Connect with us

Spread & Containment

Are the Technicals Anticipating a Soft US GDP Report? Could it be a “Sell the Rumor buy the Fact?”

Rising yields and record highs in the S&P 500 and NASDAQ failed to lift the dollar.  Indeed, the greenback fell against all the major currencies, even the Japanese yen, against which it had reached new four-year highs (~JPY114.70) before pulling…

Published

on

Rising yields and record highs in the S&P 500 and NASDAQ failed to lift the dollar.  Indeed, the greenback fell against all the major currencies, even the Japanese yen, against which it had reached new four-year highs (~JPY114.70) before pulling back.  On the other hand, the Antipodean currencies and the Norwegian krone continued to lead the move against the US dollar. The Aussie rose to new three-month highs, while the Kiwi, Nokkie, and Canadian dollar saw four-month highs.  

Emerging market currencies were more mixed than the majors.  At the end of the week, Russia's larger than expected 75 bp rate hike helped lift the rouble, the best emerging market currency, last week. It reached a 15-month high ahead of the weekend.  The Chinese yuan reached its best level in five months last week.  

On the other hand, the Turkish lira and Brazilian real came under intense selling pressure.  Turkey's central bank showed little concern about the lira's exchange rate when it delivered a larger-than-expected 200 bp cut in the one-week repo rate.  At 16%, it stands below the headline and core inflation rates (19.58% and 16.98%, respectively in September.  The lira lost 3.7% last week and fell to a record low.  The lira dropped by 25% in 2020 and is off another 22.6% this year.  Political and economic turmoil in Brazil gave Turkey a run for its money.  The Brazilian real fell 3.3% last week, which almost doubled its depreciation this year to 8.00%. President Bolsonaro has lost the confidence of investors and local businesses.  Brazil may report that inflation stabilized (above 10%) in October, ahead of the central bank meeting, which is widely expected to lift the Selic rate 100 bp to 7.25%.  It would be the third such move this year after beginning the cycle with three 75 bp increases.  

Dollar Index:  The high for the year was set on October 12, near 94.55. It pulled back to around 93.50 early last week before consolidating. It met the (38.2%) retracement objective of the leg up that began in early September and came in about 93.55. The next important chart area is the 93.00-93.25.  The momentum indicators are still headed lower, but prices have stabilized. A close back above 94.00 would suggest that minor correction is over.  The Dollar Index settled at the end of last month slightly below 94.25.  If it does not recapture this by the end of next week, it will post the first monthly loss since July.  The dollar's losses may reflect some position adjustment ahead of a soft GDP report. However, the market could be vulnerable to a "sell the rumor buy the fact" as the market quickly turns its attention to the November 3 FOMC meeting and the start of tapering.  

Euro: Although the single currency held above $1.16 since testing the $1.1570 area on October 18, the upside was limited to the $1.1670 area approached on October 19. Indeed, it has been confined to Tuesday's range (~$1.1610-$1.1670) and traded in about a third of a cent range ahead of the weekend.  The momentum indicators are pointing higher.  Yet, the market lacks energy even though the five-day moving average cross above the 20-day moving average for the first time since mid-September.  The US 2-year premium over Germany rose for the sixth consecutive week and around 110 bp, it is the most since March 2020.  It was closer to 200 bp before the pandemic.  The ECB meets next week, but important decisions are not expected until the December meeting.  The EMU reports Q3 GDP, and it is expected to have grown around 2% quarter-over-quarter.  Lastly, rising energy prices and a weaker euro suggest that the preliminary October CPI risk is on the upside.  

Japanese Yen:  After rising to a four-year high around JPY114.70, the dollar appears to have entered a consolidation phase. It pulled back to about JPY113.40 ahead of the weekend.    The weak close sets up a test on the JPY113.25 support area and then JPY112.75.  We note that US yields remain firm, but the dollar-yen rate has become a bit less sensitive to it (the correlation has softened).  The dollar's four-week ascent against the yen ended last week with a roughly 0.65% pullback, which tested the trendline off drawn from the lows before last month's FOMC meeting.  We have suggested that at least initially, the JPY114.50-JPY115.00 may mark the upper end of a new range for the dollar.  If that holds, the market may have to fish for the lower end of the range, and perhaps it may be encouraged by a rally in US Treasuries either ahead of or in response to the Q3 GDP estimate, for which the Atlanta Fed's tracker sees at 0.5% annualized. 

