the Fed staying “higher for longer” will be one that is long enough to fully normalize the yield curve towards the current level of Fed funds (because we expect the policy lags to hit the economy hard in Q4 into 1Q24). That said, the Fed can still use forward guidance signals, such as keeping their rate forecast “dot-plot” higher as a counter-balance to a bond market that is always looking for the next reason to rally. In terms of the FOMC meeting, we expect a slightly hawkish outcome, where the dots will try to pave the way for the Fed to signal they want rates to stay higher. Lastly we expect no change in actual Fed rate policy, a hawkish skip (i.e. no hike at this meeting) is our base-case.
Lee Hardman, Senior Currency Analyst, and Andrea Hayward, Vice President of the Japanese Client Sales Group for EMEA in London, discuss what has been behind a volatile week for the USD.
They also discuss how the latest central bank updates from the BoE, BoJ and Fed in the week ahead are likely to impact the FX market.
One year on since US President Biden signed the landmark IRA into law, there’s been no shortage of figures attesting to the cosmic transformation of the “Made in America” clean energy renaissance.
Ehsan Khoman, Head of Research – Commodities, ESG and Emerging Markets (EMEA) at MUFG, discusses MUFG’s latest ESG thought leadership report that provides a comprehensive assessment of what the IRA has achieved in its first year and what comes next.
According to Ehsan, the energy trilemma pillars of affordability, security and sustainability, naturally dovetail with this goldilocks piece of clean energy regulation, with the data to date substantiating that we are in the early innings of a renewables capex supercycle – see here for the full report.
In this month’s episode, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz, discusses August's prepayment data and answers the question of whether the Spring/Summer selling season prepayment data indicate a structural shift in the agency MBS market back to the “old normal”. He also addresses the question “Who is going to buy Agency MBS?” and how issuance will influence the agency MBS basis going forward.
Lee Hardman, Senior Currency Analyst, and Lin Li, Head of Global Markets Research Asia, discuss the outlook for China’s economy and the renminbi.
With USD/CNY just hitting the highest level since 2007 is this the start of another leg lower for the renminbi? What are the potential spill-overs for the global economy and FX market?
Following today’s employment report from the US, Derek Halpenny, Head of Research for Global Markets EMEA & International Securities talks to Matthieu Gloux, Head of Global Client Sales for EMEA, about the implications for the dollar and whether the data changes the outlook for Fed policy.
Derek also highlights the changes to MUFG’s US dollar forecasts following the release today of the monthly Foreign Exchange Outlook publication and updates listeners on the MUFG Research trade ideas.
Lee Hardman, Senior Currency Analyst, and Jack Greenslade from the Global Customer Marketing Group discuss the main drivers of the USD’s strong rebound over the summer. Is the USD rally likely to extend further beyond Jackson Hole?
Transformational progress in Artificial Intelligence (AI) is stimulating fear as well as excitement. Large language models (LLMS) – the genus that powers ChatGPT, a generative AI tool – have surprised even their creators with its unprecedented reach given the sheer velocity this technology is being scaled. Yet, a big problem is that they are black boxes and with the genie out of the bottle, it remains a complex task to weigh AI’s distinctive opportunities and risks in fostering ESG’s burgeoning relevance.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s latest ESG thought leadership report that examines the plethora of ESG implications from the evolution in AI – see here for the full report.
The increased focus on China and the potential fallout from a continued weakening of growth and missed payments linked to property market losses played a key role in driving markets this week.
Derek Halpenny, Head of Research, Global Markets EMEA & International Securities talks to Simon Mayes, Head of UK, Ireland and Swiss Corporate Sales, about the increased influence of CNY in the FX markets and why these developments and other factors remain supportive for the US dollar. Derek looks ahead to next week and the Jackson Hole Symposium and the possible risks of intervention in USD/JPY.
George Goncalves, MUFG Head of U.S. Macro Strategy, reviews the recent Fitch downgrade of the U.S. credit to AA+ and compares it to the first downgrade by S&P roughly 12 years ago. He believes this time the backdrop is different given that the debt loads are even larger now and the Fed has rates much higher versus back then when rates were anchored by the near zero rate policy of that time period. Market reactions thus far are also different versus the first downgrade too. The other issue is that the Fitch downgrade occurred during a week when the Treasury was announcing the need to issue more debt and increase the auction sizes of Treasury securities. George has been highlighting that the sequence from the Fed to the BoJ tweaking YCC and then more UST debt, all of which have largely come to fruition as per George’s views, should result in rates in the middle of the yield curve (known as the belly and/or intermediate rates) would do most of the adjustment higher. So far that is what we have seen with 10s now well above the 4% level. Lastly, George looks forward and discusses why NFP, which is always important, but unless it breaks the string of weaker NFP reports of late, than the Fed is likely to skip in September.
Following another favourable US inflation report this week, Derek Halpenny, Head of Research Global Markets EMEA & International Securities talks to Shan Husain, Vice President, Financial Institutional Sales EMEA, about the financial market reaction to the data and what it means for the US dollar and rates going forward. Derek also looks ahead to next week which will see the focus on inflation turn to the UK.
In this month’s episode, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz, discusses July's prepayment data and gives the lowdown on the Spring/Summer selling season's turnover. He also reviews relative value across the specified pool stories highlighting those he believes offer MBS investors superior relative carry. Finally, Glenn reviews our basis forecast and makes the argument for our year-end target of 120 to 130 basis points for the 30-year agency current coupon.
Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Currency Analyst in London, discuss the main market impacts from the recent surprise announcements from the BoJ and Fitch. The USD has staged a strong rebound since the middle of last month, will it continue in the week ahead?
As ESG’s contours and penetration continue to increase, so have the decibels of debate. Granted, energy pragmatism remains resolute on achieving long-term goals of a decarbonised world, yet how to achieve security of supply, keep prices affordable and ensure sustainability in the transition – i.e. the energy trilemma pillars – remains at the heart of the conversation.
In this week’s podcast, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses the global energy outlook in the ESG context of what it will take to ensure a just and orderly transition. He believes that the right response to today’s challenges is a matter of “and” not “or” and highlights four approaches in squaring the energy trilemma around resiliency today to tap value creation tomorrow.
Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President from Japanese Customer Sales for EMEA in London, discuss the BoJ’s decision to make YCC more flexible and recent policy updates from the ECB and Fed.
Will the BoE deliver another hawkish policy update in the week ahead?
George Goncalves, MUFG Head of U.S. Macro Strategy, expects the Fed to deliver one more hike of 25bps at the upcoming July FOMC meeting. The FOMC statement should not see major tweaks at this time of the year, largely given that it’s a July meeting that sits between Jackson Hole and the September FOMC meeting updates (and also because the June FOMC meeting saw the Fed upgrade its forecasts on growth, inflation and rates).
In order for the Fed to keep all options open and avoid hinting that this may be their last hike they need to keep forward guidance in place by keeping this phrase largely unchanged “In determining the extent to which additional policy firming may be appropriate.” As George has mentioned before, until chair Powell strikes out the inflation concerns from the opening remarks in the presser, they are focused more on fighting inflation versus being overly concerned about the trajectory for growth. The presser is what ultimately determines how markets read chair Powell’s tone if this July hike was a dovish, neutral, or hawkish hike. We are leaning on the neutral to hawkish side.
Next week is a busy schedule for the financial markets with the FOMC, ECB and BoJ all meeting. Ahead of the BoJ meeting specifically, Derek Halpenny, Head of Research Global Markets EMEA & International Securities is joined by Sumino Kamei, Senior Analyst, Global Markets, to discuss possible outcomes of the BoJ meeting.
Sumino provides an update on market expectations from a Tokyo perspective following the BoJ comments this week that has seen YCC speculation subside and explains why MUFG Bank continues to think a change in policy could happen. Derek provides his thoughts on the FX impact and possible broader market implications.
Climate negotiators met at their inter-sessional climate talks, known as SB58 (the 58th meeting of the Subsidiary Bodies), between 5-15 June 2023, at Bonn, Germany. The deliberations were supposed to lay the foundations for progress at COP28, which is scheduled for 29 November – 12 December 2023, in Dubai. Yet, they also highlighted the many gaps that still need to be bridged.
Parties and groupings stuck mostly to their familiar negotiating positions across most issues at Bonn, though faint contours of progress were made on core issues of (i) loss & damage; (ii) Article 6; and (iii) the just transition.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s latest ESG report that examines the current state of affairs of climate negotiations ahead of COP28 in November (see here for the full report).
Lee Hardman, Senior Currency Analyst, and Jack Greenslade from the Global Customer Marketing Group discuss the reasons behind the latest sell-off and whether it will continue. Inflation is also set to remain in focus for markets in the week ahead with the release of the latest CPI reports from New Zealand, Canada, the UK, the Eurozone and Japan.
George Goncalves, MUFG Head of U.S. Macro Strategy, reflects on the price action and economic developments of the 1st half and provides us with thoughts on some of the risks that may lie ahead in the 2nd half. George believes that the markets caught a big break on the back of overly defensive posturing resulting in investors having to chase performance and close out short-positions and underweight level to benchmarks during the start of the year. Granted economic conditions in the U.S. were more favorable than initially feared, the overall global backdrop, especially on manufacturing side continues to weaken. Meanwhile we have central banks that have returned to hiking and the Fed has signaled that they are not done either after having skipped at the June FOMC. In our view, after a somewhat muted reaction to Fed tightening we believe the long and variable lags may actually hit harder now as we go through the 2nd half. George remains skeptical the regional bank crisis is fully resolved and that coupled with off-shore dollar liquidity draining could serve as a catalyst for risk-off.
Following the US jobs report from the US and ahead of the CPI data next week, Derek Halpenny, Head of Research Global Markets EMEA & International Securities discusses with Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, the consequences for Fed policy, rates and the US dollar.
Derek also discusses the outperformance of the Japanese yen this week, highlighting developments that point to risks of a YCC change at the next BoJ policy meeting on 28th July.
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The JPY has weakened sharply during June falling below last year’s lows. Lee Hardman, Senior Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, discuss what has been driving recent JPY weakness & the risk of intervention.
After two event-packed weeks including the FOMC, ECB and BoE meetings and Fed Chair Powell’s semi-annual testimony, Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, discusses with Shan Husain, Vice President FI FX Sales, what the implications are for FX and rates going forward.
Derek also looks ahead to the ECB Annual Forum on Central Banking in Sintra, Portugal next week and the key incoming economic data that will help shape the direction of financial markets.
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Despite having to navigate the (i) war in Ukraine (and its reverberations on global energy and food prices); (ii) aggressive rate hikes; as well as (iii) draconian Chinese lockdowns, emerging markets demonstrated remarkable resilience in H1 2023.
In a world of tightening global financial conditions and questions about the liquidity implications of the now-finalised US debt ceiling, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), expects a heightened degree of macro risks for emerging markets in H2 2023, with external funding requirements the central concern. Still, he believes the silver lining is that subdued growth should cap inflation, facilitating monetary policy easing where external balances allow.
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Lee Hardman, Senior Currency Analyst, and Abdul-Ahad Lockhart, Quant Analyst in London, discuss the main impact of the latest central bank updates from the BoJ, ECB, and Fed on FX markets. The GBP has hit fresh highs this week against other major currencies.
What are the main risks to the bullish trend in the week ahead?
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Global carbon markets are fast becoming one of the most effective instruments in the journey to net zero. Yet, many countries are reluctant to use this policy lever, as introducing or scaling up carbon pricing faces multiple decisions when selecting among, and within, policy tools.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses the latest MUFG ESG report wherein he believes that whilst mass adoption for carbon markets is still a long way off, the fastest and most practical way to keep alive the goal of restricting global warming to below 2oC is scaling up global carbon markets (see here for the full report).
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In this month’s podcast, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz, reviews the implications of how turnover has exceeded market expectations and the implications for valuation across the coupon stack. Notably, we make the case a continued tightening of the current coupon basis and our year-end forecast of 120 basis points against the back drop of prepayment, FDIC bank liquidation, and origination volumes.
George Goncalves, MUFG Head of U.S. Macro Strategy, returns to highlight the scenarios he is expecting at the upcoming June FOMC meeting and the potential market implications. George thinks the aim will be to deliver a hawkish skip, will the markets hear that or something entirely different is what we will be trying to assess. Post Fed we think markets should turn their attention from inflation fears and central bank action towards the growth outlook. We believe quarter-end/month-end has the potential for some early fireworks before we get into the start of summer.
The Nikkei Average remains well bid while USDJPY feels a bit more top-heavy. In contrast JPY rates and JPY basis remain little changed.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido discusses Japanese life insurance company fiscal year 2022 earnings, International Transactions in Securities data and the upcoming BoJ policy meeting. He also shares his views on spot Dollar/Yen, Yen rates, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President for Japanese Customer Sales for EMEA in London, discuss the potential impact of the upcoming FOMC meeting on USD performance.
Will the Fed follow in the footsteps of hawkish policy surprises delivered by the BoC and RBA over the past week?
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With the debt ceiling resolution behind us, George Goncalves, MUFG Head of U.S. Macro Strategy, returns to recap what feels like a market that is in a holding pattern until the passage of the CPI print and the FOMC meeting. He also discusses the medium-term risks with a keen focus on liquidity dynamics. The Treasury will be replenishing its General Account (TGA), which sits on the Fed's liability side of the balance-sheet via raising cash from T-bill issuance. At a minimum, this will likely result in a crowding out effect and at a maximum level, drain market liquidity. Given some areas of the banking system remain fragile and in need of funding, it’s critical to watch how this plays out over the summer. With QT ongoing and the Fed aiming to keep rates higher for longer, this liquidity story can supercharge the Fed’s tightening efforts ahead.
The Nikkei Average continues its upward climb. USDJPY has kept pace, topping the 140-mark. On the other hand, JGB yields and JPY basis have remained little changed.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido reviews asset price developments during May and looks ahead to June based upon BoJ monetary policy and fiscal and monetary fund flows. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Oil prices ended May at their lowest point for over eight months, raising pressure on OPEC+ to implement another round of production cuts at its 3-4 June meeting.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), believes that the current tight fundamentals in the physical oil market do not provide a case for further OPEC+ production cuts, although the bearish macro environment does. On net, he believes the decision is finely balanced and will likely conclude by the group communicating a hawkish wait-and-see approach and not taking additional barrels off global markets.
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Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President of Japanese Customer Sales for EMEA in London, discuss the turning around of the USD and whether it is likely to continue in the week ahead of the US debt ceiling crescendo.
However, the biggest, hawkish repricing of central policy has been in the UK. How does this impact the pound?
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In the wake of the Russia-Ukraine war and US-China geopolitical animosity, there has been a slew of speculation that the US dollar (USD) is in danger of losing its status as the global reserve currency, with the hegemony of the petrodollar system now in question.
In this week’s podcast, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), provides an examination of the potential de-dollarisation of petrodollars following recent international deals and new alliances that have prompted the hoary old question of whether the US dollar’s dominance is at risk – see here for the full report.
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George Goncalves, MUFG Head of U.S. Macro Strategy, returns to give us an update on the current status of the debt ceiling negotiations. He explores scenarios of how this impasse may conclude and potential market implications. George also takes us through his latest Fed thinking, taking into account all of the recent Fed speakers. He also provides us with a mini-preview of what to expect at the June FOMC meeting. George looks further down the road on how the Fed may shift towards easing and what to do with QT and the supersized RRP. Lastly, if that was not enough to get one’s arms around, George provides a list of what else is on his risk radar.
The Nikkei Average and Dollar/Yen keep climbing higher. Meanwhile, Yen rate and Yen cross-currency basis remain little changed. Now that the G7 Summit in Hiroshima is over, speculation about whether Prime Minister Fumio Kishida will disband the Lower House and call for elections is growing.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido gives his view on triggers in the wake of the G7 Summit in Hiroshima as well as his analysis of the latest April JSDA data. He also shares his outlook for spot Dollar/Yen, Yen rate, and Yen basis.
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Optimism of a deal being agreed to lift the debt ceiling in the US has helped lift the dollar this week. Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, explains to Shan Husain, Vice President, FI FX Sales, why he remains unconvinced over the sustainability of the move stronger for the dollar and expects the positive momentum to fade.
Derek looks ahead to next week with UK inflation also in focus which will be key for the outlook for the pound.
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Demand angst – US banking turmoil, debt ceiling risks, recessionary fears and financial scarring through low liquidity – has dominated crude oil markets for much for 2023 so far. Our central narrative in our 2023 energy markets outlook was premised on a large H2 2023 deficit (see here), with international energy agencies and market consensus increasingly singing from the same hymn sheet. With this, attention is turning to whether the near 15% selloff crude oil year-to-date is about to reverse given the looming tightness ahead.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), contextualises the current state of affairs in global oil markets, and offers his perspective as to why accelerated growth in EM demand, deep OPEC+ production cuts and lethargic US supply are expected to drive oil prices constructively higher by the summer.
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Dollar/Yen is higher, Yen rates are little changed, and Yen cross-currency basis has started to widen slightly. Major Japanese banks have released their FY23 earnings results in mid-May, to be followed by major lifers. Bank of Japan Governor Kazuo Ueda will be watching financial system stability as he determines his next monetary policy steps.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido discusses recent political developments, cross border flows, and implications for financial markets. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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In today’s episode, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz, reviews April remittance data highlighting the ‘Kings of Carry’ and relative value around the convexity cross, and the outlook for the agency mortgage basis given the FDIC liquidations current U.S. budget negotiation. He also discusses the possible implications of the debt ceiling brinksmanship on both the GNMA and Conventional MBS sectors.
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Lee Hardman, Senior Currency Analyst, and Michael Owen, Head of Global Client Desk EMEA, discuss the USD’s recent performance and Bank of England’s policy update. After a better week for the USD, is the tide beginning to turn?
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On 5 May, the German government presented draft legislation that appears to be the first granular direction into the European response to the US Inflation Reduction Act (IRA) (the largest climate legislation in US history) at the national level that compliments the European Commission’s Net Zero Industry Act (NZIA) unveiled on 16 March. If approved, this German proposal may serve as an IRA template for other European member states, fast-tracking renewables as well as green financing to lower the cost of capital.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses why this promising German proposal may serve as a template for other European member states to follow suit, which reinforces the conviction that the current goldilocks era of regulation will carve the contours of a renewables capex supercycle (see here for the full report).
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During Golden Week, the FOMC held its May meeting while the US regional bank sector remained riddled by credit concerns. Despite all that, the lower side of the USD/JPY was solid and the rise of Yen interest rates and widening of Yen basis were limited. If investment flows from Japanese investors pick up after Golden Week as we expect, USD/JPY, Yen interest rates, and Yen basis will become more volatile.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido reviews the JSDA data for March, as well as April fiscal and BoJ fund flows and implications. He also shares his views on spot USDJPY, Yen rates, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Jack Greenslade from the Global Customer Marketing Group, discuss the key takeaways for the FX market covering the latest policy updates from the Federal Reserve and European Central Bank.
The Bank of England is the next major central bank to update policy in the week ahead but will it alter the pound’s bullish momentum?
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Turkey’s parliamentary and presidential elections, scheduled for 14 May, with a possible second round for the latter on 28 May, will be unlike any before and is now top of mind across the emerging markets complex. The opposition candidate, Kemal Kilicdaroglu, is leading in the majority of polls, but uncertainty abounds.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), believes that the magnitude of Turkey’s imbalances – high inflation, large external shortfalls, depleted central bank reserves – require a period of adjustment irrespective of the election outcome. He views that it would be challenging for the next government to navigate the post-election period without a credible, coherent and co-ordinated economic programme aimed at promoting macro-financial stability and establishing a more rule-based policy environment.
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George Goncalves, MUFG Head of U.S. Macro Strategy, thinks that given the macro to markets setup, the Fed shouldn’t be hiking at this point, but they likely will, so long as the rates market is pricing in over a 75% chance of rate hike come the time of the May FOMC rate decision meeting conclusion. Thus, the Fed is on track to deliver another 25bp hike and take up the range for the Fed Funds target rate to 5-5.25%. That said, he also believes that this could ultimately be the last hike of what was one of the most aggressive Fed hiking cycles in recent history.
The continued slide lower in U.S. economic activity with ongoing improvements in inflation measures, coupled with renewed banking turmoil and a more pressing U.S. debt ceiling impasse ahead warrants a pause, but again the Fed will likely hike at the May meeting. Therefore, Chair Powell will try to convey a neutral message and not sound overly hawkish or dovish at this juncture. We expect the presser to be dominated by regional bank concerns, especially after witnessing another bank failure this year (and the third such bank failure happened days before the FOMC decision).
Overall, the Fed’s rate path from here is fraught with many challenges. For example, until financial conditions worsen (which we believe they will into the 2nd half of 2023) and/or if there were to be a cascading of bank related trouble in the near future, unless things are glaringly and perpetually bad, the Fed will try to look past the recent bank failures. Reason being is that they want to push back on the market pricing of rate cuts and hold the line – conveying that they are planning to hold rates “higher for longer” to ensure all these rate hikes are working at wrestling inflation closer to their 2% target. The tricky part will be that holding rates at these even higher rates levels will likely expose further weakness in the banking system and potentially the private credit sector as well.
Net, we won’t know for sure if this is the last rate hike – that will hinge on their assessment that enough has been done. The markets still have to contend with NFP and CPI ahead (which depending on the messaging from the Fed and the outcome of this upcoming data batch, could re-introduce some rate hike pricing into June). However, in our view the outlook will likely worsen from here and uncertainty may go up a lot if the debt ceiling process is taken down to the wire. If so, the key thing to watch post FOMC will be how Fed speakers react to the data and debt ceiling developments.
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The Bank of Japan voted to keep monetary policy unchanged at the April Monetary Policy Board meeting, but also made some significant changes including ending its forward guidance for rates and strengthening its outlook for inflation. New Governor Kazuo Ueda started his term by announcing a comprehensive review of BoJ monetary policy, we believe differences between the new and previous BoJ Governor are slowly becoming apparent. USDJPY is up and JPY rates down. This price action is consistent with Japanese life insurance company fiscal year 2023 investment plans which were released last week.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews the April Bank of Japan meeting, discusses Japanese life insurance company investment plans and shares potentially triggers for Japanese markets in May. He also shares his views on spot Dollar/Yen, Yen rates, and Yen basis.
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The dollar advanced toward the end of the week before weakening into the London close. This was a good reflection of a choppy week of trading and Derek Halpenny, Head of Research Global Markets EMEA, talks to Simon Mayes, Head of UK, Ireland and Swiss Corporate Sales, about whether the large USD/JPY jump after Governor Ueda’s first BoJ policy meeting can be sustained.
Derek also looks ahead at the dollar’s prospects, with particular focus on the FOMC and ECB meetings taking place next week.
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The US Inflation Reduction Act (IRA) – a USD369bn legislative package combining large-scale green subsidies with healthcare savings and new revenue measures through to 2032 – is a landmark and welcome US climate policy, that enacts historic deficit reduction to combat inflation. In a clear threat to Europe through its competitiveness effect, the European Commission has presented its response – a detailed piece of legislation labelled the Green Deal Industrial Plan of which the Net Zero Industry Act (NZIA) is the central initiative.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s latest ESG report that examines Europe’s response to the transformational US Inflation Reduction Act and why he believes this goldilocks era of regulation will carve the contours of a renewables capex supercycle (see here for the full report).
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The unified local elections are nearing an end, with strong showings by ruling party candidates. With no discernable upward stress on JPY rates, the Tokyo market clearly expects Bank of Japan Governor Kazuo Ueda to take his time adjusting monetary policy.
Yen cross-currency basis and Dollar / Yen have been relatively stable. In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the Lower House elections and shares his outlook for the Bank of Japan meeting this week. He also shares his views on spot Dollar / Yen, Yen rates, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Andrea Hayward, Vice President of the Japanese Client Sales Group for EMEA in London, discuss implications for the JPY from the Bank of Japan’s upcoming policy meeting and domestic political events.
They also discuss why the USD's recent rebound is unlikely to be sustained against other major currencies.
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In today’s episode and ahead of Earth Day this weekend, Dr. Tobi Petrocelli, MUFG Head of Sustainability & Transition Finance Strategy, and Beth Gilroy, Deputy Head of Sustainability & ESRM, discuss how MUFG is helping to resolve environmental and social issues focusing on combating climate change and supporting transition financing. We also review two key publications – our recently released MUFG Progress Report, which illustrates how we as a global institution are moving towards carbon neutrality and our MUFG Transition Whitepaper, which was published last October, in which we share our sustainability views globally and summarize the decarbonization efforts of Japanese companies as well as the energy policy of Japan.
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George Goncalves, MUFG Head of U.S. Macro Strategy, is encouraged that stability has returned to the broader financial marketplace and the banks in particular, but he believes that it’s too soon to say the coast is clear. In his view, without a new negative catalyst, it’s understandable to see markets and policymakers return to their concerns over where we are in the inflation versus growth debate. And it’s true that vols in the broader asset classes have receded from the extreme levels seen in March. The concern is that after having witnessed some of the biggest moves in history, they can always come back and be disruptive once more. We think the markets have through the process of having less conviction on the macro outlook become a bit complacent as they wait for the next catalyst. However, we might need to wait until the conclusion of the upcoming Fed & ECB meetings in May before we get some clarity on where we truly are in the economic and liquidity cycle. Meanwhile, the debt ceiling concerns are growing and wait in the wings once the central bank meetings conclude. We remain cautious heading into summer.
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The Yen has weakened at the start of Japan’s new fiscal year while Yen rates and Yen cross currency basis have lacked momentum. The assassination attempt on Prime Minister Fumio Kishida over the weekend was shocking but did not elicit a major reaction in Japanese financial markets.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews recent price action and cross border security flows in March, as well as changes in market structure of the Tokyo market. He also shares his views on spot USDJPY, Yen rates, and Yen basis.
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The week is closing out with the US dollar rebounding from a low point not seen since April 2022. Derek Halpenny, Head of Research, Global Markets EMEA & International Securities discusses with Michael Owen, Head of Global Client Desk EMEA, about what drove the dollar to the lows this week and what lies ahead for the dollar. Derek also discusses the outlook for the pound ahead of a busy week of economic data that will shape expectations for the BoE MPC meeting in May.
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Whilst the recent banking turmoil appears to have subsided, the risk from tighter credit to US oil producers – a group that is capital-intensive and concentrated in a small number of US states and where only a handful of regional banks have an overwhelming market share – warrants monitoring.
Ehsan discusses the explicit and implicit implications of tighter credit markets on US oil production and what global markets can expect in any credit-driven recession on crude oil prices.
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In today’s episode, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz, provides our estimate for turnover across the 2023 spring/summer home selling season and the implication of our turnover outlook on relative value across the coupon stack. He also discusses the near, intermediate term outlook for the agency mortgage basis against the backdrop of the SVB and Signature Bank failures, along with FDIC liquidation of the securities portfolio.
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Over recent weeks, global markets have seen the largest bank collapse since 2008, the largest 2-year US Treasury yield drop since 1987 and two of the largest European banks pushed into a merger to ensure broader systemic stability. Such scarring has different reverberations across the commodities complex.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses why he is lowering his oil price forecasts which is more mark-to-market premised on a delivered market environment, and raising his gold price projections as elevated recessionary angst bring an asymmetry to the fore that skews the precious metal returns to the upside in an unparalleled manner.
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JGBs have sold-off while changes to USDJPY and JPY basis have been relatively limited. The Bank of Japan’s March Tankan survey showed business sentiment worsened only slightly, as the jitters over the US and European banking sectors have not yet spread to Tokyo. However, the Nikkei Average is up only slightly as foreign investors unload Japan shares simply because they are a risk asset. Cross boarder bond flows have been massive in the Tokyo market.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido review JPY assets and securities flows in March and also looks ahead to triggers for April. He also shares his views on spot USDJPY, Yen rates, and Yen basis.
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We end the week for the first time since early March without any elevated investor concerns over the health of banks. The calming of investor concerns has seen US yields rebound but the FX response has been mixed.
Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, discusses the FX impact of easing banking sector concerns with Simon Mayes, Head of UK, Ireland and Swiss Corporate Sales. Derek also looks ahead to next week and the potential rates and FX implications of the US jobs report at the end of the week.
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Dollar / Yen is well supported and judging from the speed of the reversal of yen rate declines and yen basis widening, the spread of risk from US and European financial unease to the Tokyo market has been limited. The market may have avoided major turmoil at the end of the fiscal year, but cross-asset flows and markets still need to be monitored for signs of stress.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido evaluates the current state of the market after the outbreak of financial unease in Europe and the United States, and discusses US TIC and JSDA securities investment flow data. He also shares his views on spot USDJPY, Yen rates, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Michael Owen, Head of Global Client Desk EMEA, discuss the loss of confidence in the banking system and how it is impacting central bank policy. Will the USD continue to weaken in response to banking fears?
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Japan’s markets have reacted to the banking issues in the U.S. and Europe in classic financial crisis/risk aversion fashion, with JPY rallying, JPY rates falling, and JPY basis widening. Japanese investors are passively watching the credit jitters in the U.S. and European banking sector, but they are being impacted considerably, given their sizeable stock overseas assets suggesting they will be monitoring global financial markets closely.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido shares his views regarding the credit concerns in the U.S. and European financial sector and his outlook for JPY cross assets and discusses the collaboration among six central banks for boost USD liquidity funding. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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George Goncalves, MUFG Head of U.S. Macro Strategy, returns to discuss the new risks facing financial markets and how the Fed will handle the current inflation backdrop, while dealing with renewed bank issues. George reviews two of his recent reports, one focused on the financial system’s plumbing and liquidity dynamics and the other on his March FOMC preview. Listeners will recall that our house view has been that the Fed can raise rates as high as they like, but the criteria to stop matters more than where they settle at, while at the same time the more they hike, the likelihood that they break something in the markets or the economy or both where high.
We argue that the criteria to stop hiking is surfacing and that the hiking cycle may be close to being over. The tightening of financial conditions and credit standards post the recent bank failures, along with the long and variable lags of the prior hikes in the system (which are clearly leaving a dent on the financial markets) will likely result in the upcoming recession being ushered in sooner. This makes the upcoming FOMC meeting decision a much closer call as a result.
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Risk sentiment has continued to deteriorate. Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, discusses with Shan Husain, Vice President FI FX Sales, the concerning deterioration in investor sentiment into the end of the week despite numerous steps taken by the authorities in the US and Europe to restore confidence in the banking sector.
Derek also looks ahead to the implications of this uncertainty for the FOMC and BoE policy meetings next week and speaks about currencies that are set to perform best if current market conditions persist or deteriorate further.
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Much of the airtime in the energy industry to lower emissions has been centred on international oil companies (IOCs). Yet, national oil companies (NOCs) account for the largest proportion of absolute upstream emissions. Successful energy transition will depend in large part on NOCs, who possess unparalleled access to competitive natural resources and capital, compared to the more constrained IOCs.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s latest ESG report, entitled, “National oil companies journey to net zero – performing and transforming”, that was published earlier this week (see here for the full report).
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The Bank of Japan’s decision to stay the course at its March meeting was the calm before the Silicon Valley Bank collapse’s storm. Over the near term, market participants will remain on guard and USDJPY and JPY rates will inevitably fall. JPY basis could be mixed, depending on duration.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews the BoJ’s March Monetary Policy meeting, discusses his expectations regarding the government-BoJ joint statement as well as his outlook for BoJ monetary policy. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President of Japanese Customer Sales for EMEA in London, discuss the fallout for the FX market from Fed Chair Powell’s semi-annual testimony and fresh concerns over the health of US regional banks.
They also discuss whether the Fed will step up the pace of hikes later this month?
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Notwithstanding China’s early reopening and a brighter global outlook than at the beginning of the year, US and European inflation have remained stickier than expected, raising expectations of further rate hikes and supressing broad commodity returns in recent weeks.
However, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), believes that the bullish micro fundamental story is still very much intact, with inventory levels at depressed levels and spare production capacity running thin. He believes that with global demand still improving, most commodity markets will likely remain in backwardation, exposing physical tightness and structural underinvestment. This will provide an organic lift in prices as soon as the bearish macro moves into the rear-view mirror.
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USDJPY has stopped rising while 10-year JGB yields remain stuck at 0.50%. The Nikkei Average is up and risk sentiment is positive. Japanese investors have been rebuilding their foreign bond positions ahead of the end of fiscal year 2022. Japanese investors’ foreign bond flows are stronger than JPY bond flows among foreigners.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido previews the March Bank of Japan Monetary Policy Board meeting and shares his outlook for JPY rates in March. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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After a choppy and largely directionless week in the FX markets, Derek Halpenny, Head of Research Global Markets EMEA and International Securities talks to Jack Greenslade, Associate in the Global Markets Sales Division, about the conflicting macro forces that have kept the US dollar in check. They also look ahead to next week and beyond to assess the potential direction of the dollar, as well as the possible impact of the National People's Congress on Sunday, Jay Powell's semi-annual testimony on Tuesday and Governor Kuroda's last monetary policy meeting next Friday.
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International Energy Week – the global conference focused on transitioning out of the geopolitical and environmental crises facing energy – took place this week in London, bringing together more than 1,000 delegates from across the energy industry, investors, policymakers, academic and NGOs.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), contextualises the takeaways from the conference within the central commonality surrounding energy affordability, security and sustainability – reinforcing the themes of MUFG’s ESG 2023 outlook report (see here).
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The spotlight has been on the vetting process for the Bank of Japan leadership nominees in the Diet since last Friday. The process has been smooth so far, and USDJPY has not been volatile but outgoing BoJ Governor Haruhiko Kuroda could still spring a surprise at his last Monetary Policy Board meeting in March.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido shares his impressions of the BoJ leadership nominee hearings and considers the implications for JPY basis and JPY rates. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Stronger activity data and firm inflation data is triggering a hawkish repricing in global rate markets. Lee Hardman, Senior Currency Analyst, and Simon Mayes, Head of UK, Ireland and Swiss Corporate Sales, discuss whether the USD will continue to rebound alongside rising US yields. Did incoming BoJ Governor Ueda open the door for further USD/JPY upside?
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This week was the third consecutive week of strength for the US dollar (DXY basis) and Derek Halpenny, Head of Research Global Markets EMEA and International Securities, talks to Shan Husain, Vice President FI FX Sales, about the drivers of the FX move including the US CPI and other data this week and the continued hawkish rhetoric from Fed officials.
Derek also looks ahead and assesses the FX outlook, including the pound after the UK CPI data.
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The European Commission recently unveiled its plan to address the fallout from the US’s Inflation Reduction Act (IRA) – the transformational USD369bn package of climate and energy spending. There has been a significant debate across the EU about the possible implications for European firms in terms of competitiveness and level playing field.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), believes that this could kickstart major EU/US cooperation, and launch a form of “Atlantic IRA” – given the EU aim to collaborate on its plan with the US (rather than working against it). According to Ehsan, this golden age period of policy tailwinds that attracts private capital will accelerate a clean energy capex supercycle this decade with rising investments in renewables and power grids across the Atlantic.
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George Goncalves, MUFG Head of U.S. Macro Strategy, walks us through the worse than expected January CPI inflation report and the market’s reaction. In general, we view the repricing of rates as appropriate but continue to be perplexed on the linger easing that remains for broader financial conditions. With the month at the half-way point, and overall economic data painting a picture that inflationary pressures still linger, the upcoming FOMC minutes from the January meeting might shed light on what the committee is thinking. Net as we have said before, it’s not about what level the Fed gets to, but what are the conditions needed for them to stop hiking altogether.
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The announcement of the nominations for the new Bank of Japan leadership has been slow to materialize, but the nomination should be formally announced by the time this episode is published. Given it is likely that LDP political considerations have already been resolved we expect the Diet approval process to be quick. Are higher Dollar/Yen, Yen rates, Nikkei stock prices and wider Yen basis a good sign for the next Governor?
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the BoJ leadership nomination, cross border securities flows and shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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US yields have stabilised following a post-US jobs jump last Friday and Monday with a wave of Fed official comments failing to extend yields further higher. Derek Halpenny, Head of Research Global Markets EMEA & International Securities, discusses with Michael Owen, Head of Global Client Desk EMEA, the implications of this for the US dollar while looking ahead to the key US CPI data next week.
Derek also discusses the impact on the Swedish krona after the Riksbank meeting and the outlook for the pound ahead of a busy week of economic data releases.
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5 February marked another seismic change in global oil markets, as the European Union added another layer to its boycott of Russian petroleum products. These sanctions bring the total volumes that Europe needs to replace to approximately 2.4 million barrels per day – and could well require a back-to-the-drawing-board approach to global oil routes if Europe wishes to avoid an acute deficit.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses whether Europe can weather the upcoming storm given challenging global supply dynamics.
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In today’s episode, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz discusses the lock-in effect, turnover, and existing home sales. He also considers if the lock-in effect is overstated and the relative value implication for new production discount mortgage backed securities.
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George Goncalves, MUFG Head of U.S. Macro Strategy, recaps the price action post the FOMC and the strong, more like wow, reading from the latest jobs report. George believes the rates market is normalizing to the idea that the Fed is “not done” and will likely be on hold for longer at higher rates, as well. That said, longer-term rates investors remain skeptical about the current state of the economy and the ability of the Fed to maintain rates elevated, or at a minimum, or are using long duration as a hedge to a potential financial accident and/or exogenous shock ahead.
Meanwhile, if the next inflation reading declines less than expected, or worse, hints that the services side inflation remains “sticky” that could result in further repricing ahead, where that would not only hit rates but broader financial assets as well, like credit and equities. Overall, we continue to view the recent bounce as a bear market rally.
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Dollar/Yen is up following media reports that current Bank of Japan Deputy Governor Masayoshi Amamiya will be nominated as the next head of the central bank. Yen rates are stable, as traders appear to be awaiting the formal announcement. The Chinese Lunar New Year holidays are over, and Yen asset trading among Asian investors has picked back up.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses recent media reports about BoJ leadership nominations and shares his outlook across markets in February. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Seiko Kataoka-Fisher, Vice President of Japanese Customer Sales for EMEA in London, discuss the main takeaways from this week’s central bank policy updates.
Seiko and Lee will also discuss risks for the JPY from the government’s upcoming announcement about the next BoJ governor.
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The Middle East region stands out as the global outlier in a world facing multitude of headwinds and recession. Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s Middle East 2023 outlook report published earlier this week.
Ehsan opines that rapid economic and social transformation alongside the expected 10yr supply-constrained energy supercycle, is strengthening the compelling story for a region which continues to see its stars align. See here for the full report.
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Dollar/Yen has been trading around 130, and Yen rate volatility has eased with the BoJ’s December surprise a thing of the past after the bank held the line in January. All eyes are on potential nominees for BoJ leadership.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses what to watch during the fiscal year 2023 ordinary Diet session, the nomination process for the next BoJ governor and deputy governors, the shift from Abenomics to the Kishida Administration’s New Style of Capitalism, and implications for markets. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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The US dollar has rebounded modestly as the week comes to an end, ahead of some key events next week. Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, talks to Simon Mayes, Head of UK, Ireland and Swiss Corporate Sales, about the outlook for the FX markets ahead of the FOMC meeting and whether this key event may trigger a turn stronger for the dollar.
Derek also provides his view on the ECB and BoE meetings which also take place next week.
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Distressingly high inflation, elevated interest rates, the war in Ukraine, COVID outbreaks in China and a dominant US dollar dented the performance of EMs in 2022. While EMs continue to grapple with the same themes at the turn of the year, we view 2023 as a tale of two halves.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s emerging markets 2023 outlook. Ehsan writes that the waning effects of market re-openings, a global manufacturing cycle downturn and tighter financial conditions are lumpy headwinds that will weigh on EM prospects in the first half of 2023.
However, China’s zero-COVID policy exit, the end of rate hikes and a US dollar peak, all offer significant tailwinds to the EM complex in the second half of 2023. See here for the full report.
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George Goncalves, MUFG Head of U.S. Macro Strategy, argues that the latest price action, as positive and powerful to the upside that it has been, has skewed perception of the macro outlook. Granted, it’s likely that some positive factors – mostly the weather in Europe and contained energy, plus China reopening – have improved the outlook, these alone won’t be enough to overcome the cumulative effective of global central bank tightening and ongoing draining of liquidity via various forms of QT. In the end, it’s likely yet again another short-term bear market rally in risk assets.
Meanwhile, rates markets continue to defy the Fed and where policy rates will eventually stabilize at. These inconsistencies matter and could also drive Fed thinking. Chair Powell might remind investors that their policies work through tightening financial conditions. We expect a “hawkish” 25bps hike at the next meeting.
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Yen rates fell and the Yen has weakened following the January BoJ meeting. The BoJ did not announce any “surprises” this month, but the market is not convinced there aren’t any in store.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido analyses investing flows and sentiment among Japanese and foreign investors based on the latest USTIC and JSDA data. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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As ESG’s scope and penetration increased in 2022, so too did the decibels of debate. Surging inflation, the reverberations of the war in Ukraine, the energy crunch and global recessionary angst have called into question the value of ESG considerations, forcing policymakers to reconsider the rank of importance in the energy trilemma pillars – affordability, security and sustainability. Yet, we view louder deliberations and pockets of pushback as indicative of ESG’s burgeoning relevance and a natural and necessary step in its maturation.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s ESG 2023 outlook that was published earlier this week (see here for the full report).
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JGBs rallied, Yen basis widened, and the Yen weakened in the aftermath of the Bank of Japan’s January Monetary Policy Board meeting. The surprise decision at the December BoJ meeting stoked speculation in the market about further changes this week. Ultimately, the BoJ stood pat but announced some enhanced lending capabilities that could prove significant.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews the January BoJ policy meeting, shares his outlook for monetary policy going forward, and discusses cross-border securities investing flows during December. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
Lee Hardman, Senior Currency Analyst, and Matthieu Gloux, Head of Global Client Sales in EMEA, discuss why fundamental drivers are creating a more compelling case for a weaker USD at the start of the new calendar year.
Will USD weakness be reinforced by next week’s BoJ policy update?
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In today’s episode, MUFG Head of Prepayment Modeling and Strategy, Glenn Schultz reviews December’s remittance data and addresses the question: are we in the winter of prepayment or are the slow speeds just turnover? He also discusses relative value across the specified pool and derivative markets.
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Amid unprecedented market volatility, Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s 2023 outlooks for commodities and energy markets that were published this week (see here and here).
Ehsan believes that the supply constrained commodities supercycle is still in its early stages, whilst a tolerable 2022 will give way to a much more uncertain 2023 for the global energy complex.
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George Goncalves, MUFG Head of U.S. Macro Strategy still thinks it’s a macro-driven year ahead. The economic backdrop continues to worsen in the first half, and it’s possible that the recession hits sooner. The good news – U.S. inflation should continue to decline. By mid-year, the shift from inflation to growth concerns should result in a short-lived Federal Reserve (Fed) pause, and then easing by year-end. However, markets are already pricing to such an outcome on day one! The risk is that instead we get one last major sell-off at the start of 2023 as global rates rise (driven by other central banks – notably the BoJ and ECB along with supply concession). And we also think that risk markets (i.e. stocks) have yet to make their final low, too. While we wait to get clarity on the outlook for the economy, earnings, and risk assets, we make the case to dollar-cost average into bonds. We like L/T USTs/MBS on dips more so than credit, for now. For further information please also see the executive summary of our 2023 Macro2Markets Outlook titled Passing the Baton: A shift from inflation to growth concerns.
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The Bank of Japan’s surprise monetary policy decision in December hastened a sell-off in the JGB market, a drop in Dollar/Yen, and a tightening of Yen cross-currency basis. The government’s FY23 budget has grown to JPY114 trillion causing upward pressure on JPY rates to likely persist. We suggest investors watch not only BoJ JGB purchases but also BoJ lending and pooled collateral operations.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects the December BoJ meeting, the monetary operations that followed, and what he expects going forward. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Data from the US at the end of the first week of 2023 has raised fears of recession in the US.
Derek Halpenny, Head of Research Global Markets EMEA and International Securities talks to Michael Owen, Head of Global Client Desk EMEA, about the implications for the US dollar and Fed policy following the jobs and ISM data. Derek also highlights some of the key takeaways from the Annual Foreign Exchange Outlook publication, released today, in relation to FX forecasts for the year ahead and what will be some of the key drivers for FX in 2023.
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Lee Hardman, Senior Currency Analyst, discusses the main drivers of the FX market in 2022 and looks ahead to next year. Will the USD be able to hold on to this year’s gains?
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In the final full week of trading of the year, the BoJ surprised the market with a change in policy. Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, discusses with Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, the implications of the BoJ’s announcement for monetary policy and the yen in 2023.
Derek also looks ahead to Q1 and what might be in store for the US dollar. At the end of the year, Derek also looks back at the trade recommendations over the year.
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USDJPY, JPY rates, and JPY basis have lacked direction as of late despite trading with a high degree of volatility. In contrast, Japanese company and investor behavior is in the process of changing, which has and will affect trading in the U.S. bond market.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews the December Tankan survey and October USTIC data. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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A busy week of central bank policy meetings before the end of the year saw the ECB steal the Federal Reserve’s thunder by providing a far more hawkish communication than expected. Derek Halpenny, Head of Research Global Markets EMEA and International Securities, discusses with Michael Owen, Head of Global Client Desk EMEA, what the rates and FX implications will be following the FOMC and ECB meetings.
Derek also looks ahead to the BoJ policy meeting next week and assesses the prospect of a change in the Yield Curve Control policy and implications for the yen.
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In today’s episode, MUFG Head of Prepayment Modeling and Strategy Glenn Schultz wraps up 2022 prepayment and reviews our major themes for the year and how they played out versus our expectations. Looking forward into 2023, Glenn discusses the outlook for prepayment, along with the PO value of the discount agency MBS sector and its place in investor portfolios.
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In this episode, MUFG Head of U.S. Macro Strategy George Goncalves walks us through what we collectively observed from the second weak inflation print in a row, and what to expect ahead on that front. George views the markets have this tendency to pull forward returns, and the latest price action is emblematic of such performance. Finally, George gives his base case on what to look for at the upcoming FOMC meeting. Bottom line, although with each subsequent FOMC meeting we are getting closer to the end of the hiking cycle, we do not expect chair Powell to signal as such.
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Dollar/Yen has rebounded from the lows while super long term JGBs have been volatile. The front end of the USDJPY basis curve continues to tighten while the long end has widened. The Kishida Administration has announced tax hikes and a bigger defense budget, which could increase volatility in the JGB market. Japanese investors also face challenges with managing their JGB and USDJPY positions ahead of year-end.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews Japanese lifers first half fiscal year 2022 earnings and connects them to October securities flow data. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Shan Husain, Vice President, FI FX Sales, discuss how the busy economic calendar in the week ahead could prove pivotal for FX market performance through the rest of this year.
Will the latest US CPI report and FOMC meetings shake up financial markets?
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Global oil markets are standing on the brink of a profound restructuring. After months of deliberations, Europe’s boycott of all Russian seaborne crude oil began on 5 December, accompanied by the G7’s price cap of USD60 per barrel on Russian oil. With Russian oil accounting for 10% of Europe’s total imports – to the tune of some 1.2 million barrels per day – the boycott is unprecedented in scale and scope.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), contextualises what the recent sanctions on Russian crude oil signal for global energy markets and what we have learned nearly one week on into its implementation.
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JGB yields have been little changed as of late, while in contrast, spot Dollar/Yen has fallen sharply, and Yen cross-currency basis has tightened off the wides. Japanese investors have been unloading their foreign bond holdings, while demand for JPY bond asset swaps has been strong among foreigners, which has caused price action into the end of the year to be a little unusual.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews 2022 and gives his outlook for 2023, including changes in JGB issuance. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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The week is closing out with some modest US dollar strength after further selling this week fuelled by Fed Chair Powell’s speech on Wednesday. Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, discusses with Chris de Sibert, Head of Institutional Investors FX Sales for EMEA, the implications of Powell’s speech for the dollar going forward.
Derek also discusses the seasonal bias for EUR/USD in December and looks ahead to next week when the Reserve Bank of Australia and the Bank of Canada will kick-start a busy month of central bank policy meetings.
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The 2022 FIFA World Cup that commenced on 20 November is expected to attract billions of viewers worldwide and will bring an additional 1.5m visitors into the hosts Qatar through more than 500 shuttle flights a day. It will have wide-reaching implications for the Middle East both during the tournament as well as for its legacy once it is concluded on 18 December.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses what the FIFA World Cup means for the region and explores the potential implications across 10 key sectors.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves reviews the recent price action as November comes to a close. Markets have been relatively tame in the last few weeks versus what has been characterized as a volatile environment for the majority of 2022. George thinks that the tranquility in markets won’t last much longer, at least for the first half of December. George discusses the key events that lie ahead as we look to wrap up this tough year for markets. The risk for illiquidity are high as investors potentially fine tune portfolios and asset allocations.
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Dollar/Yen has started to trend downward, trading on either side of the 140-mark. JGB yields have been stable thanks to the Bank of Japan’s yield control operations, while cross-currency basis has tightened amidst foreigners' asset swap buying and Japanese investors' foreign bond selling. It is unusual for Dollar/Yen basis to tighten significantly ahead of year end, but 2022 has been an unusual year in many respects and basis is no exception.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the September USTIC and October JSDA, along with MoF investing flows data. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Matthieu Gloux, Head of MUFG’s Global Client Sales for EMEA, discuss the USD’s latest sell-off ahead of a keynote speech from Fed Chair Powell in the week ahead.
Will the return of COVID risks in China provide much needed support for the USD?
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Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses MUFG’s latest ESG publication, titled, “COP27 outcomes – Principles, policies, politics” (read it here). The report aims to offer corporates and investors a comprehensive breakdown of COP27 deliberations that concluded on 20th November, and what the next steps look like.
Ehsan believes that COP27 did little to accelerate the speed of transition at a global political level, leaving ambition and action to take place at COP28 in the UAE in November 2023. After drawing to a close 39 hours late (the second-longest COP in history), many contentious matters, notably around language limiting fossil fuels, were left for future climate talks. Succinctly, faint contours of progress – not balanced – were achieved.
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The focus in the FX markets toward the end of the week was on the Pound after the Autumn Statement. Did the new government do enough to reverse the recent loss of credibility? Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, discusses with Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, the implications of the Autumn Statement for BoE monetary policy and the Pound.
Derek also discusses the early ECB Targeted Longer-Term Refinancing Operations (TLTRO) repayment and looks ahead to the Riksbank and RBNZ policy meetings next week.
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With COP27 drawing to a close on 18th November, there are no clear signs of how it is going to conclude. The main negotiations (“blue zone”) have largely been as expected, with developed and emerging markets mostly taking their anticipated sides over key issues. The side events (“green zone”) have made progress but have not transformed pathways, especially given that many initiatives from last year’s COP26 have not been followed through.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA) offers what markets can interpret from COP27 and whether what transpires as the final communique will lead to an acceleration in the energy transition and safeguarding energy security.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves discusses the recent price action around the CPI and PPI readings and puts that into context relative to the latest thinking on the Fed. George says we should take the Fed at face value until they decide to signal or officially offer forward guidance on policy objectives. That means that it’s still premature to suggest they are about to pause, and with USTs still sub where the Fed may still end up pushing up rates, George suggests that buying dips and potentially dollar-cost-averaging into fixed income is still the prudent course of action. Meanwhile, George does not think the bond market will take out all of the 2023 rate hikes – at least not between now and year-end – until the Fed gives more forward guidance.
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Dollar/Yen and Yen rate have fallen from the highs while cross-currency basis has tightened and the Nikkei Average continues to recover. The front end of the JGB yield curve stabilized after the government announced it will increase issuance of JGBs to fund Prime Minister Kishida’s second supplementary budget. Separately, Japanese bank and life insurance companies are releasing their H1 FY22 earnings results, which include details of losses incurred on foreign bond holdings in the recent global bond market rout.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews cross border security investment flows during September and October and sets forth his outlook for the month of November. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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After a drop of over 5% for the US dollar this week, Derek Halpenny, Head of Research Global Markets EMEA and International Securities, talks with Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, about the primary driver of the move – the weak US inflation data, and what this means for the US dollar. Might we have seen the ‘three peaks’ for inflation, rates and the US dollar?
Derek also looks ahead to the UK budget announcement on 17th November and the implications for the Pound.
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Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA) discusses MUFG’s new ESG publication, titled, "ESG in the EMEA region – The corporate and investor guide to the pillars for the next phase". The report aims to guide corporates and investors to take a systematic and rewarding approach to ESG as sustainability increasingly pivots from aspiration to action.
Ehsan believes that ESG isn’t today and it isn’t tomorrow – it’s a process, not an outcome – the evolution of which posits that corporates and investors that embrace environmental responsibility, safeguard social ethics and strengthen governance practices will garner more long-term economic value.
Listen in to this week’s podcast as Ehsan elaborates on how the report seeks to provide a clearer sense of where ESG fits in the broader scope of corporate strategies and asset management in order to ultimately better structure the ESG journey.
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In today’s episode, MUFG Head of Prepayment Modeling and Strategy Glenn Schultz discusses the October remittance data and outlines our views with respect to winter seasonal turnover prepayment, 2023 issuance, and investors’ search for convexity in the agency MBS. He also discusses the use of machine learning to identify unique convexity profiles, and how investors may leverage machine learning to create excess risk adjusted returns in the agency MBS market.
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USDJPY has come off the highs as of late. Freight shipping rates and resource prices have started to slip ahead of Thanksgiving, and tight logistics conditions are loosening somewhat despite the persisting stresses of the war in Ukraine. At the same time market pricing has begun to shift and speculation that BoJ Governor Kuroda may change his policy stance has increased.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the impact of the MoF’s currency intervention and BoJ monetary operations on the flow of money, as well as what to watch with regards to monetary and fiscal policy. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Reza Nasehi, Vice President of the Japanese Client Sales Group for EMEA in London, discuss the impact on the FX market from the Fed’s latest policy update, and building optimism over a shift away from the zero-COVID strategy in China.
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COP27, which takes place in Egypt from 8-16 November, will be crucial to keeping government action in check and the Paris Agreement goals alive.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA) contextualises what markets can expect from COP27, which comes at a critical time after the seismic events of 2022 – the war in Ukraine, the global energy crunch and the cost-of-living crisis. Key items Ehsan is watching focus on whether countries will strengthen climate targets and policies, raise climate funding for emerging markets and demonstrate steadfastness in turning aspirations of climate targets into action.
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USDJPY is off the highs as the Dollar gives back a portion of recent gains. JGB yields reflect the strength of the Bank of Japan’s yield control operations as an increase in buybacks last week helped the super long sector recover. USDJPY basis has tightened on both strong demand for JGBs from foreigner investors and Japanese investor selling of foreign bonds. Amidst the market volatility in G10 rate markets and the October BoJ meeting non-event, we expect the Tokyo market to reflect a mixture of JGB flows among Japanese and foreign investors, foreign companies’ JPY Samurai bond issuance, and Japanese companies’ overseas investing activities.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects H2 FY22 Japanese life insurance company investment plans, discusses the Samurai bond market, and summarizes high points from the BoJ’s October policy meeting. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
MUFG Head of U.S. Macro Strategy George Goncalves provides an update on the bullish risk market price action and thinks too much good news around a potential Fed pivot is already priced-in. George provides his base case FOMC meeting views and provides both dovish and hawkish scenario outcomes. Bottom line, we expect team pivot (those expecting Fed to transition policy) will be let down again as the Fed is committed to getting inflation under control.
