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CNBC: New Year Fear: Euro Crack CNBC: New Year Fear: Euro Crack Reviewed by magonomics on December 31, 2010 Rating: 5
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Three Revealing Developments

December 28, 2010
I am on vacation, but I have a television interview later today and as I was reviewing what happened today and three things strike me as noteworthy.  
First, China had its second failed auction this month today.  It sold about 80% of the 3-month bills as it wanted to.  The 7-day repo rate, which is similar to our Fed funds rate insofar as it shows …
Three Revealing Developments Three Revealing Developments Reviewed by Marc Chandler on December 28, 2010 Rating: 5
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CNBC: Currency Flow in 2011 CNBC: Currency Flow in 2011 Reviewed by magonomics on December 28, 2010 Rating: 5
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Big Move on 2-Year US-German Spreads

December 22, 2010
The euro-dollar exchange rate has done a fairly good job of tracking the movement in the US-Germany 2-year interest rate differential over the past several quarters.  There is a big move today.  The premium Germany offers over the US has narrowed sharply.  At 35 bp, it is the narrowest since Dec 7. 
The main driver seems to be flows out of the per…
Big Move on 2-Year US-German Spreads Big Move on 2-Year US-German Spreads Reviewed by Marc Chandler on December 22, 2010 Rating: 5
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Mistrust Euro Bounce

December 22, 2010
The US dollar is generally weaker across the board.  These are holiday thin markets and the price action seems a reflection of necessary flows.  The main news that appeared to steady the euro were reports suggesting China is prepared to by 4-5 bln euros of  Portuguese debt.  Other reports indicate PBOC officials have not confirmed the earlier repo…
Mistrust Euro Bounce Mistrust Euro Bounce Reviewed by Marc Chandler on December 22, 2010 Rating: 5
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Euro Rot Continues

December 20, 2010
The steady drum beat of negative European news continues and the euro has been sold off in response.  It is not simply limited to the periphery, as we have pointed out.  There are rumors today that Belgium faces an imminent downgrade.  Recall that Belgium's outlook was cut to negative from S&P on Dec 14.  There is also increasing concern t…
Euro Rot Continues Euro Rot Continues Reviewed by Marc Chandler on December 20, 2010 Rating: 5
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Handicapping European End Game Scenarios

December 17, 2010
The European financial crisis is of historic proportions and it remains unresolved as the year draws to a close. The resolution remains elusive, but there seems to be a finite number of ways that the situation will ultimately be resolved. Let’s consider them.
Scenario I: Country Leaving Monetary Union (3%) Many observers suggest that the only soluti…
Handicapping European End Game Scenarios Handicapping European End Game Scenarios Reviewed by Marc Chandler on December 17, 2010 Rating: 5
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Fade Euro Resilience

December 17, 2010
The EU Summit may have ended, but the European debt crisis has most certainly not. What does it really matter to current investors, under mark-to-market pressure that the European officials have agreed to some wording changes in their Treaty to allow for a permanent crisis facility at the end of 2013?  Even the aid packages for Greece and Ireland …
Fade Euro Resilience Fade Euro Resilience Reviewed by Marc Chandler on December 17, 2010 Rating: 5
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ECB Increase Subscription Capital by 5 bln Euros

December 16, 2010
The ECB announced its subscription capital base of 5.8 bln euros would effectively be doubled to 10.8 bln euros effective at the end of the year. The move is not surprising and has been hinted for the better part of a week at least.
It does not have market implications. The ECB will have 10.8 bln euro capital base and asset holdings that are just …
ECB Increase Subscription Capital by 5 bln Euros ECB Increase Subscription Capital by 5 bln Euros Reviewed by Marc Chandler on December 16, 2010 Rating: 5
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Dollar Consolidates Wednesday's Gains

December 16, 2010
The EU Summit begins shortly. Out of the cacophony of voices will come some agreements, principally the modifications of the Lisbon Treaty, the closest thing to a constitution that Europe may have for quite some time, that will enshrine the European Stabilization Mechanism--the successor of the EFSF. This may include an agreement on collective act…
Dollar Consolidates Wednesday's Gains Dollar Consolidates Wednesday's Gains Reviewed by Marc Chandler on December 16, 2010 Rating: 5
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FOMC Says Little News