British Pound: Sterling was practically flat last week despite the seventh consecutive weekly increase in the implied yield of the December 2021 short-sterling interest rate futures contract.  The implied yield rose 10 bp to about 46 bp. In early September, before the surge in rates began, it was at 0.11%.  Even at the end of the week, BOE officials (chief economist Pill) were still goading the market by saying a hike in November was "fairly balanced."   Sterling's rally, which began the month near $1.34, stalled around $1.3835 last week (fraying the upper Bollinger Band), just in front of the 200-day moving average (~$1.3850).  This area also corresponds to the (50%) retracement of the sell-off since the May high ($1.4200).  Momentum indicators are getting stretched but have not begun leveling off.  Support is seen in the $1.3675-$1.3700 area.  

Canadian Dollar:  The Canadian dollar rose for the fifth consecutive week, albeit barely,  and reached levels not seen since June.  The market is aggressive in pricing in a hike several months before the Bank of Canada anticipated the output gap to be closed.  The implied yield of the March 2022 BA futures rose 11.5 bp, marginally exceeding the increase of the previous two weeks.  At 0.795%, it is 23 bp on top of the December 2021 contract yield.  The Bank of Canada meets next week and may subtly push against speculation of an early hike.   After falling slightly below CAD1.2290, the US dollar reversed higher but again encountered selling pressure near CAD1.2385. Both the MACD and Slow Stochastic appear to have leveled off in oversold territory. However, it probably requires a move above CAD1.2400-CAD1.2425 to suggest a corrective phase as opposed to consolidation.

Australian Dollar:  The Aussie rose 0.6% last week, its third weekly advance.  The move extended its gains to 3.3% this month.  It settled last month around $0.7225.  It is not just against the US dollar; speculative participants have driven the Aussie up on the crosses, including the yen and euro. The $0.7500 area corresponds to the (50%) retracement objective of the slide from early May that began by $0.7900 and bottomed in late August close to $0.7100.  The next (61.8%) retracement is found just shy of $0.7600, but before that, the 200-day moving average (~$0.7565) must be overcome.  The momentum indicators are stretched, and the Slow Stochastic has already begun curling over.  The Aussie finished last week below its five-day moving average for the first time this month.  Initial support is seen around $0.7450, and a break signals a move to $0.7400.  If that goes, there is room for another cent pullback.  

Mexican Peso:  The peso extended the previous week's gains that had halted a four-week slide. Indeed, the peso's nearly 0.75% gain last week put it near the best performers in the emerging market universe.  Anticipation of more aggressive rate hikes, even before the bi-weekly CPI, reported before the weekend, accelerated more than forecast. The peso may have also benefited from a rebalancing of portfolios away from Brazil, where neither the political nor economic environment is favorable.  The sell-off in bonds, stocks, and currency gives the sense that foreign investors are joining domestic investors in abandoning President Bolsonaro.  The Brazilian real managed to fall nearly as much as the Turkish lira (~3.3% vs. 3.6%). Before the weekend, the US dollar recorded a new low for the month (MXN20.1250) ahead of support seen near MXN20.10. A break sets up for a test on more important support around MXN20.00.   The MACD and Slow Stochastic reflect the strong downside momentum.  The latter has begun entering oversold territory.  Mexico reports September trade, employment, and Q3 GDP next week.  Growth is expected to have shifted lower to around 0.5% from 1.1% and 1.5% in Q1 and Q2, respectively. 

China:   If we begin by acknowledging that the yuan is closely managed and observe that it has risen four consecutive weeks to levels not seen since June, it seems reasonable to conclude that officials desired some yuan strength.  And that strength should be kept in perspective.  It is a little less than 1% this month. Still, the 0.8% gain last week was more than the cumulative gains of the previous three weeks and was the biggest advance since the last week of May when the dollar's three-year low (~CNY6.3570).  The dollar finished last week near CNY6.3835.   Some speculate that Beijing's efforts to secure energy supplies and dampen commodity prices are consistent with a stronger currency.  However, the volatility of commodities overwhelms the exchange rate volatility that PBOC officials tolerate.  Also, the exchange rate is a blunt instrument, creating unintended consequences.  Some demand for the yuan may have stemmed from the dollar bond issuance last week (four tranches for $4 bln).  The momentum studies on the offshore yuan are stretched.  


Disclaimer


Read More

Continue Reading

Government

European outbreak of monkeypox: what you need to know

There are some concerns of human-to-human transmission.

Published

on

By

Four new cases of monkeypox have been reported in the UK, bringing the total number of confirmed cases to seven. The UK Health Security Agency (UKHSA) is urgently looking for the source of the outbreak.

