Article / 05 October 2016 at 8:00 GMT

From the Floor: Mild hawk talk sends greenback higher

Your Next Trade
  • Talk of a US rate hike boosts greenback against G3
  • '103.25 is the big trigger in USDJPY': Hardy
  • ECB taper talk sees gold post largest declines in three years
  • Core bond yields spike on surprise hawkish note from Frankfurt
  • 'The ECB report still does not rule out an extension of QE': Boye

From the Floor
By Michael McKenna 

In his Q4 preview published yesterday, Singapore-based Saxo Bank global macro head Kay Van-Petersen reiterated his view that "we are still in the midst of the largest monetary policy experiment of all time", stating that "bubbles populate the world" due to continual central bank stimulus and quantitative easing.

Given this, it is perhaps understandable that investors keep coming back to the US dollar, even as the Federal Reserve dithers and scrapes past chance after chance to normalise policy.

The greenback rally that is sweeping world markets is an extension of this half-desperate hunt for a retreat from the stimulus narrative, and comes on the back of Chicago Fed president Charles Evans telling press in Auckland that he would "be fine" with a December hike provided macro data and inflation continue to show signs of strength.

As hawkish words go, it was a pretty hedged and low-flying example of type, but it is not as if traders seeking some sort of step back from continual stimulus have much to pick from.

"The USD is very strong across the board right now," said Saxo Bank head of forex strategy John J Hardy on today's Global Morning Call, noting that USDCHF and USDJPY are two of the more interesting pairs amidst the greenback's surge.

In terms of the former, Hardy notes that the Swiss franc is one to watch versus USD on a continuation of the higher rates theme. "Yesterday saw dollar/Swiss poke its head above the 200-day moving average," says Saxo's FX head, adding that 99.50 and parity are the levels to watch to the upside.

In terms of USDJPY, Hardy reports that 103.25 is the "big trigger" to keep an eye on as the dollar ascends versus a stimulus-soaked Japanese yen.


Create your own charts with SaxoTraderGO click here to learn more

Source: Saxo Bank 

Interestingly, yesterday saw not one but two significant steps away from the money-printing regime as the European Central Bank was also out with a report stating that it could potentially wind down its bond-buying prior to the planned conclusion of the current QE programme next March.

"The talk of an ECB taper impacted fixed income markets heavily yesterday," says Saxo Bank bonds trader Michael Boye, who cautions, however, that the report did not rule out an extension of the bank's QE regime, and may represent a simple "testing of the waters" by the ECB.

"Nevertheless," says Boye, "core European yields jumped on the news and continue to rise with the 10-year German bund yield completing a 10 basis point move to minus 0.05%.

The combination of less-dovish words from the two major central banks led gold to its largest drop in three years as investors confirmed yesterday's breach of the $1,300/oz level and pushed gold to an early-morning low below $1,270/oz.

"Keep an eye on open interest here," says Saxo Bank head of commodity strategy Ole Hansen; "fluctuations in the net-long position [will be key for investors looking to gauge gold's strength]".

According to Hansen, the $1,266/oz level  is likely to act as support here in the short term.

In crude markets, Hansen tells us that WTI is looking towards $50/barrel today with Brent moving towards $52/b. Oil was boosted by yesterday's API figures that showed an unusually strong draw on refinery supplies while today's EIA data are projected to show a one million barrel rise in stocks.

Policy hawks
Could it be? Photo: iStock 

Michael McKenna is an editor at

Editor’s note: From the Floor takes advantage of's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail