Connect with us

International

Is the Dollar Tired? Did Fed Frenzy Peak? A Look at the FX Price Action

The price exchange in the foreign exchange market was a story separate from the macro developments. The euro traded below parity for the first time since…

Published

on

The price exchange in the foreign exchange market was a story separate from the macro developments. The euro traded below parity for the first time since 2002. The yen fell to its lowest level against the dollar in 22 years. Sterling, the dollar-bloc currencies, fell to their lowest levels since 2020.  

Yes, the stronger than expected rise in the US June CPI, above 9%, helped spur speculation that the Fed could raise rates 100 bp in a couple of weeks. Still, the probability was downgraded with some cautionary comments by a couple of the Fed's hawks, even though the June retail sales were stronger than expected, and nine of the 13 categories showed an increase, and the May decline was revised to 0.1% from -0.3%. At the end of the week, the Fed funds futures had about a 20% chance of a 100 bp hike.  

Developments in the eurozone and Japan may have also served as drags. US Treasury Secretary Yellen and Japan's Minister of Finance Suzuki met, and the risk of material intervention, which we had not thought very high in the first place, may have lessened. Notably, the euro's push through parity did not get much reaction from the ECB outside of the usual boilerplate statement that it was watching the currency market.  

Italy's tettered on a political crisis, and the 10-year premium rose every day last week for a cumulative 17 bp increase to a one-month high near 2.15%. We suspect that in a week or so,  Italy's political situation will stabilize, and it will become less pressing of an issue. We expect Draghi to remain the prime minister. The key to the peripheral-core spreads may shift from politics to the ECB and the details of the Transmission Protection Mechanism.  

We note that the volatility of the S&P 500 (VIX) has slipped back toward 25. The 200-day moving average is slightly above 24. The S&P and NASDAQ gapped higher before the weekend. The volatility of the Treasury market (MOVE) eased a bit after pushing above the pandemic high near 138.40. It finished the week near 137.70. The bill auctions tailed last week. While the three and 30-year auctions were well received, the 10-year was a bit sloppy.  

Still, after a good week, the US dollar pulled back ahead of the weekend. So let's take a closer look at the price action.  

Dollar Index: The Dollar Index reached almost 109.30 on July 14, its best level since late June 2002. Although it succumbed to profit-taking before the weekend, it closed more than 1% higher for the week. It was the third consecutive weekly advance and the sixth weekly gain in the past seven weeks. The Slow Stochastic appears to be rolling over, and the MACD looks poised to turn down. Initial support may be found near 107.20. The 20-day moving average is slightly below 106.00, and DXY has not closed below it in over a month.  

Euro:  For the third consecutive week, the euro fell by more than 1%. In fact, the euro has declined for seven of the past ten weeks, and in all but two, the decline exceeds 1%. The momentum indicators are stretched, but the MACD is about to cross higher, and the Slow Stochastic does not appear far behind. A move above the $1.0120 area could signal a move toward $1.03 in a consolidative/corrective phase. That said, a significant low does not appear to be in place. Parity is a nice figure for headlines, but we see more important technical support in the $0.9600-$0.9800 area. The US premium over Germany on two-year money reached 272 bp last week, a three-year high. It had dipped below 200 bp in mid-June after peaking in April near 255 bp. In our work, we have found that interest rate differentials peak before the exchange rate.  

Japanese Yen: The dollar surged to JPY139.40 on July 14, a new 24-year high. The speculation of a 100 bp hike by the Fed, while the BOJ, as we will likely learn next week, is continuing to support the economy through asset purchases, negative rates, and yield curve control. The greenback has closed above the upper Bollinger Band in the last two sessions. It begins the new week near JPY138.40. Initial support is likely in the JPY137.75 area. The momentum indicators had pulled back in the first part of the month but have turned higher. The Slow Stochastic is nearly overextended again, but the MACD is not. The JPY140 area is the next psychological area, but the high in 1998 was around JPY147.65 may be important. The five-day moving average (~JPY137.85) has been above the 20-day moving average (~JPY136.30) since early June, illustrating the strength of the trend.  