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After another weak of US dollar depreciation, Derek Halpenny, Head of Research Global Markets EMEA and International Securities, discusses with Julie Ellert, Head of Frabelux Corporate Sales, Paris branch, whether this US dollar sell-off will be sustained into next week.
It’s a big week for the US dollar and the broader financial markets - the FOMC meeting on Wednesday is set to dictate whether the negative US dollar sentiment will persist or not.
Derek also discusses what the central bank meetings this week mean for the FX markets, in particular how the Bank of England meeting next week will impact the pound.
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The IMF’s semi-annual Fiscal Monitor report recently published – arguably the most comprehensive source of standardised global fiscal data available – accentuates how fiscal policy can protect emerging market economies against the cost-of-living crisis, while concurrently preserving medium-term sustainability of public finances.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA) discusses the IMF’s key conclusions and offers insights into why he believes the next major imbalance to materialise across the emerging markets complex will be public finances. Ehsan believes that those comprising large fiscal deficits, public debt levels and weaker balance sheets will be key differentiating factor for markets to cogitate in the months ahead.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves discusses how the developments in the bond markets have been more logical lately, especially around key macro events. Whereas risk assets, like the performance of equities, have been more perplexing. George attributes the multiple bounces higher for stocks over the last month as a function of “bearish exhaustion” as investors try to determine if a solid bottom has been put in for 2022. George believes that broader markets are perhaps confusing a potential Fed pause as a pivot, and even then it’s still too early for the Fed to be signaling a transition in policy given how high inflation remains.
George gave us a glimpse of some of the risk factors into the end of 2022. He is most worried about liquidity risk after one of the worst bond market performances in history. Meanwhile, what has been happening in the FX markets suggest that dollar liquidity and access could be an issue into year-end. For now, we need to get through the next Fed meeting and the mid-term elections before we can have a better outlook on how this year may end.
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Currency intervention capped USDJPY at the 152-mark, but Yen selling flows dominate, and the uptrend for USDJPY has not been thrown off course. Upward stresses on JPY rates are deep-rooted, but the BoJ has been able to cap rates with its yield control operations. JPY bond arbitrage trading flows by foreigners and Japanese investors’ selling of foreign bonds have caused the belly of the JPY basis curve to tighten, but the front end has been dominated by Japanese investors’ funding of USD assets over year-end.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido updates us on the cross asset flows during the month of September and also previews the October BoJ policy meeting. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Lee Hardman, Senior Currency Analyst, and Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, discuss the latest political instability in the UK following the resignation of Prime Minister Truss.
How will the upcoming leadership election affect GBP performance in the week ahead? Furthermore, what is the potential market impact from the BoJ’s and ECB’s latest policy meetings? Listen to Lee’s analysis here.
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The European Union has announced a new emergency package to tackle the energy crisis, betting on steps to bolster solidarity among member states. Yet, the bloc is refraining from immediate gas price caps to stem high inflation and stave off recession, amid a lack of unanimity in the European Council and considerable technical complexities.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA), discusses the latest proposals in depth and offers insights into the continent’s dynamic system of cross-border gas network, the practicalities of which have never been tested before.
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In this episode, MUFG Head of Prepayment Modeling and Strategy Glenn Schultz discusses the October remittance data and outlines our thesis of the ‘Second Golden Age of Mortgage Backed Securities.' He reviews how the evolution of the coupon stack, borrower and loan characteristic diversity, and the normalization of interest rates converge to bring about the dawn of a second golden age for mortgages.
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The upward trajectory of Dollar/Yen is driving cross-currency basis wider. Yen rate has been relatively stable thus far, which stands in stark contrast to GBP and other G10 bond markets. How the Bank of Japan’s yield control policy withstands stresses in Gilt and other global bond markets remains an open question.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews cross-border securities flows during the volatile price action that occurred during the months of August and September, as well as additional insights from the quarterly Tankan survey. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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A major policy U-turn is underway in the UK and levels of volatility are high as the week ends. Derek Halpenny, Head of Research Global Markets EMEA and International Securities, outlines to Matthew Carvell, Director of Spot FX Trading at MUFG, what this might mean for the UK markets and GBP. Has Liz Truss done enough to restore confidence and is Jeremy Hunt a wise choice as Chancellor? Derek also discusses the US CPI print and what the data means for the FOMC and the US dollar.
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European countries are still scrambling for common solution to the energy crisis. Even though the recent fall of gas and electricity prices, as well as gas storage fill levels being well above 90%, is offering comfort for navigating the looming winter ahead, European policymakers are still scrambling for a more permanent common solution to the energy crisis.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA) believes that the winter energy risks are pivoting from a continental gas emergency towards national, controlled and transient electricity cuts (known as load shedding) as now the central threat, especially in the event of colder-than-normal temperatures.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves marks to market what he believes was another head-fake move at the start of Q4 trading. The roundtrip price action that we have seen in the last week or so of trading in both bonds and stocks – which saw massive rallies unwind into this new trading week – reminds us that many investors are still enamored with the buy-the-dip approach versus selling-the-rips stance that we have been advocating for a while, which are more common trading strategies in bear markets. We go into what to expect from the FOMC minutes and the upcoming inflation reports. Given the consistency of Fed speakers of late, we would be shocked if they signal anything specific to what would get them to pivot before seeing inflation clearly heading lower. Economists expect another elevated inflation reading and even if it comes in weaker, we do not believe one data print or two would get the Fed to deviate from its hawkish goal of front-loading as many hikes as possible in 2022. Whereas a high CPI print runs the risk of shocking us into a bigger risk-off. That would be an issue as markets are on their backfoot and hugging multi-week trend supports, especially in stocks, but even bonds are at risk of a push to 4% across all curve points.
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It has been another volatile week in the FX market as the USD and US yields have corrected lower. Lee Hardman, Senior Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, discuss whether it is too soon to expect a dovish Fed policy pivot and sustained reversal of USD strength.
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In today’s episode, Hailey Orr, MUFG Capital Markets Strategist, discusses her team’s most recent publication: Casualties of Tightening (The Historic Rise in Global Central Bank Policy Rates). Hailey speaks to the idea of “synchronicity”, where she takes us through the remarkable YTD sell-off of nearly every risk asset on the planet. She also goes over how the current global policy tightening cycle differs from past cycles and which areas in the market are bearing the brunt, and expectations for the Fed tightening cycle going forward.
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OPEC+ announced a production cut of two million barrels per day at its meeting this week – the largest such cuts from the group since the start of the Coronavirus in early 2020. What’s unprecedented is that the group decided to take barrels off global markets amid one of the tightest oil markets on record and ahead of a potential decline in Russian exports later this year.
Ehsan Khoman, Head of Commodities, ESG and Emerging Markets Research (EMEA) believes that the group’s headline cut will result in a lower effective cut of the quantum of ~1.1m b/d due to adjustments to baseline levels of production allocated to producers. Critically, he views that the cuts will not only further tighten fundamentals – lending support to his bullish price forecasts – but also help remedy the large exodus of oil investors that has left prices underperforming both fundamentals and other cyclical asset classes.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves provides us with an update on how markets got back to dreaming of Fed pivots again after such a terrible performance in September. He also walks us through some of his main themes in the latest Macro2Markets Monthly called: A sea of doom (loops) as FCI tightens further. George remains skeptical of what could be another bear market rally in the making and attributes the recent price action to positioning and sentiment having gotten too bearish-leaning. That said, George does not believe there is an imminent Fed reversal and that the Fed needs financial conditions to tighten even further in order to clamp down on aggregate demand and contain inflation into the new year. It’s also interesting to hear how George defined the criteria for what he dubs the end of the bond bull run, but that said, it doesn’t mean the start of the bear market in bonds is ahead either.
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Spot Dollar/Yen has consolidated below 145 after the Japanese Government intervened to buy Yen for the first time since 1998, while Yen rate and basis have been little changed. Going forward an extraordinary session of the Diet is scheduled to convene this month, and we expect the Kishida Administration to announce inflation countermeasures, as well as a second supplementary budget.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the September BoJ meeting, Tankan survey, and his outlook for Yen assets across markets for the month of October. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Another week of wild swings in the financial markets saw the UK take centre-stage. Derek Halpenny, Head of Research Global Markets EMEA and International Securities, provides Shan Husain, Vice President, FI FX Sales, with a view on what might happen next for the pound. A renewed decline seems plausible - especially given the likely continuation of tightening financial conditions globally.
Derek also discusses JPY moves with USD/JPY rebounding notably from the post-intervention lows.
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With a deep recession looming, Germany’s government has announced a EUR 200bn gas price cap to support corporates and households to contain the energy affordability crisis. This may soften the coming recession but poses unprecedented risks.
Whilst precise details are yet to announced, Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that from a energy markets perspective, gas price caps are not a solution without a corresponding cap on the demand-side of the equation. As such, he views that the measures might at best limit, and at worst reduce, the gas demand destruction needed to rebalance the extremely tight market.
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It has been another volatile week in the FX market as the USD has surged to fresh year-to-date highs. Lee Hardman, Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, discuss the main drivers of further USD strength and whether intervention from Japan will prevent further upside for USD/JPY.
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In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), shares his highlights from this latest commodities research report, wherein he believes that despite the recent easing in commodity prices, the energy and food crises are not being resolved. That is, recessions driven by high prices are not long-term solutions to the permanent structural challenges facing commodities. Ehsan believes that the commodities supercycle is only in its first innings.
Why? The permanency of the dynamics surrounding deglobalisation, decarbonisation, the structural rise in demand induced by government policies around redistribution and the reduction in capital availability given structural underinvestments in commodity supply capacity over the years will resurface as soon as demand recovers once again. Click here for the full report. (PDF)
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves provides an update on his latest views post the recent volatility in markets. George believes the gap between rate expectations and risk assets are closing. Post the hotter than expected CPI print, the Fed is not going to pivot any time soon as many initially were hoping. George provides his base case for the September FOMC with expectations of another 75bp hike higher in rates, the third in a row, along with higher dots, too. George expects Chair Powell to deliver a message that is consistent with his speech from Jackson Hole, which was hawkish.
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Dollar/Yen is now trading in a narrow range below 145 ahead of the FOMC and BoJ September meetings. Yen rate and basis have paused after rising and widening, but we expect volatility to pick up once the BoJ meeting is over.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects the impact of Yen money supply/demand as well as inflationary pressures ahead of the BoJ’s meeting. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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The financial markets are braced for a busy week next week, with six G10 central bank meetings, and all are expected to hike rates apart from the BoJ. This week, Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, discusses with Chris de Sibert, Head of Institutional Investors FX Sales for EMEA, the threat of JPY intervention after comments from Tokyo this week and ahead of the BoJ meeting next week.
Derek also covers some of the other central bank meetings next week, including the Federal Reserve, and what to expect in the foreign exchange markets.
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Red-hot inflation, aggressive interest rate hikes and a surging US dollar are reminiscent of the early 1980s – a decade that brought a wave of emerging market sovereign debt crises. This year has already witnessed Russia’s first in a century external default, coming hard on the heels of Sri Lanka’s liquidity crisis with its failure to meet its payments on its US dollar bonds. The risk of broader contagion is alarming markets.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), examines the risks across emerging markets and highlights which sovereigns are most susceptible to the current challenging global operating environment.
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In this episode, MUFG Head of Prepayment Modeling and Strategy Glenn Schultz discusses the August remittance data and shares his views on turnover and refinancing activity in the moderately seasoned cohorts, valuation across the agency MBS coupon stack, specified pool sectors, and CMOs.
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Dollar/Yen has found solid footing above 140, and Yen rate and basis, as well as the Nikkei Average have leveled off. All eyes remain on the Fed and the U.S. Treasury market for direction on Japanese financial markets.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido shares his take on recent cross border investment data and the implications of recent changes to BoJ current deposit accounts, and also discusses developments in the Tokyo repo market during July and August. He also shares his views on Dollar/Yen, Yen rate, and Yen basis.
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This week, Lee Hardman, Currency Analyst, and Reza Nasehi, Vice President of the Japanese Client Sales Group for EMEA in London, discuss the volatile price action in the FX market which prompted Japanese policymakers to step up concern over JPY weakness.
Reza and Lee also discuss implications for the FX market from the ECB’s latest policy update and the new UK Prime Minister Liz Truss’s energy relief package.
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G7 leaders have been cogitating a cap on the price of Russian oil as a mechanism of driving down Russia’s energy revenues without causing a surge in global oil markets. Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that theoretically, such a price cap – if fully and successfully realised – would permit Russian oil flows while concurrently achieving Europe’s strategy of limiting Russian energy receipts.
Practically, however, he suggests that there are no guarantees that Russia would agree to ship its oil at capped prices – particularly if the cap is close to production costs.
Such retaliatory action runs the risk of elevating global energy prices, fanning the flames of global inflation and worsening the already acute cost-of-living crisis.
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USDJPY is through 140. In contrast, JPY rates have risen gradually, JPY cross-currency basis is mixed – tighter in the front end on foreign demand for short-term, while wider in the belly through the long end of the curve – and the Nikkei Average is flat. It would not be unexpected for Japanese exporters to cover USDJPY ahead of the quarter-end, pushing USDJPY even higher.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews what was an eventful end of the summer, shares his outlook for September, and discusses the BoJ’s JGB buying plans and the Ministry of Finance’s JGB yield assumptions in its FY23 budget proposal. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves recaps the key events of the last couple weeks of trading into and out of the Labor Day holiday in the U.S. He discusses the renewed hawkishness by central banks, which were taken up a notch at Jackson Hole. Meanwhile, Fed speakers kept the hawkish tone alive post-event, which has helped keep the direction of rates higher since. George highlights that a big driver of the U.S. rates move, especially out the curve, was the global rise in rates, where European and U.K. rates have actually risen more than what we have witnessed in Treasuries. Looking ahead, George will be watching if Fed speakers keep delivering a consistent message, and how hawkish or not the ECB will be at its upcoming policy meeting this week. George concludes that the Fed will likely do 75, so long as market pricing is at least 50/50 chance of a 75 hike at the September meeting.
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The US dollar has softened into the end of the week after hitting another new closing high on Thursday. This week, Derek Halpenny, Head of Research Global Markets EMEA & International Securities, and Simon Mayes, Head of UK and Ireland Corporate Sales, discuss the outlook for the US dollar while looking ahead to the key events next week – the ECB meeting and result of the Conservative leadership election in the UK.
Derek also provides an update to the MUFG FX forecasts and explains why USD/JPY could move further higher still after breaking the key 140-level.
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With the critical Russian Nord Stream 1 pipeline being shut down again for at least three days from 31 August, fears of gas shortages have once again spiked in Europe. Encouragingly, most countries are managing to bring up their gas storage fillings close to targets ahead of winter. However, Europe is now having to deal with electricity shortages as well. On 9 September, EU energy ministers will gather for an emergency meeting to work out ways to decouple gas and electricity prices to ease at least one part of the cost-of-living crisis.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises the current state of affairs, honing in on what options are available to EU policymakers when they meet on 9 September and what they could mean for global markets.
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Lee Hardman, Currency Analyst, and Seiko Kataoka-Fisher, Vice President, Japanese Customer Sales for EMEA in London, discuss the main take away from Fed Chair Powell’s keynote speech at Jackson and the impact on the outlook for the USD.
Seiko and Lee will also discuss why higher rates in Europe are failing to support the EUR and GBP.
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We are firmly in the midst of a global energy crisis. The challenge is most acute in Europe – as the epicentre of global volatility – with benchmark natural gas (TTF) prices continuing to smash new records. Conventional wisdom signals that natural gas prices should be higher in the winter than in the summer, as that’s when demand is highest. However, Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes the current extreme tightness in European gas balances flips that around. Without a recovery in Russian gas flows to Europe, the region’s blackout and heating risks in winter are potentially so extreme that we expect markets (and policymakers) to frontload action to now, i.e. in the summer, to manage the challenges.
This week, Ehsan delves into why storage building to get European targets of 90% full capacity by the end of October will mean less work for prices in the colder winter. Listen now:
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The optimism over declining inflation looks to be ebbing away fast. This week, Derek Halpenny, Head of Research Global Markets EMEA & International Securities, talks to Martin Viohl, Director of the Global Customer Market Group in London, about what factors were behind this deterioration in optimism over the outlook for inflation and whether the US dollar can sustain the rebound seen this week going forward.
Derek also looks ahead to next week when the Jackson Hole Symposium will be the highlight of the week but some focus will also be on the ECB minutes and the OFGEM price cap announcement.
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In what is being heralded as the most significant US climate legislation in history, the House of Representatives approved the “Inflation Reduction Act of 2022” (IRA) on 12 August. The US IRA marks a pivotal milestone for the US’ energy system transformation, with the bill including a number of key clean energy provisions fuelling significant investments in (i) hydrogen; (ii) biofuels (inclusive of sustainable aviation fuels – SAF); and (iii) carbon capture.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), delves into the details into the newly minted law that contains USD 369 billion in funding and why it may prove transformational for tackling climate change.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves continues to suggest that the markets’ belief that the Fed has or is about to pivot is just wishful thinking and is more a narrative being used to explain the markets performance as of late. George thinks that inflation remains the Fed’s main focus. Even if the assumption is that the peak in headline inflation is behind us, so long as core PCE inflation stays elevated, it’s a binding constraint for them. Thus those in the marketplace expecting the Fed to dial back its hawkishness and/or eventually flip into easing in 2023 might be getting ahead of themselves.
In many ways George suggests the recent financial conditions easing during the summer of 2022 will require the Fed to lean further into tightening if they truly want to become restrictive. We expect rates to get deeper into the 3% range for the base rate soon and if max-QT in September/October does not result in a material tightening of financial conditions, the Fed may have to lean even harder to get their desired results on reigning in core inflation via slowing down aggregate demand. At a minimum the longer it takes for inflation to get to the Fed’s 2% target, it’s likely they don’t pivot but instead pause at a higher rate level.
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Spot Dollar/Yen, Yen rate, and cross-currency basis have behaved well as of late, and we expect this to continue. The Nikkei Average has reversed course and rallied reflecting an improvement in risk sentiment. Separately Prime Minister Fumio Kishida has reshuffled his Cabinet early.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews Japanese investor activity in foreign markets as reflected in Japanese Ministry of Finance data. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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After a weaker than expected US CPI print this week, Derek Halpenny, Head of Research Global Markets EMEA and International Securities explains to Matthieu Gloux, Head of Global Client Sales EMEA, why the data itself might not have much significance for the financial markets over the near-term. Derek also looks back at 2s10s curve inversions to assess equity and FX performances. The US dollar is set to strengthen further from here with the Fed’s battle with inflation far from won.