The first case in the current outbreak was confirmed on May 6. But this is not the first time monkeypox has been reported in the UK. Three cases were also reported in 2021 and one in 2018. However, these infections are rarely seen in the UK and are overwhelmingly linked to international travel from endemic areas, including parts of west and central Africa.

On May 18 five cases of monkeypox were reported in Portugal, with investigations into 20 further suspected cases. On the same day, the Spanish health authorities reported eight suspected cases in men who have sex with men.

This is the largest monkeypox outbreak ever seen in Europe. It is not known if the cases are linked.

Misnomer

Monkeypox, as the name suggests, was first found in laboratory monkeys in the late 1950s. However, scientists aren’t sure if monkeys are the main animal reservoirs (carriers of the virus), so the name may be a bit of a misnomer. The latest thinking is that the main reservoir is probably smaller animals, such as rodents.

Reservoirs of monkeypox have been found in rodents, such as the Gambian pouched rat. Laëtitia Dudous/Wikimedia Commons, CC BY-SA

Unlike COVID, monkeypox does not spread easily from human to human. It typically requires interaction with animals that carry the virus, or being in very close contact with infected people, or having contact with “fomites” (such as contaminated clothes, towels or furniture). Also unlike COVID, monkeypox is not known to spread asymptomatically. However, the evidence on monkeypox is thin, and the current outbreaks will provide new knowledge around its impact and transmission.

Monkeypox belongs to the same family of viruses as smallpox, but is less transmissible. People who catch it typically develop a fever and a distinctive rash and blisters. The disease is usually self-limiting, with symptoms disappearing after a few weeks. However, monkeypox can cause severe illness, with outbreaks typically showing a case-fatality rate (the proportion of people with the disease who die from it) of between 1% and 15%, with severe disease and death more likely among children.

Sexually transmitted?

The UKHSA says that some cases in the May 2022 outbreak cannot be explained by recent international travel, suggesting that there has probably been some “community transmission”. Four of the seven cases are in people who identify as gay, bisexual or other men who have sex with men. A UKHSA epidemiologist tweeted that this is “highly suggestive of spread in sexual networks”. The cases in Spain may also fall under similar consideration.

So the transmission here may be a little unusual compared with previous outbreaks. While there is a lot we don’t know about monkeypox, we do know the virus can be transmitted via close contact, for example, including prolonged skin-to-skin contact.

There is no evidence that it is a sexually transmitted infection in the manner of HIV or chlamydia. It’s more that, in the UK outbreak, the close contact during sexual or intimate activity may have been a key factor during transmission.

This may be the first time transmission of monkeypox via sexual contact or intimate activity has been documented. But the implications are not so significant in that we know close contact is required for transmission. The social dynamics around the transmission of infectious diseases means this finding may be most useful for the public health teams involved in “contact tracing” – finding other people who may have been exposed to the virus.

Very low risks for the general public

The monkeypox risks to the wider UK public are extremely low, and the NHS has specialist units that focus on treating these sorts of tropical infections. And, thankfully, there are ways of bringing the virus to heel.

The US Centers for Disease Control and Prevention highlights how the smallpox vaccine, cidofovir (an anti-viral drug), and vaccinia immune globulin can be used to control a monkeypox outbreak.

However, beyond the smallpox vaccine, there is no specific vaccine to protect against monkeypox. Some experts have suggested that stopping widespread vaccination against smallpox might have lowered population immunity against monkeypox, thus making cases and outbreaks more likely.

A 2019 meeting at Chatham House in London suggested that an unintended consequence of smallpox eradication could be that “emergent or re-emergent human monkeypox might fill the epidemiological niche vacated by smallpox”.

However, these imported monkeypox cases and other tropical infections (such as Ebola, malaria and Lassa fever) indicate a wider burden of disease elsewhere in the world, typically in low-income countries with limited access to healthcare. It may be that in a post-pandemic environment, we should give more consideration to understanding the local and global implications of Lassa, monkeypox, Ebola and other rare but serious pathogens.

Michael Head has received funding from the Bill & Melinda Gates Foundation and the UK Department for International Development.

Read More

Continue Reading

Spread & Containment

Researchers may have unlocked mechanism driving inflammation in rheumatoid arthritis

Researchers at Hokkaido University in Japan, in a collaboration with American scientists, may have identified neural crosstalk as the mechanism that drives…

Published

on

Researchers may have unlocked mechanism driving inflammation in rheumatoid arthritis

Read More

Continue Reading

Spread & Containment

Haven’t had COVID yet? It could be more than just luck

Even taking into account people who have had COVID but didn’t know it, there’s still likely to be a group of people who have never been infected.