British Pound: In last week's dollar frenzy, sterling fell to its lowest since March 2020, around $1.1760. The nearby cap is around $1.1920, a congestion area seen in recent days, and it is also where a three-week downtrend begins the new week. The MACD is near the middle of its range but drifting lower. The Slow Stochastic is slipping into oversold territory. However, a reversal of the trend does not appear imminent. The US offers about 120 bp more than the UK to borrow for two years. It has risen from a two-month low below 88 bp in late June to almost 137 bp last week before pulling back. The low sterling reached in March 2020  was near $1.14, and there is little to hang one's hat in front of it. Many find the Tories' leadership context engrossing, but it continues to seem marginal to the sterling's price action. After seeing its best level in two months against the euro in the middle of last week, it reversed last week. The euro bounced off of the GBP0.8400 area in the middle of the week and proceeded to recover to meet the (38.2%) retracement objective of a little more than GBP0.8500 before the weekend. The next retracement level (50%) is close to GBP0.8540, and the 20-day moving average is slightly higher.  

Canadian Dollar:  The Bank of Canada's aggressive 100 bp rate hike did not prevent the Canadian dollar from selling off last week. Amid speculation that the Fed would match the move, the US dollar reached CAD1.3225, its best level since around the US election in 2020 and the announcement of the first vaccine. As the Fed speculation eased, the US dollar returned to where it settled the day before the BOC move (~CAD1.3025). The swaps market has almost a 2/3 chance of a 75 bp hike at the next central bank meeting on September 7. The five-day decline in the S&P 500, as a proxy for risk appetites, seemed to have taken a toll on the Canadian dollar. The S&P 500 gapped higher before the weekend, the gap remains open, and the Canadian dollar gained about 0.75% since June 24. A break of CAD1.30 may push some momentum players to the sidelines, but the CAD1.2935 area, which also hosts the 20-day moving average, may offer better support. The momentum indicators are not generating strong signals around the middle of their ranges but may turn lower with a bit of encouragement.  

Australian Dollar: After falling to almost $0.6680, its lowest level since mid-2020, the Aussie recovered to trade at a four-day high at the end of last week (~$0.6805). The nearby ceiling is the $0.6800-$0.6820 band; overcoming it would target the $0.6920 area, last seen on June 30. The MACD has been trending lower since early June, when the Australian dollar last traded above its 200-day moving average (now ~$0.72), and it looks like it is trying to turn higher. On the other hand, the Slow Stochastic has been flatlining since late June and rising ever so slightly. Falling commodity prices may not have helped sentiment, and last week's loss of about 0.95% was the most in the dollar bloc, though admittedly, Canada and New Zealand hiked rates, 100 bp, and 50 bp, respectively. The Aussie-Kiwi cross was practically flat on the week.  

Mexican Peso: The Fed hike frenzy lifted the dollar above MXN21.00 for the first time in four months. Good selling was seen. The dollar did not close above it, and follow-through selling saw it fall to a four-day low near MXN20.5245 ahead of the weekend. It settled last week near its lows below this month's uptrend line that came in around MXN20.64. After a three-week rally and appreciating in five of the past six weeks, the dollar is looking a little tired. The MACD has turned down from overbought, and the Slow Stochastic looks about to do so. A key band of support is seen between around MXN20.35 and MXN20.43. It holds several retracement objectives of the last leg higher and moving averages, including the 20-day and 200-day.  

Chinese Yuan:  The dollar rose a little less than 1% against the Chinese yuan last week. That is the largest weekly advance since mid-May. The greenback's gains simply frayed the upper end of the range that has prevailed since late May, seen around CNY6.75. It stopped just shy of CNY6.77. The dollar's pullback in North America before the weekend may lend support to the yuan. After accepting yuan depreciation for a couple weeks beginning around the middle of April, Chinese officials appear to want a relatively stable dollar-yuan rate at the cost of yuan appreciation against most of its other trading partners. A move above CNY6.80 would be notable. The year's high was set in mid-May near CNY6.8125. Similarly, a break of CNY6.70 would catch attention.  



Disclaimer

Read More

Continue Reading

International

There will soon be one million seats on this popular Amtrak route

“More people are taking the train than ever before,” says Amtrak’s Executive Vice President.

Published

on

While the size of the United States makes it hard for it to compete with the inter-city train access available in places like Japan and many European countries, Amtrak trains are a very popular transportation option in certain pockets of the country — so much so that the country’s national railway company is expanding its Northeast Corridor by more than one million seats.

Related: This is what it's like to take a 19-hour train from New York to Chicago

Running from Boston all the way south to Washington, D.C., the route is one of the most popular as it passes through the most densely populated part of the country and serves as a commuter train for those who need to go between East Coast cities such as New York and Philadelphia for business.

Veronika Bondarenko captured this photo of New York’s Moynihan Train Hall. 

Veronika Bondarenko

Amtrak launches new routes, promises travelers ‘additional travel options’

Earlier this month, Amtrak announced that it was adding four additional Northeastern routes to its schedule — two more routes between New York’s Penn Station and Union Station in Washington, D.C. on the weekend, a new early-morning weekday route between New York and Philadelphia’s William H. Gray III 30th Street Station and a weekend route between Philadelphia and Boston’s South Station.