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Foreign investors have pulled funds out of emerging markets for five consecutive months in the longest streak of withdrawals since records began in 2005, underscoring how recession apprehensions, tightening in global liquidity, geopolitics, the stronger US dollar and rising interest rates are jolting sentiment.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), delves into the details and offers insights into the recent dynamics in cross-border capital flows and what may be in store for the remainder of 2022.
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In today’s episode, MUFG Head of Prepayment Modeling and Strategy Glenn Schultz reviews the July prepayment data, burnout in the moderately seasoned cohort and its implication for refinance risk in the new production cohorts, as well as the agency MBS basis relative value outlook.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves reviews the market price action post the strong July NFP report and what to look out for in the upcoming CPI report. At a minimum, the latest NFP report has made market participants put the “Fed pivot” concept on the backburner as the ongoing robust job growth, along with higher wage inflation, suggests that the Fed will have to lean harder to tightening monetary conditions to weaken aggregate demand.
Meanwhile, George believes that markets will start to focus more on core inflation versus headline, which historically has been more volatile. Lastly, markets remain on edge, but once we get past this week’s CPI report and bond supply, it’s possible that the summer lull sets in with rates grinding out to potentially slightly lower rates. However, George suggests that investors should stay focused and expect an active market once activity picks up in September.
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Neither Dollar/Yen FX, JGBs, or Yen cross-currency basis have moved much as of late, ahead of the lull of the Obon summer holiday. Separately, recent torrential rains and flooding damage in Niigata and Yamagata prefectures highlight the great dangers of climate change and the need for the BoJ’s climate change operations.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews cross-border security flows and changes to the monetary base during the month of July. He also shares his view on spot Dollar/Yen, Yen rate, and Yen basis.
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This week, Lee Hardman, Currency Analyst, and Reza Nasehi, Vice President of the Japanese Client Sales Group for EMEA in London, discuss the main triggers for the USDs bounce back over the past week, and whether it is likely to extend further into the week ahead.
Reza and Lee will also discuss if the flare up in geopolitical tensions between the US and China over Taiwan will have any implications for FX markets.
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Emerging markets are caught in the middle of a perfect storm. Indebted governments have spent capital they didn’t have to shore up healthcare systems against the pandemic. Then, the war in Ukraine turbocharged commodities, with central banks raising borrowing costs to quell inflation. To make matter worse, the Fed’s twin tightening – higher cost of funding and withdrawal of liquidity – alongside a lower gear in China, is biting, inhibiting capital flows with many investors retrenching from assets in emerging markets.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises the state of affairs, and believes that the odds are rising for a wave of bond defaults, with nearly a quarter of emerging markets now trading at distressed levels.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves explains that the broader markets are increasingly more concerned about recessions and growth versus just focused on inflation, however the Fed has not taken its eye off of the elevated levels of inflation. Thus it’s too early for markets to force a pivot and rally on bad news, as if the Fed would come to the rescue and stop hiking and/or ease.
We think a couple more hikes are in store for 2H22 and that should keep curves inverted and eventually weigh on other asset classes, too. We briefly highlighted our views from a joint publication with the capital markets team on a piece called “Mixed Signals: An Assessment of US Recession Risk in the Year Ahead” reviewing our take on recessions and the signals we use to assess them.
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JPY rose, JPY rates declined, and JPY basis tightened in July, reversing their trends of April through June. The BoJ made no changes following the assassination of former Prime Minister Abe just ahead of the Upper House elections. In August, we expect external factors to impact JPY rates and basis during the Obon holidays.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews markets in July including the BoJ’s July Monetary Policy Board meeting and discusses potential JPY trading triggers for August. He also shares his views on Dollar/Yen, Yen rate, and Yen basis.
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Lee Hardman, Currency Analyst, and Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, discuss the recent correction lower for the USD. Has the USD reached a bearish turning point?
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Russia’s game of pipeline poker continues to keep Europe on edge. European natural gas (TTF) prices are on a tear and are re-testing record highs as Russia further weaponises supply by suppressing flows via the Nord Stream 1 pipeline to a fraction of capacity (20% run rate) in response to sanctions.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises the state of affairs, with his base case that Nord Stream 1 flows are restored back to a 40% run rate once a repaired turbine that is under maintenance is in place. He believes that could see TTF prices balloon to average EUR180/MWh this quarter. Critically, that could help take EU gas storage levels to its targeted 90% level by end of October through government-driven efficiency measures as well as price-driven industrial demand destruction.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves provides an update on his latest views. George believes that market participants are in a tug-of-war on the inflation versus recession debate and are hoping that central banks will start to pivot their focus to recession risks versus inflation. Even if that is what will ultimately happen, George feels that it’s too soon for that to be the prevailing theme because the Fed is only now getting toward neutral levels of rates.
Listen to the podcast to hear George's base case for the upcoming July FOMC with expectations of one more 75bp hike in rates with chair Powell delivering a neutral message.
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The USD has corrected lower over the past week alongside lower US yields and a rebound in global equity markets. Lee Hardman, Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, discuss whether the best days are over for the USD rally ahead of next week’s FOMC meeting.
They also look at implications for the EUR from this week’s ECB’s policy update.
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Japan remains in mourning after the shock of former Prime Minister Abe’s shooting. Recently USDJPY made new highs and JPY basis widened slightly while 10Yr JGB yield has stayed just below the upper band of the BoJ’s target. Despite the depreciation of the Yen exporter operations have not strengthened because of supply chain constrictions, while the impact on import prices has been significant. The culprit behind the rise in USDJPY has been net imports in the resource account while foreigners’ Yen short positions have not changed much.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido shares his views ahead of the Bank of Japan’s July meeting. He also discusses inflation in Japan and shares his views on Dollar/Yen, Yen rate, and Yen basis.
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With EUR/USD breaching parity this week and the Fed expected to maintain its hawkish stance given stubbornly high inflation, the 2s10s US Treasury curve has inverted further. This week Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, discusses with Michael Owen, Head of Global Client Desk EMEA, the implications for the US dollar in periods of curve inversion.
Derek also looks ahead to the ECB meeting next week and addresses a client question on the possibility of the G20 turning its attention to curtailing US dollar strength.
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In this episode, MUFG Head of Prepayment Modeling and Strategy Glenn Schultz discusses recent prepayment data and shares his views on valuation across the agency MBS coupon stack. He also reviews the recent slowdown in the U.S. housing market and the outlook for the housing market against the backdrop of a higher 30-year mortgage rate. Finally, Glenn takes listeners through the outlook for agency MBS issuance for the second half of the year and the mortgage basis.
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In today’s podcast, we mark-to-market the latest macro developments in the U.S. and recent price action, as well as briefly review some of the inflation concepts covered in our recent monthly strategy report.
We also touch upon what to expect from markets post the June CPI report. In our view, if the inflation report does not show any signs of price increases slowing, then a high reading may trigger a more lasting risk-off as investors potentially throw in the towel on inflation moderating.
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Voting for the Upper House elections got underway following the shocking and tragic assassination of former Prime Minister Shinzo Abe last week. The ruling Liberal Democratic Party of Japan scored a big victory in the elections. Over the near term, the Kishida Administration will likely focus on inflation countermeasures. At the same time, security issues both domestic and abroad will also be key policy issues.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses implications for financial markets from Upper House election results, the impact on the Bank of Japan’s yield control operations, and securities investing flows in May and June. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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It has been a dramatic week at Westminster, culminating in Boris Johnson resigning as Prime Minister. Lee Hardman, Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, discuss implications for the pound, and what’s behind the USD’s renewed upward momentum.
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So far in July, USDJPY, the 10Yr JGB yield, and the Nikkei Average have all stayed in a flat range, while JPY basis has remained wide. With the risk of a global economic slowdown being questioned, developments in G10 bond markets have impacted Japanese investors’ overseas bond flows, while foreign investor behavior in the JGB market is also being affected.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses his July outlook for JPY cross assets and Japanese investor behavior based on the June Tankan survey, and reviews BoJ and MoF money flow data for June. He also shares his views on Dollar/Yen, Yen rate, and Yen basis.
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Another extraordinary week has seen some further record moves in rates markets and FX volatility as well. Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, talks with Shan Husain, Vice President, FI FX Sales, about MUFG’s updated FX forecasts published in today’s Foreign Exchange Outlook. Derek explains why MUFG Research is now on “parity watch” as the US dollar continues to strengthen.
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2022 has witnessed a lot and we are only half way. It’s seen one of the worst financial market performances on record, an intense conflict in Europe, the re-emergence of the COVID crisis in China and the first 75bp hike by the Federal Reserve since 1994.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises how emerging markets and commodities markets are navigating the storm in global markets and offers prospects of what to expect in the second half of the year.
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Increased global recession fears fueled some unprecedented moves in rates markets this week and Derek Halpenny, Head of Research Global Markets EMEA and International Securities, talks to Michael Owen, Head of Global Client Desk EMEA, about the implications of these moves for the FX markets going forward.
There are plenty of key events next week that could also fuel renewed FX volatility – the G7 summit in Germany, the ECB Forum in Sintra, Portugal, and natural gas prices in Europe all have the potential to influence market direction next week.
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Over the last week, European natural gas prices have rallied more than 60% to around EUR135/MWh as Russia reduced flows via its main major Nord Stream 1 pipeline, citing issues with turbines undergoing maintenance in Canada with sanctions making it difficult to return it. The cuts which have resulted in reduced gas deliveries to Germany, the Netherlands and Italy comes at a time when Europe is in injection season and pressing hard to hit its target of having storage 80% full by 1 November (currently 55% filled), ahead of the heating season. On net, these cuts are pushing Europe’s gas crisis toward its endgame.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises the concerning state of affairs and believes that if these reduced flows persist through the summer, then Europe may find it a challenge to adequately supply itself with gas throughout winter, requiring persistent gas prices north of EUR200/MWh to balance the market.
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Elevated inflation is prompting G10 central banks to speed up tightening plans, but there is one notable exception - the Bank of Japan. Why is the BOJ not following suit?
Lee Hardman, Currency Analyst, and Matthieu Gloux, Head of MUFG’s Global Client Sales for EMEA in London, explain and also discuss implications for the FX market from recent central bank policy updates.
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In a world devoid of inventory buffers, commodity markets are beginning to experience severe distortions in conventional behaviour. Global markets are having to deal with an extreme molecules crisis across the commodities complex with shortages across energy, metals and agriculture.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that demand destruction remains the only practical mechanism to rebalance exceptionally tight commodity markets in the near-term.
Critically, however, he advocates that once widespread, demand destruction is not a long-term solution with a risk of the permanent structural challenges facing oil and broader commodities – de-globalisation, de-carbonisation, the structural rise demand from low income groups and a reduction in capital availability given structural underinvestments over the years – resurfacing as soon as demand recovers once again.
Ehsan believes this is a decades-long commodities supercycle and we are only in its first innings.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves discusses his FOMC preview for the upcoming June meeting. George expects more hawkish signals from the Fed as they continue their fight against persistently high inflation. This will likely come about with the first 75bp hike since the 1994 hiking cycle, as well as a meaningful jump higher in the rates dot plot. The risk of the Fed introducing a balance-sheet unwind facility to make the QT caps whole is also lurking in the wings. On the dovish side, it would be odd if the Fed does not do 75bps, but that is a risk as is the risk they highlight recent market vol.
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The 10Yr JGB zone has been dented as USDJPY continues to climb and the JGB yield curve steepens. Market speculation about Bank of Japan yield control operations persists ahead of the central bank’s June meeting. USDJPY basis has widened in line with U.S. rates. The Nikkei Average is lurching along.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews lifers’ FY21 earnings results and changes in their asset management portfolios, analyzes JPY cross asset developments in May, and previews the June BoJ meeting. He also shares his views on Dollar/Yen, Yen rate, and Yen basis.
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Lee Hardman, Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, discuss the main fundamental drivers of the yen’s recent sharp sell-off, and potential triggers for a reversal of the bearish trend.
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Whilst investors have focused on the negative reverberation of rising US rates on EMs, a strong USD heralds additional pressures for the EM complex.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), examines three core transmission channels in which a strong dollar – a constituent or consequence of tight US monetary conditions – is impacting emerging markets.
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In today’s episode, Hailey Orr, MUFG Capital Markets Strategist, discusses her team’s most recent publication, New World Order, where they outline 15 defining themes for the global economy and markets in the second half of 2022. In the podcast, Hailey focuses specifically on the transition from “COVID” linked inflation to “conflict” linked inflation and the implications that has for markets driven by stagflation risk. Despite numerous challenges in the economy and markets today, silver linings can still be found.
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JPY basis has widened while staying flat amidst a mix of buying and selling as JPY rates have stabilized and the Yen has generally weakened against USD (Monday’s price action notwithstanding). The Nikkei Average has started to tick up again slowly. Japanese investors could gradually restore their foreign bond positions as they both buy and sell during the month of June. Separately, June also brings the high season for Samurai bond issuance.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses his outlook for Yen assets, analyzes BoJ operations and fiscal fund flows, and reviews the Samurai bond market. He also shares his views on the Dollar/Yen, Yen rate, and Yen basis.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves recaps his latest Macro2Markets Monthly report and goes over how macro narratives are evolving and how markets are adjusting to competing themes. George believes that rate risks are in the process of taking a back seat to coming credit concerns where the cross roads of high inflation and slowing growth may result in a challenging environment for Corporate America, especially firms dependent on low rates and fast economic activity. George views the rebound in risk assets as markets adjusting from oversold conditions, and that more downside risks remain for 2022.
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The US dollar depreciated again this week, with US yields declining and equity markets rebounding – always a bad mix for the dollar. Derek Halpenny, Head of Research, Global Markets EMEA and International Securities discusses the outlook for the currency with Michael Owen, MUFG’s Head of Global Client desk for EMEA in London.
Where is the US dollar on the famous USD Smile theory and will the more favourable financial market conditions persist and weaken the dollar further?
Derek also provides his view on the market impact of the UK fiscal support package announced on Thursday.
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Extensive negative supply-side disruptions, the war in Ukraine, rising commodity prices and a less supportive global liquidity backdrop have markedly deteriorated the inflation-growth trade-off across Emerging Markets (EM).
A drawn-out inflation challenge with more rate hikes, tighter financial conditions, sharply slowing growth and higher borrowing costs leaves a perplexing outlook for EMs.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes it is prudent to look at bottom-up narratives in gauging where the risks sit and where the opportunities remain across the EM complex.
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USDJPY and Japan stocks continue to fall, pulled down by weakness for U.S. stocks. JGB rates have not moved much under the tight control of the BoJ’s yield management, but JPY basis is still likely to widen. Japanese G10 bond flows are substantial, and Tokyo market JGB asset swap appeal could be impacted by Japanese investors trading JGBs.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews developments with cross-asset JPY asset positions, as displayed in the March USTIC and J-BoP, and April JSDA data. He also shares his views on spot Dollar/Yen, Yen Rate, and Yen basis.
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Lee Hardman, Currency Analyst, and Matthieu Gloux, Head of MUFG’s Global Client Sales for EMEA in London, discuss the recent correction lower for the USD, and what factors could help to trigger a sustained reversal.
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Headline inflationary pressures hit key emerging markets early last year, generating hawkish monetary policy responses well ahead of developed markets. To the extent that inflationary dynamics are proving more global than anticipated, and with most key developed market central banks following emerging markets’ monetary tightening cycles with around a one-year lag, it’s possible that the evolving emerging markets inflation and rate cycles could offer valued guidance of what developed markets may experience in the coming months.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), offers insights into the lessons learnt from the inflation experience in emerging markets and what this could entail for developed markets as the prospects of peak inflation moves into sight.
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Japanese companies and banks have been releasing earnings results. A key point for the bank sector has been valuation losses on foreign bond holdings, while for exporters, a higher USDJPY and better terms of trade have been a boon for earnings. JPY basis has been widening as USDJPY and JPY rates have benefitted from risk aversion.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews April securities investing flows and Japanese lifers’ investment strategies for the first half of fiscal year 2022. He also shares his views on spot Dollar/Yen, Yen rates, and Yen cross-currency basis.
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Lee Hardman, Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, discuss the recent turn around for the yen, and the likelihood of EUR/USD hitting parity as it tests the lows from the start of 2017.
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In today's episode, MUFG Head of Prepayment Modeling and Strategy Glenn Schultz reviews April’s prepayment data, issuance trends in the agency MBS market, and the Federal Reserve’s MBS portfolio run-off. He discusses how the confluence of the Federal Reserve’s interest rate policy, balance sheet run-off, and issuance and prepayment trends inform MUFG’s ‘old normal’ thesis for the agency MBS valuations and the current coupon spread.
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On April 28, the Bank of Japan bucked market speculation and left monetary policy unchanged. USDJPY continued on its uptrend, but JPY rates remained steady and JPY basis widened. Those trends did not change over Golden Week, even after the FOMC meeting.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the April BoJ Monetary Policy Board meeting and BoJ monetary operations, and also outlines the key points regarding JPY cross assets in May. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Following the FOMC and BoE meetings this week, Derek Halpenny, Head of Research Global Markets EMEA and International Securities, discusses the implications for the dollar and the pound going forward with Chris de Sibert, Head of Institutional Investors FX Sales for EMEA.
Will the large swings for the US dollar continue and what do the grim forecasts from the BoE mean for monetary tightening and the pound going forward?
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves discusses his FOMC preview for the upcoming May meeting. George believes the Fed cannot flip to dovish this soon, and thus this meeting will likely come across as hawkish as they announce QT and lift rates by 50bps, the first time since 2000.
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Lee Hardman, Currency Analyst, and Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, discuss why the USD has surged to multi-decade highs. Will next week’s FOMC meeting affect the USD’s bullish momentum?
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Russia is making good on a threat to cut off gas flows to “unfriendly countries” that refuse to pay for the fuel in roubles. On 26 April, Russia’s Gazprom informed Poland and Bulgaria’s state gas companies, PGNiG and Bulgargaz, that it would halt gas supplies commencing Wednesday (27 April) following their refusal to comply with its demands.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that whilst this development is not an immediate systemic threat, it is a major turning point for European gas markets, with a key concern now whether Russia will escalate further by cutting supplies to other European countries.
What is clear is that this major escalation will keep European gas prices supported, with spillovers into the Asian market given Europe will have to increasingly compete with Asia for flexible LNG supply, keeping Asian spot LNG prices bid.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves provides an update on what has driven rates higher over the course of April. He also refreshes his view on the interplay of financial conditions, Fed’s QT, and how high short rates can ultimately go in the coming quarters.