Published

on

I Wei Huang/Shutterstock

We all know a few of those lucky people who, somehow, have managed to avoid ever catching COVID. Perhaps you’re one of them. Is this a Marvel-esque superpower? Is there any scientific reason why a person might be resistant to becoming infected, when the virus seems to be everywhere? Or is it simply luck?

More than 60% of people in the UK have tested positive for COVID at least once. However, the number of people who have actually been infected with SARS-CoV-2, the virus that causes COVID-19, is thought to be higher. The calculated rate of asymptomatic infections varies depending on the study, though most agree it’s fairly common.

But even taking into account people who have had COVID and not realised it, there is still likely a group of people who never have. The reason why some people appear immune to COVID is one question that has persisted throughout the pandemic. As with so much in science, there isn’t (yet) one simple answer.

We can probably dismiss the Marvel-esque superpower theory. But science and luck likely both have a role to play. Let’s take a look.

The simplest explanation is that these people have never come into contact with the virus.

This could certainly be the case for people who have been shielding during the pandemic. People at significantly greater risk of severe disease, such as those with chronic heart or lung conditions, have had a tough couple of years.

Many of them continue to take precautions to avoid potential exposure to the virus. Even with additional safety measures, many of these people have ended up with COVID.

Due to the high level of community transmission, particularly with the extremely transmissible omicron variants, it’s very unlikely that someone going to work or school, socialising and shopping hasn’t been near someone infected with the virus. Yet there are people who have experienced high levels of exposure, such as hospital workers or family members of people who have had COVID, who have somehow managed to avoid testing positive.

We know from several studies vaccines not only reduce the risk of severe disease, but they can also cut the chance of household transmission of SARS-CoV-2 by about half. So certainly vaccination could have helped some close contacts avoid becoming infected. However, it’s important to note that these studies were done pre-omicron. The data we have on the effect of vaccination on omicron transmission is still limited.


Read more: Four strange COVID symptoms you might not have heard about


Some theories

One theory around why certain people have avoided infection is that, although they are exposed to the virus, it fails to establish an infection even after gaining entry to the airways. This could be due to a lack of the receptors needed for SARS-CoV-2 to gain access to cells.

Once a person does become infected, researchers have identified that differences in the immune response to SARS-CoV-2 play a role in determining the severity of symptoms. It is possible that a quick and robust immune response could prevent the virus from replicating to any great degree in the first instance.

The efficacy of our immune response to infection is largely defined by our age and our genetics. That said, a healthy lifestyle certainly helps. For example, we know that vitamin D deficiency can increase the risk of certain infections. Not getting enough sleep can also have a detrimental effect on our body’s ability to fight invading pathogens.

An illustration of SARS-CoV-2, the coronavirus that causes COVID-19.
The SARS-CoV-2 virus needs to attach to receptors to gain access to our cells. Kateryna Kon/Shutterstock

Scientists studying the underlying causes of severe COVID have identified a genetic cause in nearly 20% of critical cases. Just as genetics could be one determining factor of disease severity, our genetic makeup may also hold the key to resistance to SARS-CoV-2 infection.

I research SARS-CoV-2 infection on nasal cells from human donors. We grow these cells on plastic dishes which we can then add virus to and investigate how the cells respond. During our research we found one donor whose cells could not be infected with SARS-CoV-2.

We discovered some really interesting genetic mutations, including several involved with the body’s immune response to infection, that could explain why. A mutation we identified in a gene involved with sensing the presence of a virus has previously been shown to confer resistance to HIV infection. Our research is on a small number of donors and highlights that we’re still only scraping the surface of research into genetic susceptibility or resistance to infections.

There’s also the possibility that previous infection with other types of coronaviruses results in cross-reactive immunity. This is where our immune system may recognise SARS-CoV-2 as being similar to a recent invading virus and launch an immune response. There are seven coronaviruses that infect humans: four that cause the common cold, and one each that cause Sars (severe acute respiratory syndrome), Mers (Middle East respiratory syndrome) and COVID.

How long-lasting this immunity may be is another question. Seasonal coronaviruses that circulated pre-2020 were able to reinfect the same people after 12 months.


Read more: The common cold might protect you from coronavirus – here's how


If you’ve managed to avoid COVID to date, maybe you do have natural immunity to SARS-CoV-2 infection, or perhaps you’ve just been lucky. Either way, it’s sensible to continue to take precautions against this virus that we still know so little about.

Lindsay Broadbent receives funding from The Wellcome Trust.

Read More

Continue Reading

Trending