More Travel:

According to Amtrak, these additions will increase Northeast Corridor’s service by 20% on the weekdays and 10% on the weekends for a total of one million additional seats when counted by how many will ride the corridor over the year.

“More people are taking the train than ever before and we’re proud to offer our customers additional travel options when they ride with us on the Northeast Regional,” Amtrak Executive Vice President and Chief Commercial Officer Eliot Hamlisch said in a statement on the new routes. “The Northeast Regional gets you where you want to go comfortably, conveniently and sustainably as you breeze past traffic on I-95 for a more enjoyable travel experience.”

Here are some of the other Amtrak changes you can expect to see

Amtrak also said that, in the 2023 financial year, the Northeast Corridor had nearly 9.2 million riders — 8% more than it had pre-pandemic and a 29% increase from 2022. The higher demand, particularly during both off-peak hours and the time when many business travelers use to get to work, is pushing Amtrak to invest into this corridor in particular.

To reach more customers, Amtrak has also made several changes to both its routes and pricing system. In the fall of 2023, it introduced a type of new “Night Owl Fare” — if traveling during very late or very early hours, one can go between cities like New York and Philadelphia or Philadelphia and Washington. D.C. for $5 to $15.

As travel on the same routes during peak hours can reach as much as $300, this was a deliberate move to reach those who have the flexibility of time and might have otherwise preferred more affordable methods of transportation such as the bus. After seeing strong uptake, Amtrak added this type of fare to more Boston routes.

The largest distances, such as the ones between Boston and New York or New York and Washington, are available at the lowest rate for $20.

Read More

Continue Reading

International

The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

Read More

Continue Reading

International

This is the biggest money mistake you’re making during travel

A retail expert talks of some common money mistakes travelers make on their trips.

Published

on

Travel is expensive. Despite the explosion of travel demand in the two years since the world opened up from the pandemic, survey after survey shows that financial reasons are the biggest factor keeping some from taking their desired trips.

Airfare, accommodation as well as food and entertainment during the trip have all outpaced inflation over the last four years.

Related: This is why we're still spending an insane amount of money on travel

But while there are multiple tricks and “travel hacks” for finding cheaper plane tickets and accommodation, the biggest financial mistake that leads to blown travel budgets is much smaller and more insidious.

A traveler watches a plane takeoff at an airport gate.

Jeshoots on Unsplash

This is what you should (and shouldn’t) spend your money on while abroad

“When it comes to traveling, it's hard to resist buying items so you can have a piece of that memory at home,” Kristen Gall, a retail expert who heads the financial planning section at points-back platform Rakuten, told Travel + Leisure in an interview. “However, it's important to remember that you don't need every souvenir that catches your eye.”

More Travel:

According to Gall, souvenirs not only have a tendency to add up in price but also weight which can in turn require one to pay for extra weight or even another suitcase at the airport — over the last two months, airlines like Delta  (DAL) , American Airlines  (AAL)  and JetBlue Airways  (JBLU)  have all followed each other in increasing baggage prices to in some cases as much as $60 for a first bag and $100 for a second one.

While such extras may not seem like a lot compared to the thousands one might have spent on the hotel and ticket, they all have what is sometimes known as a “coffee” or “takeout effect” in which small expenses can lead one to overspend by a large amount.

‘Save up for one special thing rather than a bunch of trinkets…’

“When traveling abroad, I recommend only purchasing items that you can't get back at home, or that are small enough to not impact your luggage weight,” Gall said. “If you’re set on bringing home a souvenir, save up for one special thing, rather than wasting your money on a bunch of trinkets you may not think twice about once you return home.”

Along with the immediate costs, there is also the risk of purchasing things that go to waste when returning home from an international vacation. Alcohol is subject to airlines’ liquid rules while certain types of foods, particularly meat and other animal products, can be confiscated by customs. 

While one incident of losing an expensive bottle of liquor or cheese brought back from a country like France will often make travelers forever careful, those who travel internationally less frequently will often be unaware of specific rules and be forced to part with something they spent money on at the airport.

“It's important to keep in mind that you're going to have to travel back with everything you purchased,” Gall continued. “[…] Be careful when buying food or wine, as it may not make it through customs. Foods like chocolate are typically fine, but items like meat and produce are likely prohibited to come back into the country.

Related: Veteran fund manager picks favorite stocks for 2024

Read More

Continue Reading

Trending