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The BoJ has given notice of consecutive fixed-rate fund purchase operations and prevented Yen rates from rising before the April Monetary Policy Meeting. Spot Dollar Yen has risen significantly, but volatility in both the Nikkei Average and Yen basis has been fairly limited.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido previews the April BoJ monetary policy board meeting. He also shares his outlook for Dollar/Yen, Yen rate, and Yen basis ahead of Japan’s “Golden Week” holiday.
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With USD/JPY hitting the highest level since 2002, it has been another tumultuous week in the FX markets. Derek Halpenny, Head of Research Global Markets EMEA and International Securities, discusses the ongoing turmoil with Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, breaking down vital market issues like the prospect for joint intervention by Japan and the US to stem yen weakness.
The Bank of Japan policy meeting on April 28 could be key in any FX intervention response. Derek also covers the outlook for the pound after the plunge in GBP/USD and updates listeners on MUFG’s trade views.
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Expectations for emerging markets were already downbeat at the start of year, centred on stagflation trepidation. However, four months into 2022 and the outturn has been much worse than anticipated. Extensive negative supply-side disruptions, the war in Ukraine, rising commodity prices and a less supportive global liquidity backdrop have markedly deteriorated the EM inflation-growth trade-off.
A drawn-out inflation challenge with more rate hikes, tighter financial conditions and higher borrowing costs leaves a precarious outlook for emerging markets. Ehsan Khoman, Head of Emerging Markets Research (EMEA), advocates that such an environment favours a bottom-up selection process to differentiate outperformers.
Listen in to this week’s podcast as Ehsan elaborates which emerging markets offer the best risk-reward opportunities at the current juncture.
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In today’s episode, Leanne Rakowitz, MUFG Head of ESG Coverage in the Americas, and Amanda Kavanaugh, MUFG Head of Sustainable Finance in the Americas, discuss the importance of this year’s Earth Day theme “invest in our planet,” the global sustainability progress they’ve seen over the past year, and how evolving regulatory activity, trends, and investor interest will impact the market in the year ahead.
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The Yen continues to weaken. In contrast, the Nikkei, Yen rate, and Yen basis have been relatively flat. Finance Minister Suzuki has shown concern for Yen weakening, while Bank of Japan Governor Kuroda appears to be more positive.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects U.S. bond investing flows based on the February USTIC data and discusses the attributes of Japan stock investing flows as reflected by JPX data and what to expect from the Kishida administration. He also shares his views on Dollar/Yen, Yen rate, and Yen basis.
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Sanctions and disrupted payment systems have left holders of bonds sold by Russia and its companies bracing for defaults, according to Ehsan Khoman, Head of Emerging Markets Research (EMEA).
Fears eased in mid-March when the first interest payments due since Russia’s invasion of Ukraine came through, proving that at least some of the country’s borrowers could still service their foreign currency bonds. The relief was short-lived.
In early April, an attempt to pay Russian government dollar-debt obligations was rejected by U.S. banks, causing S&P to downgrade Russia’s credit rating to “selective default”. This now all but guarantees Russia’s first external debt default since 1917. What could the potential fallout from this be for global markets? Ehsan explains.
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The USD has hit fresh highs over the past week driven by the Fed’s plans for faster policy tightening and building downside risks to growth outside of the U.S.
Lee Hardman, Currency Analyst, and Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, discuss whether the USD’s bullish trend is set to continue, and implications from recent central bank policy updates, including BoC, ECB and RBNZ.
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JPY has weakened thus far in FY22. JPY rates have remained high even under the watchful eye of the Bank of Japan and its YCC operations. The Nikkei Average has moved little. U.S. Fed officials have issued comments on rate hikes and quantitative tightening, but the BoJ leadership has not made any changes to monetary policy in response. The stances of U.S. and Japanese monetary policy officials are in stark contrast for now ahead of the U.S. November mid-term elections and the Japanese July Upper House elections.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects March securities investing flows, the balance between the MoF’s FY22 JGB issuance plans and the BoJ’s JGB buying plans, and the BoJ’s yield control tools. He also shares his views across Dollar/Yen, Yen rate, and Yen basis markets.
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After a US dollar advance of over 1% this week, Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, discusses with Matthieu Gloux, Head of Global Client Sales EMEA, whether this US dollar strength will persist.
Then there is Federal Reserve balance sheet shrinkage plans, the first round of the French presidential election on Sunday and the ECB policy meeting on April 14 - how will these impact FX markets going forward? Listen to hear Derek’s analysis.
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Russia’s invasion of Ukraine has introduced a risk premium in oil prices that is likely to remain embedded in markets for months.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that barring a breakthrough in peace negotiations, the price-induced demand destruction – the only practical mechanism currently available in a world devoid of inventory buffers and supply elasticity – necessary to reduce consumption is set to become widespread by the third quarter, with a corresponding Brent crude oil price above USD140 per barrel. He believes this is the maximum pain level that could jolt corporate activity, squeeze private consumption and ultimately begin to ease the market’s severe tightness.
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In today’s episode, Hailey Orr, MUFG Capital Markets Strategist, discusses her team’s new publication and implications for the global economy and markets.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves shares some of his observations from public data (such as TIC and MOF data) on how investment flows historically have looked in and out of Japan for U.S. assets at the start of their fiscal new year (which just started in April). George also commented on recent Fed speeches that are mentioning that the Fed’s balance-sheet is poised to shrink much more quickly this time around, all of this happening ahead of the March FOMC minutes release. George ties all these developments to his macro views.
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USDJPY has retreated to the 122 level, and the 10Yr JGB yield is back to the 0.21% level after hitting 125 & 0.25%, respectively. USDJPY basis is off the wides. The Nikkei Average is treading water just under the 28,000 mark despite the reorganization that took effect this month.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido reviews JPY asset pricing and flows in March, looks ahead to April JPY triggers, and discusses the key points of the March Tankan survey. He also shares his views on Dollar/Yen, Yen rate, and Yen basis.
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Today marks the start of Q2 and the release of the April MUFG Foreign Exchange Outlook publication. Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, discusses changes to views and forecasts with Michael Owen, Head of Global Client Desk EMEA.
Derek also provides an update on energy supplies into Europe after Russia’s decree for natural gas payments to be made in rouble and what to expect from the French presidential election on April 10.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves reviews his recently published macro thematic report on our latest views for the U.S. outlook in the next 18 months as well as a review of markets in and out of the first hike in this cycle. George feels that the rates market is operating to a “back to the future” tightening cycle that has fast-forwarded all the Fed hikes into and out of the Fed’s first move. This has led to a cascading of curve flattening (with a number of curve spreads going inverted in the process) as the market is skeptical the Fed will get far.
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The Nikkei Average, USDJPY, and JPY rates are all up, while the front end of the JPY basis curve has widened. Real demand for resources has caused JPY to weaken ahead of the fiscal year-end, and the Kishida Administration has unveiled inflation countermeasures. On Monday, March 28, the Bank of Japan announced multiple fixed-rate JGB buying operations to cap 10Yr JGB yields at 0.25%.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido dissects the BoJ's fixed rate JGB buying operations and JPY cross-asset flows in February. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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Fed officials have sent a strong signal over the past week that they will deliver more front-loaded tightening in an attempt to regain control over surging inflation. A larger 50bps rate hike is now the base case for the May FOMC meeting. The sharp adjustment higher in US yields has hit the yen the hardest.
Lee Hardman, Currency Analyst, and Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, discuss the implications for the FX market from the Fed’s shift in policy, and Japanese policymakers reaction to more acute yen weakness.
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The US administration is finalising plans with the European Union to support the continent's access to incremental US liquefied natural gas (LNG) supply in an effort aimed at slashing Europe’s dependence on Russian energy.
Whilst the full details have yet to be announced, Ehsan Khoman, Head of Emerging Markets Research (EMEA), discusses why the near-term considerations are likely to focus on a reallocation of supply to Europe, rather than volumetric increases in total US LNG exports given that US terminals are already running at capacity.
Listen in to this week’s podcast as he discusses why for Europe, this increased US LNG intake would raise summer supply at the margin which will help to take European storage to comfortable levels ahead of next winter, unless Russian inflows fall further with renewed risks surrounding the proposed shift to Russian Roubles (RUB) payments that may lead to a fall in EU termed gas purchases.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves summarizes the current rates and curve dynamics post the first Fed hike of this cycle. George is pretty emphatic that the U.S. bond market needs to hold the line—which is short for saying that we are in the intersection of some key technical metrics and market structure factors—and that this perhaps is the most important time in the bond market’s history to date.
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Last week, Prime Minister Kishida decided to lift all remaining quasi-emergency measures introduced to slow the spread of COVID-19. The Bank of Japan is focusing on normalizing monetary policy ahead of the post-pandemic era as inflationary pressures build around the world. The Nikkei Average and USDJPY reflect the shift in events in Ukraine, and JPY basis reflects the sense of crisis.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido deliberates the attributes of U.S. bond flows among Japanese and Asian investors more broadly, as well as the BoJ's March meeting and policy outlook. He also shares his views on the Dollar/Yen, Yen rate, and Yen basis.
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While the focus is very much still on the potential fallout from the Russian invasion of Ukraine, this week did also include three key central bank meetings – the Federal Reserve, the Bank of England and the Bank of Japan.
Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, discusses the differing messages from each of these market-moving meetings with Michael Owen, Head of Global Client Desk EMEA.
What are the FX implications going forward in the context of the continued optimism over the prospects of peace talks reaching a positive outcome? Listen now for Derek’s outlook.
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With the US Federal Reserve (Fed) kick-starting its hiking cycle, investors are seeking protection. While financial assets (equities, bonds and credit instruments) are forward-looking and driven by growth “rates”, commodities are spot physical assets driven by demand “levels”.
This distinction matters as the Fed hikes slows down the growth rate of demand (which drives anticipatory financial assets), not demand levels (which drives unanticipatory assets like commodities) – so long as the level of demand exceeds the level of supply, which is corroborated with nearly all major commodities in super backwardation (signalling market tightness).
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), discusses why commodities remain the best hedge during periods of the Fed hiking cycle. His examination of each of the nine Fed hiking cycles since 1972 signals that global commodities have on average outperformed all major cross-asset classes.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves discusses the intra-meeting price action between the last FOMC through today and spells out what to watch for in the Fed’s updates for the economic outlook and rate path ahead (i.e. the dot plot). George expects the Fed to try to thread the needle as a lot of hikes are already priced-in.
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The unknowns surrounding the war in Ukraine continue to swirl. USDJPY has risen, along with commodities prices. But risk aversion has supported lower JPY rates, and USDJPY basis has widened. Japanese investors have been covering their USD fund positions ahead of the fiscal year-end, but MoF data shows that foreigners have been cutting their exposure to Japan stocks even as purchase JGB asset swaps.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido previews the Bank of Japan’s March Monetary Policy Board meeting. He also discusses the impact of the war in Ukraine on Japan’s bank sector and domestic inflationary pressures as shown in corporate prices as well as shares his views on Dollar/Yen, Yen rate, and Yen basis.
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The impact of Russia’s invasion of Ukraine on energy supply remains the key focus for the financial markets. The impact is resulting in a retracement of the previous huge gains in crude oil and natural gas markets, offering some respite for European currencies like the Swedish Krona and the Euro.
Derek Halpenny, Head of Research for Global Markets EMEA & International Securities, talks to Chris de Sibert, Head of Institutional Investors FX Sales for EMEA, about developments this week, including implications for the Euro after the ECB meeting, outlook for the FOMC and BoE meetings next week, and prospects for the Japanese yen, which is underperforming despite the high levels of uncertainty.
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The global economy is now facing its largest commodities supply shock since the 1973 oil embargo. The stratospheric breadth and velocity of the moves in commodity prices since the Russian invasion of Ukraine is structurally altering the contours of policymaking and corporate strategy.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that the permanency of such pivots, with entities lining up to exit Russia and Europe now placing energy security above energy transition priorities, will reshape the landscape for the coming decades.
In the near-term, he holds conviction that with the sheer ambiguity of how the conflict will end, as well as how extreme shortages in energy, metals and the agricultural space will be resolved, the world could be heading into a recession.
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In this episode MUFG Head of Prepayment Modeling and Strategy Glenn Schultz discusses the transition of the mortgage prepayment landscape to one dominated by turnover and burnout rather than refinancing. He discusses why he believes that turnover will become the dominant theme in 2022. He takes a balanced look at the specified pool sector, identifying the ‘Kings of extension protection” and “Princes of call protection.” Finally, he discusses his views on the recent widening trend in the current coupon basis.
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The war in Ukraine rages on and Japan stocks have marked a year-to-date low. USDJPY basis is volatile, amidst mixed trading by Japanese and foreign investors. Downside for USDJPY has been limited even despite the risk-off sentiment in the market reflecting surging oil prices, risk aversion, and fiscal year-end factors, while in contrast all these factors have put a bid into JGBs. Although not obvious, JPY asset price action remains in line with the microstructure of the Tokyo market post-pandemic.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido shares his outlook for JPY cross assets in March and also looks back at fiscal and BoJ monetary operations, as well as securities investing flows in February. He also shares his views on Dollar/Yen, Yen rate, and Yen basis.
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There are growing signs in the financial markets that the fallout from sanctions on Russia following its invasion of Ukraine is spreading, with Europe in particular beginning to show contagion. It has created a more uncertain backdrop for the ECB ahead of next week’s policy meeting.
Lee Hardman, Currency Analyst, and Michael Owen, MUFG’s Head of Global Client Desk for EMEA in London, discuss the implications for the FX market and what to expect from the ECB’s policy update.
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The vertiginous surge in global commodities has surpassed even our above consensus expectations that we laid out in our annual 2022 outlook. The rally will stoke a torrent of inflationary pressures as the building blocks of the global economy gets ever more costly.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that commodities are now marching to levels where demand destruction – through still higher prices – will become prevalent.
Critically, he notes that the supply scarcity narrative being played out in commodities predates the geopolitics of the day – the Russia-Ukraine conflict – is merely turbo-charging today’s extreme supply shortages.
Listen in to this week’s podcast to hear why he believes demand destruction is now the only practical mechanism to rebalance exceptionally tight commodity markets.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves discuss the recently produced report on geopolitical analysis and historical experience of markets and the Fed during prior events. George emphasizes that it's early days to draw any strong conclusions, but he is comfortable with his views that it all comes down to how financial conditions evolve ahead.
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Ukraine is in chaos following the invasion by Russia. The Nikkei Average has responded by weakening, but USDJPY and JPY rates have not fallen markedly, staying level at around 115 and 0.20% respectively. In contrast JPY basis widened significantly. Expelling Russia from the SWIFT system has increased USD asset funding costs for Japanese investors.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects market uncertainties caused by the Ukraine invasion and discusses JPY cross-asset pricing and JPY cross-asset flow from the January JSDA data. He also shares his views on Dollar/Yen, Yen rates, and Yen basis.
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The Russian invasion of Ukraine has so far had a brief and relatively muted impact on FX in the G10 space, with the initial risk-off reaction yesterday reversing quickly. Why is this? Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, talks to Michael Owen, Head of Global Client Desk, EMEA about the FX reaction to the Russia-Ukraine conflict and how the markets might play out going forward.
Derek expects greater focus on inflation and central bank action next week given Fed Chair Powell will present the semi-annual testimony to Congress.
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The alarming Russia-Ukraine crisis has raised the spectre of a worst case scenario for European gas prices, at a time when inflation is already elevated and financial conditions are tightening.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that the markets concern is beginning to pivot for investors pricing in geopolitical risk premium to now a heightened chance that markets and European authorities have to contend with physical delivery risks. Ehsan believes that this signals significantly higher (and more) volatile gas (and utility) prices until price-induced demand destruction becomes prevalent.
Listen in to this week’s podcast as he delves more into how the European gas supply could be impacted by the geopolitical crisis unravelling in Ukraine and what could come next.
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The risk of renewed conflict between the Ukraine and Russia has contributed to more volatility in FX markets over the past week. The shift in focus has temporarily taken the spotlight away from expectations for central policies - but for how long?
Lee Hardman, Currency Analyst, discusses what these geopolitical risks could mean for FX market performance going forward with Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA, in London.
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With inflation currently at multi-decade highs and uncertainty surrounding the inflation outlook already unprecedented, the last thing the recovering global economy needs is another leg higher in energy prices. Yet that is what it is getting.
A confluence of elusive geopolitics surrounding both the Russia-Ukraine crisis and Iranian nuclear negotiations, in conjunction with the extreme shortage of oil and gas supplies, are rattling global markets.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), takes stock of developments and offers his perspective as to why further rises in salient energy prices could fuel inflation expectations and wage pressures, with oil – and the broader bull commodities market – contributing to significant monetary tightening over the next 24 months.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves discusses the implications of the break above 2% on the 10-year Treasury and how sustainable is the move in the near-term versus longer-run for the U.S. markets and the economy. He also discusses how U.S. credit is in the cross hairs of higher rates and risk market volatility.
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JGB rates rose last week, and the Bank of Japan offered fixed-rate JGB buying operations on February 14. USDJPY downside has been firm, and JPY basis returned to its previous level after first widening. The Nikkei Average has been soft, reflecting the slump in U.S. stock prices. The firmness of USDJPY downside and USDJPY basis volatility have been impressive. Looking ahead, we expect the BoJ yield curve control operations and cross-border investment flows to be the driver of JPY asset price action.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the nuances of the BoJ’s fixed rate buying operation as well as the attributes of securities investing flows from last week’s Balance of Payment data. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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After another week of huge moves in rates markets, where does this leave FX? Shan Husain, Vice President of FI FX Sales, asks Derek Halpenny, Head of Research Global Markets EMEA and International Securities, why the US dollar has performed so poorly given another higher than expected CPI print which led to the significant move in short-end spreads, which should have been in favour of the currency.
It has fuelled speculation of the Fed moving 50bps or even hiking inter-meeting. Derek also discusses the Japanese yen implications ahead of the planned BoJ unlimited fixed-rate JGB buying next week and updates listeners on MUFG Research FX trade ideas.
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U.S.-Iranian nuclear talks are reaching a decisive point. While the incentives to strike a deal have increased for the U.S. – with oil prices now at seven year highs – the lack of direct U.S.-Iran talks, as well as unresolved key areas of disagreement, signals that the expected ramp-up in Iranian oil barrels will take time and patience.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that at best, an interim deal can be reached by the summer, permitting an additional 0.5m barrels per day of Iranian crude exports.
Listen in to this week’s podcast wherein Ehsan offers his insights as to the likely expected impact on oil prices from the potential return on Iranian crude onto global oil markets, and why a deal would not derail his structurally bullish oil conviction.
