From Marc to Market:
Oil and US rates are softer today and these developments have helped steady the US dollar after this week’s surge. Even with a firmer tone today, four of the G10 currencies are off more than 1% this week. The yen would have been among them, but comments earlier today from Japan’s Finance Minister Katayama played up the ongoing coordination with the US and has seen the yen rise for the first time in six sessions.
The market is pricing in a “normal” Fed tightening cycle, in contrast to the Summary of Economic Projections, where the median dot implied a mini-cycle. We suspect the pendulum of sentiment has swung nearly as far as it might, especially given the prospect of a relatively tame PCE deflator (helped by methodological changes), softer September auto sales and slower jobs growth that will likely be reported next week. We are looking for some sign of a reversal in the price action in the foreign exchange market....
...MUCH MORE