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In today’s episode, Glenn Schultz, MUFG Head of Agency Mortgage Prepayment Modeling and Strategy, discusses the regime change he has witnessed in Agency MBS prepayment during the most recent refinance wave and its implications for investors. Glenn discusses its impact on option adjusted spreads, MBS option costs, and nominal spreads, as well as the risk to his 2022 issuance outlook as a result of a higher 30-year mortgage rate.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves provides an update on what has been driving the U.S. bond market post the FOMC meeting. The hawkish pivot has gone global post the recent ECB shift and BoE hawkishness. This has resulted in a multi-sigma move in Euro rates, which are impacting U.S. rates. George takes us through a few scenarios around the Treasury auctions and the upcoming CPI report.
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An upward trend on JPY rates has taken hold, in tandem with rates in the U.S. and Europe. JPY basis has also been widening. The Nikkei Average and USDJPY have not moved as much as JPY rates or JPY basis. The JPY and USD bond markets are mutually dependent, and bond investors have been adjusting their positions more actively.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the recent sell-off in the JGB market including the impact of monetary and fiscal operations. He also shares his outlook for Dollar/Yen, Yen rate, and Yen basis.
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The BoE and ECB have followed the Fed by delivering hawkish policy updates this week, reinforcing the sharp sell-off in global bond markets. It was an important policy pivot for the ECB, who opened the door to rate hikes later this year.
Lee Hardman, Currency Analyst, discusses what this means for performance of the euro and the broader FX market implications from rising yields with Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London.
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The sheer dizziness of the oil price strength since the turn of the year has taken even the most bullish investors by surprise. The global oil markets narrative is hastily pivoting from pricing in demand recovery towards supply scarcity, corroborated by the steep backwardation in forward markets, signalling acute market tightness.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), deliberates why the simultaneous blend of depleting inventories, thinning spare capacity and structural underinvestments is leading him to fast forward his long structural supply-side side thesis. Listen in to hear Ehsan’s comprehensive analysis underpinning why MUFG’s oil price forecasts have been revised higher to now point to Brent averaging USD96/b in 2022 and USD112/b in 2023.
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While USDJPY and JPY rates have started to rise notably, upside for the Nikkei Average has been heavy and JPY basis has tightened. Monetary policy normalization will likely pick up in 2022 as the effects of the COVID-19 pandemic fade. Tokyo markets will not necessarily react as they have in the past, and changes could be substantial. This is because of structural changes to both Japanese and foreign investors JPY cross asset trading.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects the attributes of cross-currency JPY repo trading in Tokyo and discusses BoJ Monetary Policy. He also shares his views on the Dollar/Yen, Yen rate, and Yen basis.
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After another volatile week for the markets, Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, talks to Michael Owen, Head of Global Client Desk in EMEA, about the key takeaways from the FOMC meeting for the FX markets and the US dollar in particular.
Derek also discusses how other G10 central banks will follow the Fed given the RBA, the BoE and the ECB all meet next week. The RBA will end Quantitative Easing; the BoE will hike but the ECB will remain relatively more dovish keeping EUR/USD under downward pressure.
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According to media reports, deliberations between Russia, the U.S. and Europe surrounding the Ukraine crisis – which have been intensifying since last summer over a Russian military build-up near the Ukrainian border – have gone from bad to worse. There are increasing signs of posturing and escalation, rather than of progress, since the turn of the year.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises the implications of elevated Russian geopolitical tensions on global markets and offers perspectives of what could come next through scenario analysis.
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The MUFG Capital Markets Strategy Group recently published their 2022 Global Markets & Economic Outlook: Transitioning Corporate Strategy for the Post-Pandemic World. In today’s episode, Hailey Orr, MUFG Capital Markets Strategist, discusses key themes from the report including the regime change underway in the economy and markets and the remarkable level of corporate activity taking place as company strategy pivots to investing for a post-pandemic world.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves provides an update on current market volatility and concerns over broad financial conditions tightening. George takes us through the view that the movement in real rates hold the key to what happens next for financial conditions and thus markets. And lastly, George gives us a quick rundown on what to expect at the upcoming January FOMC meeting.
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Since the beginning of 2022, expectations that the Fed will accelerate its rate hikes have strengthened. It is unclear whether the BoJ and the ECB will keep pace with the Fed. However, changes in policy trends with a view to the post-COVID-19 era are almost certain. Last week, Dollar/Yen and the Nikkei Average fell as risk-averse investment flows strengthened and the JPY basis tightened, while JGB yields only fell slightly. The reaction across assets suggests that the structure of the Tokyo market is steadily changing.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects investor activity across JGBs, Nikkei stocks, and foreign bonds in December, as well as additional insights from the November U.S. TIC data. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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The current equity market correction lower in the U.S. is the biggest since October 2020, with risk-off conditions resulting in an emerging pattern of G10 performance we would expect.
Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, talks to Chris de Sibert, Head of Institutional Investors FX Sales for EMEA, about risk conditions, USD outlook and the key event next week – the FOMC meeting, with the market now seemingly much better positioned for hawkish communications.
Derek also covers EUR and the turn positive of German 10yr Bund yields, as well as current trade ideas.
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With four Federal Reserve (Fed) hikes currently priced in for 2022, investors are seeking protection. Commodities are anchored physical assets driven by demand “levels” while financial assets (equities, bonds and credit instruments) are driven by growth “rates”. This distinction matters as Fed hikes slow down the growth rate of demand (which drives anticipatory financial assets) – not demand levels (which drives spot assets like commodities) so long as the level of demand exceeds the level of supply. This creates a scarcity premium in commodity prices.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), discusses why commodities remain the best hedge during periods of rising Fed rate hikes. His examination of each of the nine Fed hiking cycles since 1972 signals that commodities have, on average, outperformed all major cross-asset classes.
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In Part 3 and the final in our podcast series for the Macro2Markets 2022 Outlook, George Goncalves, MUFG Head of U.S. Macro Strategy, interviews Bill Matthews, MUFG High Yield Credit Analyst, on his outlook for the HY Credit market in 2022. George and Bill discuss the Fed-induced financial conditions tightening among other things, where the High Yield market is not immune to any meaningful repricing of risk assets, but its lower duration footprint and strong credit fundamentals is leading it to trade, for now, towards the bottom of our forecast spread range.
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One of the early surprises in the New Year has been the USD’s failure to track US yields higher on the back of the recent hawkish shift in policy. Does this mark an important turning point for the USD?
Lee Hardman, Currency Analyst, discusses the implications for the FX market and other risks to watch out for in the week ahead with Simon Mayes, Director of MUFG’s Global Customer Marketing Group, for EMEA in London.
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2021 was a year to remember and a year to forget for emerging markets, which were hit by a series of negative supply-side shocks causing a discernible deterioration in growth-inflation mix, which elevated stagflationary pressures.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that most of the fundamental pressure points from 2021 still linger, and the path of least resistance is to stay cautious on emerging markets in 2022.
In this week’s podcast, Ehsan discusses how some all too familiar old school emerging market issues such as stagflation, fiscal overreach and geopolitical instability are back on the table.
He expects emerging market growth to likely slow as the reopening boost fades, inflation (which caused much of the tightening cycle in 2021) to peak then moderate, whilst rates will continue to rise but be driven more by fears about capital flights – given tightening global financial conditions – than inflation this year.
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In Part 2 of the Macro2Markets 2022 Outlook, George Goncalves, MUFG Head of U.S. Macro Strategy, interviews Eric Ruff, Investment Grade Credit Analyst, on his outlook for the IG Credit market in 2022. George and Eric discuss the overall credit spread outlook of the IG Index for the year, their views on focus sectors, and the resilience of the IG market in light of the risks of tighter Fed policy and financial conditions, which may lead to potential volatility ahead.
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In Part 1 of the Macro2Markets 2022 Outlook, George Goncalves, MUFG Head of U.S. Macro Strategy, interviews Glenn Schultz, MUFG Head of Agency Mortgage Prepayment Modeling and Strategy on his 2022 outlook. George and Glenn discuss the issuance outlook and dynamics of the agency MBS market, and the outlook for the overall U.S. residential housing market against the backdrop of Federal Reserve tightening and QE tapering.
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2022 is now underway. The Fed is showing a hawkish policy stance even as the Omicron COVID-19 variant surges. The BoJ made its initial offers in the new climate change countermeasure operations while also announcing to extend and scale back COVID-19 countermeasure operations around the end of the year. In December, the MoF rushed to get Cabinet approval for the FY22 budget ahead of the regular Diet session. The Nikkei Average and USDJPY have dropped in early January as JPY rates have risen, but JPY basis has stayed tight.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects the key points to follow in Japanese politics, the MoF’s plans for JGB issuance, the BoJ’s monetary operations and JPY flow of funds for the first half of 2022. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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We’ve had quite a start to 2022 with a spike in U.S. yields after another hawkish shift from the Federal Reserve.
Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, provides his thoughts on the near-term outlook following the U.S. jobs report and the FOMC minutes.
MUFG has also released its Annual Outlook report and Derek talks through some of the key forecasts for the year ahead.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves briefly goes over his recently published 2022 Macro2Markets outlook report, where he provides the topics covered in the report and goes into his macro framework for the year ahead. On the more tactical side, George also gives us his latest list of factors that he will be watching for in the early days of 2022.
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After the best annual performance in 20 years – principally driven by energy markets – commodities should moderate in 2022, as a confluence of higher supply, fading fiscal stimulus and broader monetary policy tightening will weigh on prices, and with it, ease inflationary pressures.
This is according to Ehsan Khoman, Head of Emerging Markets Research (EMEA), who in this week’s podcast contextualises prospects for commodities next year.
Longer-term, he expects continued structural underinvestment in energy – which has been prevalent since the 2008-09 Great Financial Crisis (GFC) as ESG forces have gained traction – to cause commodity prices to significantly overshoot to the upside, in order to provide the incentive for large-scale green infrastructure to be met, propelling "greenflation" higher.
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The decades-old reliance on oil and gas alongside the dominance of GCC governments and related entities have led to overdependence on energy prices, an underdeveloped private sector and low productivity growth. However, there is increasing evidence that the “this time is different” mantra is bearing fruit.
Encouragingly, the vigour of GCC authorities to realise National Vision strategies to structurally transform their economies away from the cyclical reliance of oil and gas is gaining traction. Granted, diversification will require patience given the scale and magnitude of the transformation programmes at hand, but what is clear is that the longstanding impediments to investment and productivity are progressively being reversed.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), provides insights into the current assessment and prospects of the GCC region in 2022, taking stock of COVID-19 developments, energy transition progress and ESG considerations.
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The end of the year is at hand. USDJPY upside has been heavy since the Omicron COVID-19 variant emerged. Overseas investors have been building up their medium- to long-term JPY bond positions, and JPY basis has been tightening. With investors awaiting the release of Japan’s FY22 budget and JGB issuance plans, JPY rates have been flat.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido dissects the results of the BoJ’s December meeting as well as Japan stock, JGB, and foreign bond flows in November, while looking ahead to Japanese investors’ U.S. bond flows in 2022, based on USTIC and BoP data. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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The BoE, ECB and Fed have all provided hawkish policy updates over past week. It has been clear that combating upside risks to inflation has become the most immediate policy concern, especially for the BoE and Fed. In contrast, the BoJ understandably continues to sound more relaxed over inflation risks.
Lee Hardman, Currency Analyst, discusses the implications for the FX market and remaining risks to watch out for over the holiday period with Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London.
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Nobody thought it would be easy, but it is hard to imagine 2021 ending up so challenging for Emerging Markets, with stagflation trepidation – portmanteau of slowing growth and rising inflation – top of mind for the best part of the year.
Risk sentiment has been on a rollercoaster ride for months, faced with a myriad of challenges such as continued COVID-19 headwinds, downside growth risks, rising inflation and inflation volatility, a less supportive global liquidity backdrop, the tapering of asset purchases by developed market central banks, a lower gear in China, a resurgent US dollar, inexorably elevated commodity prices and a leg up in core bond yields.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), takes stock of the performance of Emerging Markets throughout 2021, and underscores the key themes that led investors to increasingly trim their expectations for emerging market throughout the best part of this year.
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In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves provides his view on the upcoming and last FOMC meeting of 2021. As our title suggests, the Fed could be heading into a Catch-22 in 2022, where the challenge now is that financial conditions and market sentiment linked to it are so intertwined with the Fed’s balance-sheet. Thus as the Fed tapers faster and pulls forward hikes in 2022, the give and take between rates and financial conditions more broadly will likely dictate how far and how high the Fed can lift rates before materially impacting markets to the downside.
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Global stock markets and USDJPY turned volatile with the discovery of the Omicron COVID-19 variant, but markets then quickly recovered and volatility has fallen. JPY rates did not drop markedly, but JPY basis has tightened. Overseas investors have been arbitraged JPY basis as Japanese investors have been actively rebalancing their asset portfolios. Will the Bank of Japan make changes to its COVID-19 countermeasure operations as the U.S. accelerates monetary tapering?
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the December BoJ Tankan survey, the upcoming BoJ December meeting, and first half fiscal year 2021 life insurance company earnings. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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The week ahead – the final full week of trading for many markets – will be packed with Central Bank meetings. There will be no fewer than six G10 Central Bank announcements and seven amongst Emerging Markets Central Banks.
Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, hones in on a few of the key announcements with Michael Owen, MUFG’s Head of Global Client desk in London.
What does Friday’s US CPI print mean for the Fed, the expectations of QE tapering being quickened and for the dollar more broadly especially when compared to policy announcements from the ECB and BoE? Listen now to find out.
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In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), offers insights into MUFG’s oil market outlook for 2022. His central thesis is one wherein oil prices are set to moderate next year, driven by a pivot in the prevailing market deficit towards a surplus, albeit with elevated volatility given a confluence of risk factors.
Critically, he perceives the market balances looking tighter going into the last quarter, and with it holds conviction that Brent crude will find its way back into the USD 80s/b by year-end – this is centred not just on a cyclical rotation back into a deficit but anchored on our broader thesis that oil markets remain structurally underinvested as the forces of ESG gain traction.
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The emergence of the Omicron COVID-19 variant has upended JPY market pricing. USD has been sold against JPY, Nikkei selling has picked up speed, JPY rates have gone from flat to downward, and JPY basis has tightened. But investors are still seeking arbitrage opportunities for their spare funds.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the 2021 year in review and his outlook for 2022, as well as near-term monetary supply and fiscal fund supply and demand dynamics. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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FX volatility has continued to pick up over the past week as market participants await further clarity over the potential impact on the global economy from the new COVID variant. The uncertainty should make DM central banks more cautious over tightening policy in the near-term. However, the Fed has signalled that it plans to speed up tightening at their next FOMC meeting.
Lee Hardman, Currency Analyst, discusses the implications for the FX market with Martin Viohl, Director of MUFG’s Global Customer Marketing Group for EMEA in London.
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In November, oil prices suffered their worst monthly decline since March 2020, with markets under renewed pressure over the impact of the Omicron variant of COVID-19. This came at a time where markets were already apprehensive about the scale of the globally coordinated strategic petroleum reserves (SPR) release to combat energy price inflation.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), takes stock of the developments and offers insights on what oil markets can expect for the remaining trading days of 2021.
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Risk related to the new Omicron COVID-19 variant from South Africa roiled Tokyo markets at the end of last week. On November 26, the Kishida Administration announced slight revisions to the JGB issuance plans to meet additional economic support measures. New JGB issuances will be limited, compared to the scale of the budget. Market conditions have been transformed in the space of just a few days.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the revisions to the FY21 JGB issuance plans and implications for JPY rates as well as cross-border flow information from recently released September TIC data. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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The massive risk-off move in the financial markets today could have meaningful global repercussions for investors. This week, Derek Halpenny, Head of Research for Global Markets and International Securities, discusses the implications of the latest upturn in COVID risks with Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London.
Can the surge of the yen continue, and what does FX positioning and monetary policy expectations tell us about possible FX moves ahead? Listen to find out.
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Despite being the most anticipated climate event since the Paris Agreement in 2015, in the end discussions at COP26 took place against a backdrop of concerns regarding security of energy supply and high prices that threatened to derail a global recovery from the worst economic shock in a generation.
Energy crises often need short-term (6-12 months) fixes that can be contrary to longer-term climate targets, and whilst change was never going to happen over a fortnight, the pre-occupation of global energy markets with resurging demand and security of supply concerns made COP26 somewhat of a side show.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), offers perspectives on what the outlook for energy markets post COP26 looks like and believes that whilst the energy transition train will march on, COP26 highlighted that the split between emerging markets and developed markets split in tackling climate change is as wide as ever.
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A key piece of uncertainty has been addressed with the nomination of Chair Powell to run the Fed for another four more years, while Fed Governor Brainard was also nominated to the vice chair role. Meanwhile, last week the U.S. House passed their version of the Build Back Better Stimulus plan, but with the U.S. Thanksgiving holiday ahead, we don’t believe the bill is close to being finalized in the Senate.
However in Japan, the Kishida administration announced additional economic stimulus measures on November 19, with fiscal spending of JPY55.7 trillion. JPY basis has been widening and USDJPY spot rates and the Nikkei stock indexes have been firm. The U.S. rates markets have had another decidedly shift upwards as markets interpret the Fed nomination selection as a more hawkish outcome.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido and MUFG Head of U.S. Macro Strategy George Goncalves discuss how these developments are impacting their views in their respective markets and what to expect ahead.
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Market participants are becoming more fearful of downside risks to growth in Europe. The latest COVID wave has already prompted policymakers to re-tighten restrictions. It joins the energy price shock, geopolitical tensions with Russia and the developing currency crisis in Turkey on the list of worries for European investors. In contrast, the US economy has regained upward momentum and the Fed’s communication is turning more hawkish.
Lee Hardman, Currency Analyst, and Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, discuss the market implications of last week's events, adding a long USD/CZK trade idea to reflect these risks.
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As we near the end of 2021, the emerging market growth outlook appears more challenging and also more heterogeneous than at the outset of the year. Monetary and fiscal policy have played a pivotal role in supporting growth since the onset of the pandemic, but as policy is tightened, these tailwinds are turning into headwinds. Inflation has been driven sharply higher across many economies by a confluence mix of higher commodity prices (energy and food), base effects, re-opening reverberations and fast-recovering developed markets demand.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), offers perspectives on what to expect for emerging markets over the remaining weeks of this year with all-too-familiar issues such as inflation, fiscal overreach and political instability increasingly entrenched on investors’ minds.
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In today's episode, MUFG Head of U.S. Macro Strategy George Goncalves recaps what has amounted to one of the most interesting years in the bond markets. He also reminds us that the year is not over, and there are more key fiscal, Fed, and economic events ahead that could still result in even more interesting twists and turns in markets.
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In today’s episode, Tobi Petrocelli, MUFG Head of Environmental and Sustainability Management and Hailey Orr, MUFG Capital Markets Strategist discuss several key outcomes from COP26, the importance of the Glasgow Climate Pact, and how agreements and negotiations stacked up against expectations going into the conference.
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Another shock inflation print in the U.S. this week will likely have consequences for the FX markets going forward. This week Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, discusses this and other FX themes in focus with Chris de Sibert, Head of Institutional Investors FX Sales for EMEA.
What are the implications for the USD as US yields drift higher and what are the consequences for the pound with increasing speculation that the UK government could be about to trigger Article 16 under the Northern Ireland Protocol?
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In today’s episode, Glenn Schultz, MUFG Head of Agency Mortgage Prepayment Modeling and Strategy, discusses the upcoming baseline loan limit increase and its potential impacts on the market. He also reviews in detail the expanded-data home price index and the standard home price index and how they behave versus each other.
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The COP26 climate summit in Glasgow has made real progress – announcing new and unexpected net-zero pledges, a commitment to reduce methane emissions and moves to squeeze fossil fuel funding and end deforestation. The finer points, however, such as the rules for a global carbon market, the format for countries to report their emissions and the level of climate-related financial assistance provided by developed to emerging markets, remain unresolved.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), offers perspectives on the first take of COP26 deliberations that draw to a close on 12 November and what to make of thorny questions of enforcement surrounding non-legally binding COP26 pledges until countries meet in November 2022 at COP27.
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Yields of G10 sovereign bonds, especially U.S. Treasury and JGB yields, declined in early November, following the policy meetings by the FOMC, the Reserve Bank of Australia, and the Bank of England. And the rally in spot Dollar/Yen has stalled coincidently with the Yen rallying against other currencies. Yen basis has been particularly volatile but has come off the wides.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido summarizes TDB and JGB issuance prospects for November, JPY basis moves, and Japanese pensions investment results. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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Last week was a busy week for central bank policy updates, with the Bank of England delivering the biggest market surprise by leaving rates unchanged after recent hawkish policy signals. The Fed meeting was less eventful; good communication from the Fed has prevented another taper tantrum as it outlined plans to start tapering Quantitative Easing. The USD has benefitted from the scaling back of rate-hike expectations outside of the US and is set to record fresh year to date highs in the week ahead.
Lee Hardman, Currency Analyst, and Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, discuss the market implications of last week's events, adding a short GBP/CHF trade idea to reflect heightened downside risks for the GBP from rising inflation expectations and Brexit tensions.
Listen to the podcast for more insights.
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The first week of the 26th Conference of Parties (COP26) is now history. With heads of state now exiting Glasgow, the hard and delicate slog of negotiating is officially underway. While COP26 certainly made headlines since kicking off on 31 October, there have been few true legitimate surprises, with most previous climate pledges being reiterated during the event without material visibility on the timelines for transitioning towards a renewables-led future.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), summarises the highs and lows of the first week at COP26 in terms of energy pledges, assesses the long list of thorny issues confronting negotiators, and contextualises how deals made at COP26 will have repercussions for financial markets and corporates across all sectors of the global economy.
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In today's episode, MUFG Head of U.S. Macro Strategy George Goncalves takes us back and compares Taper 1.0 and how Taper 2.0 will differ slightly given the urgency to wrap up QE before the Fed begins to contemplate raising rates in 2022 and beyond. George gives us a glimpse into his latest thoughts covered in his FOMC preview and discusses the interest rate outlook into and out of the Fed meeting.
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The ruling coalition retained a simple majority of seats, the threshold for victory, and stanched its losses in Lower House elections. Prime Minister Fumio Kishida will stay in office. The Nikkei Average has reacted by surging, ahead of USDJPY and JPY rates. Risk appetite is strong, and investors will be watching the extraordinary Diet session this month as well as the specifics of economic policies, especially in regard to additional economic measures and the extraordinary Diet session.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido summarizes the outcome of the Lower House elections. He then discusses the Bank of Japan’s October meeting and Japanese life insurance companies’ second half asset management strategies. He also shares his views on spot Dollar/Yen, Yen rate, and Yen basis.
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Next week will be a busy one with a number of key central bank meetings starting with the RBA on Tuesday, followed by the FOMC on Wednesday and the BoE on Thursday. Central banks are struggling to convince the markets that the post-COVID inflation surge will be transitory. Will we see changes in monetary stances confirmed this week?
Derek Halpenny, Head of Research, Global Markets EMEA and International Securities, and Michael Owen, MUFG’s Head of Global Client desk discuss the prospects for some change in policy stances and the implications for the FX markets going forward.
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The inexorable march higher in oil has some speculative traders betting on the options market that prices could hit USD100/b by the end of 2021. A core driver of surging oil prices over recent months is not that the market is cyclically tight, but critically structurally underinvested. Energy transition and ESG considerations after oil’s golden era between 2010-14 have capped capital expenditures, leaving inadequate production capacity to meet today’s vaccine-led demand recovery.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), elaborates on the precise factors that could lead to oil markets reaching USD100/b, which he believes is an increasingly likely phenomenon given markets have pivoted from pricing demand recovery to now pricing in a supply scarcity premium.
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Byelections were held for Upper House seats in Shizuoka and Yamaguchi prefectures on October 24. The LDP won one and lost one, so the ruling coalition lost one of the two seats that were up for election. Tokyo markets are now awaiting the results of the October 31 Lower House election.
In today's episode, MUFG Chief Japan Strategist Takahiro Sekido previews the October BoJ monetary policy meeting and general elections in addition to reviewing the August USTIC and September JSDA flow data. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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It has been a bad week for the USD. Lee Hardman, Currency Analyst, and Michael Owen, MUFG’s Head of Global Client desk for EMEA in London, discuss what has been driving the USD weaker and what to expect from the BoC and ECB at next week’s policy meetings.
Will the BoC and ECB push back against rate hike expectations? Listen to the podcast for more insights.
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The parabolic acceleration in commodity prices, as well as the broadening and deepening monetary policy normalisation, are the two core macro developments currently confronting emerging markets.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), discusses the exposure of emerging markets to higher commodity prices as well as rising interest rates, and offers his insights as to which economies are best placed to gain, to lose and muddle through over the near to medium-term.
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In today’s episode, Hailey Orr, MUFG Capital Markets Strategist, and Tobi Petrocelli, MUFG Head of Environmental and Sustainability Management, discuss recent ESG developments and expectations for mandatory disclosure standards in the U.S. and implications for U.S. companies and their banking partners.
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In today’s episode, Head of U.S. Macro Strategy George Goncalves reviews his latest piece from the Global Markets Monthly as well as discusses the latest developments on the yield curve and short-term interest rate markets.
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So far in October, the number of daily new COVID-19 infections has declined, and on October 14, Prime Minister Fumio Kishida dissolved the Lower House. Campaigning has begun ahead of the General Election on October 31. Both the ruling and opposition parties promise subsidies and tax cuts. JPY rates are trending upward, and Japanese investors are causing JPY basis to widen. USDJPY has risen, pushed upward primarily by rising oil prices.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses September and October securities investing flows in the wake of the Lower House dissolution and ahead of the general elections. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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The market shifted back from stagflation towards reflation this week and saw strong performances from AUD, NZD, NOK and CAD but how does this impact the USD? And what’s happening with the JPY and TRY?
Lee Hardman, Currency Analyst, discusses the past week with Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London and gives his outlook for the week ahead, watching in particular for key data releases from China.
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In this episode, Glenn Schultz, MUFG Head of Agency Mortgage Prepayment Modeling and Strategy, discusses pending and existing home sales and how this gives us a glimpse into prepayment speeds. He also goes over what is driving the turnover rate higher than model assumptions.
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The growth-inflation nexus is deteriorating precipitously for emerging markets. Risk sentiment across EMs has been on a rollercoaster ride for months, faced with a myriad of challenges such as continued COVID-19 headwinds and variants, downside growth risks, rising inflation and inflation volatility, a less supportive global liquidity backdrop, the looming tapering of asset purchases by developed market central banks, regulatory tightening in China, a resurgent US dollar, a spike in energy prices and a leg up in core bond yields.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that the fear of stagflation – portmanteau of slowing growth and rising inflation – will increasingly move front of mind for emerging market investors, with volatility likely staying elevated until year-end.
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In today's episode, MUFG Head of U.S. Macro Strategy George Goncalves gives us a brief update on the various factors that have been driving up rates over the last 2 weeks and how the narrative on inflation, episodic or not, is now also leading to some twisting of the yield curves, too.
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On the back of weaker-than-expected U.S. payrolls this week, can we expect the Fed to announce the start of tapering in November asks Derek Halpenny, Head of Research Global Markets EMEA and International Securities, in conversation with Michael Owen, MUFG’s Head of Global Client desk for EMEA in London. What does today’s data mean for the US dollar going forward?
Looking ahead, Derek also gives his outlook for the ECB Conference on Monetary Policy and updates listeners on MUFG Research trade ideas.
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The renewed acceleration in energy prices, combined with spillovers into higher food prices, is forcing markets to re-evaluate their EM inflation and rates expectations.
With fundamentals pointing to a bullish Q4 ahead for global commodity prices, alongside historical lessons from previous hiking cycles, Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that EM central banks will stay hawkishly inclined in the face of non-core inflationary pressures, especially given the high commodity-intensity of EM consumer baskets.
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An extraordinary session of the Diet opens. USDJPY upside has been heavy and JGB rates have moved little after rising, while the Nikkei Average has largely retraced its surge following the announcement of previous Prime Minister Suga stepping down. A number of political events lie ahead this fall, and JPY assets will likely be volatile.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the LDP leadership election, fiscal and monetary policy triggers, the September Tankan survey, and cross-border flows. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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Since the onset of the COVID crisis 18 months ago, the Fed has doubled its balance sheet from $4 to $8 trillion, and Congress has passed $6.2 trillion of fiscal stimulus (with another $2-3 trillion likely in the weeks ahead). This, in turn, has contributed to an acceleration of the recovery cycle accompanied by significant supply-demand imbalances across the economy.
In today’s episode, Tom Joyce, MUFG Head of Capital Markets Strategy, discusses his latest views on the economic / markets / and policy outlook and expectations into year-end 2021 and beyond.
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With the Dollar index breaking above the previous yearly highs and the Pound underperforming among its G10 peers, this week has proved to be one to watch for investors.
On the podcast, Lee Hardman, Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London, Lee Hardman, Currency Analyst, and Simon Mayes, Director of MUFG’s Global Customer Marketing Group for EMEA in London,
Listen to the podcast for more insights.
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Notwithstanding the stagflationary winds blowing through the global economy, the looming Fed taper, COVID-19 Delta variant risks, oil markets, and broader commodities, have continued to march higher over recent weeks, with Brent oil prices reaching new three year highs just north of USD80/b.
With pandemic inventory buffers exhausted, Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that supply shortages that spur such high price shocks will be negated by demand elastic destruction as the only option to rebalance oil markets (that is, the cure for high prices is high prices – a self-correcting mechanism). Ehsan contextualises the latest prospects in oil markets and runs through MUFG’s new oil price forecasts for the remaining months of this year and into 2022.
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Although the situation remains very fluid, it looks like the markets are starting to get concerned over the U.S. Debt Ceiling again. In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves is joined by Anthony Tarabocchia, Head of the Repo Desk for MUFG to discuss market implications of a drawn out debt ceiling extension and potential scenarios.
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The end of H1 FY21 is at hand. USDJPY, JPY rates, and Japan stocks are up since the FOMC’s September meeting. U.S. short-term rates have trended downward, and the front end of the JPY basis curve has tightened. Japanese politicians are focusing on preparing for the Lower House elections.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido discusses the BoJ’s September monetary policy meeting, including the BoJ’s view of risks to supply chain restrictions and China, as well as potential near term market triggers. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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This week, the UK is reckoning with a myriad of challenges; fuel supply issues, 1.5 million workers set to see the end of the government furlough scheme and consumer confidence falling sharply.
Michael Owen, MUFG’s Head of Global Clients for EMEA, joins Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, to discuss how the macro environment backdrop will impact GBP and the market reaction following the German election outcome.
Listen to the podcast for more insights.
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Global gas prices have surged driven by a myriad of events that have all added up – LNG supply outages; steep declines in European gas production; below average renewable power output; and lower-than-expected Russian exports to Western Europe.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), believes that a severe tightening in global gas supplies presents a unique and acute bullish impulse for oil as a widening deficit depletes inventories and sees markets struggling to find a balance. Whilst he maintains his conviction for a bearish oil price profile along the curve for now (year-end Brent forecast is USD64/b), he acknowledges that the knock-on effects of the global gas crunch may lead to an even tighter physical oil market, with a conceivable transitory price spike north of USD85/b in Q4 2021.
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The bond markets have been in one of the tightest ranges in recent history, meanwhile volatility is starting to pick up as markets respond to global events and policy challenges in the U.S. In today’s episode, MUFG Head of U.S. Macro Strategy George Goncalves shares his views on how all this might impact the U.S. bond markets and what to expect at the upcoming FOMC meeting.
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Four candidates, including new entrant and former internal affairs minister Seiko Noda, have declared their intent of running for the LDP leadership. The various factions have been stoking a melee, rather than coalescing around a single candidate. Investors are wary that USDJPY, the Nikkei Average, and JPY rates could come under downward pressure ahead of the September FOMC and Bank of Japan policy meetings both scheduled for September 21-22, as risks related to COVID-19 variants fester. Meanwhile, JPY basis is also less likely to widen this week.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido examines cross-border investment activity in July and discusses the BoJ’s financial stability report. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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Looking ahead to a busy week, Lee Hardman, currency analyst, is joined by Simon Mayes, Director of MUFG's Global Customer Marketing Group for EMEA, to discuss the key events to watch for.
The Federal Open Market Committee (FOMC) meets on Wednesday and Lee outlines what impact could be seen to USD as the markets anticipate an indication of when to expect the first rate hike in 2022.
Across the pond, Canada will be voting in their Federal Election. Lee shares his insights on the impact on the Canadian dollar if Prime Minister Trudeau is re-elected and what the markets can expect for a second term Trudeau minority government.
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Emerging market investors remain fixated on the US Federal Reserve’s 21-22 September FOMC meeting for details on the start date, pace and duration in tapering of its monthly USD120bn (USD80bn Treasury securities and USD40bn agency securities) asset purchases.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), contextualises what’s in store for emerging markets as they navigate the trajectory of the Fed’s tapering strategy, which he believes will have explicit implications on the pace of global liquidity growth, and in-turn emerging market fund flows.
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Prime Minister Suga announced that he will not run for re-election as leader of Japan’s Liberal Democratic Party. This suggests that investors would be wise to watch the finer points of the candidates’ policy debates for potential triggers for financial markets. USDJPY, JGB, and JPY basis have all stayed within range of late, but over the near term, any changes in government policy could tighten the correlation to a bullish Nikkei Average.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido examines implications for monetary and fiscal policy as they pertain to JGB and JPY basis. He also shares his views on the Dollar/Yen, Yen rates, and Yen basis.
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This week, Derek Halpenny, Head of Research for Global Markets EMEA and International Securities, speaks to Michael Owen, Head of Global Client desk for EMEA, about the financial market themes going forward. It has been a fragile start to the week, with concern about global growth implications as inflation figures continue to sound alarm bells. Key CPI data releases over the coming week will be vital, with a strong focus on how these will be interpreted by investors.
Michael also poses the question about how politics could drive the market. Norway has a general election today, and with upcoming elections in Germany and Japan, what could the FX implications be? Listen now for Derek’s analysis.
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After a severe downgrade cycle triggered by the pandemic, recent credit rating developments have been more mixed across emerging markets, with upgrades in parts of Africa, further downgrades in Asia and Latin America, whilst most of the MENA region has been left unchanged.
In this week’s podcast, Ehsan Khoman, Head of Emerging Markets Research (EMEA), takes stock of the year-to-date credit rating developments in emerging markets. Importantly, he also flags countries where credit rating developments could turn positive due to relatively strong fundamentals, as well as countries which are at risk of further downgrades due to the delta variant and delayed reopenings, as markets begin to form new contours of normality towards a post-virus equilibrium.
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Both the U.S. and Japanese administrations have seen their ratings drop recently. In Japan, Japanese Prime Minister Yoshihide Suga has announced he will not run for re-election in his party’s 2021 leadership race. Nikkei stocks and JPY rates have been rising in hopes for the next administration. Whereas fiscal policy implementation is the U.S. still faces risks given the tension down in D.C. Meanwhile U.S. rates as well as the USDJPY basis movements could change, as related to these cross-border developments and the Fed’s monetary policy stance at the September FOMC meeting.
In today’s episode, MUFG Chief Japan Strategist Takahiro Sekido and Head of U.S. Macro Strategy George Goncalves share their views on the U.S. and JPY bond markets, the Fed’s policy stance, and Japanese political and fiscal risks (as well as the U.S. debt ceiling) from a cross-border New York and Tokyo markets perspective.
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In this episode, Glenn Schultz, MUFG Head of Agency Mortgage Prepayment Modeling and Strategy, discusses home price appreciation and whether we are in a housing bubble. He also explains the framework for his analysis as well as the anatomy of a bubble.
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The US dollar has continued to weaken following the Jackson Hole symposium and softer NFP report, but the key events in the week ahead Lee Hardman, currency analyst, thinks will have the most impact on the markets will come from outside the U.S.
Lee shares his thoughts on the upcoming European Central Bank policy meeting, which he believes will be important for EUR performance. Meanwhile, the surprise announcement from Prime Minister Suga in Japan to not seek re-election has opened the door for a new leader. But will a new leader alter the outlook for the yen?
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Push-and-pull factors have led oil prices to oscillate wildly this quarter. A confluence of (i) the unravelling of the reflation trade; (ii) COVID-19 Delta variant apprehensions in some geographies; (iii) vaccine optimism with reopenings continuing apace; (iv) mixed economic data out of major economies; (v) a gyrating US dollar; (vi) revolving investor positioning; and (vii) somewhat heightened geopolitical risk premia, have all played a part, with hesitancy to push the oil market in either direction.
Ehsan Khoman, Head of Emerging Markets Research (EMEA), discusses in this week’s podcast why the balancing of cyclical demand headwinds with structural supply tailwinds, leads him to remain bearish on oil prices going forward.
Under the weight of higher OPEC+ output, steadily rising shale, the eventual return of Iranian supply, juxtaposed with a more normalised demand profile, he leans short oil further out along the curve.
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