December 14, 2010
The last FOMC meeting of the year produced a statement that reads very much like the Nov statement. It recognizes that although the economic data has improved it has not been sufficient to lower the unemployment rate. Contrary to some speculation prior to the meeting, it did not change its $600 bln Treasury purchase figure. There is little new or …
FOMC Says Little News FOMC Says Little News Reviewed by Marc Chandler on December 14, 2010 Rating: 5
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Outlook for Swiss National Bank

December 14, 2010
The Swiss National Bank meets Thursday. A change in its monetary stance is not likely for several months at least. However, the SNB will provide new GDP and inflation forecasts that investors may find helpful. The Swiss government provided new forecasts today, ahead of the SNB. Growth this year is put at 2.7%, while the SNB's forecast is for …
Outlook for Swiss National Bank Outlook for Swiss National Bank Reviewed by Marc Chandler on December 14, 2010 Rating: 5
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The Dollar Slips More, but Weights are Transitory

December 14, 2010
The US dollar's pullback has been attributed to three main factors. First, some are placing emphasis on Moody's warning that the Obama- Republican fiscal compromise increases the likelihood of a negative outlook within two years. While this is potentially worrisome, the market most directly impacted would be the Treasury market and it rall…
The Dollar Slips More, but Weights are Transitory The Dollar Slips More, but Weights are Transitory Reviewed by Marc Chandler on December 14, 2010 Rating: 5
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ECB: Where is the Shock and Awe ?

December 13, 2010
The Financial Times reported that as Trichet was holding a press conference after the recent ECB meeting, European central banks were buying large amounts of sovereign European bonds. Reports suggested that the amounts were in 100-200 mln euro clips, 2-4 times more than usual. The market bandied about estimates of the ECB's bond purchases in t…
ECB: Where is the Shock and Awe ? ECB: Where is the Shock and Awe ? Reviewed by Marc Chandler on December 13, 2010 Rating: 5
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Atlantic Council Interview: Financial Impact of the Lisbon Summit Atlantic Council Interview: Financial Impact of the Lisbon Summit Reviewed by magonomics on December 13, 2010 Rating: 5
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FOMC Preivew and Dollar Outlook

December 13, 2010
A new factor has arisen that complicates the Federal Reserve’s task as it prepares for its last meeting of the year. The broad outlines of the agreement between President Obama and the Republican leadership on fiscal policy is significant, even if the compromise is tweaked a bit now or passes retroactively early in the new year.
Although few call …
FOMC Preivew and Dollar Outlook FOMC Preivew and Dollar Outlook Reviewed by Marc Chandler on December 13, 2010 Rating: 5
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Consolidative Tone

December 13, 2010
The major currencies are little changed against the US dollar at the start of the new week.  The exception is sterling, where it has been undermined by weak, but housing data from Rightmove but more importantly by the euro's recovery on the crosses.  The dollar is holding just below the JPY84.40. 
The modest gains in the the euro and Australia…
Consolidative Tone Consolidative Tone Reviewed by Marc Chandler on December 13, 2010 Rating: 5
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Spanish Bonds Continue to Retreat ahead of Supply

December 10, 2010
Spanish bonds have fallen each day this week. The 13 bp increase today brings the 10-year yield increase to 30 bp this week, easily the worst performing bond market within the euro zone. Portugal has the dubious honor of being in second place with a 19 bp yield increase. Pressure is also evident in the short end of the coupon curve. The 2-year yie…
Spanish Bonds Continue to Retreat ahead of Supply Spanish Bonds Continue to Retreat ahead of Supply Reviewed by Marc Chandler on December 10, 2010 Rating: 5
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Dollar Softer

December 10, 2010
One of the most important developments in recent days has been the sharp backing up of global interest rates, spurred primarily by indications that contrary to expectations, US fiscal policy is in play again beyond simply preventing the expiration of the 2001 and 2003 tax cuts. While the rise in US rates has helped keep the dollar supported, we ar…
Dollar Softer Dollar Softer Reviewed by Marc Chandler on December 10, 2010 Rating: 5
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Euro Skids

December 09, 2010
The euro bounce toward the middle of the day's range ran into a wall of selling. Rumors that Italy may see its rating cut and news that Irish Labour Party will vote against IMF/EU aid package drove the euro briefly through yesterday's lows. The former may be true, but we are not inclined to believe it. The latter is true but hardly news. T…
Euro Skids Euro Skids Reviewed by Marc Chandler on December 09, 2010 Rating: 5
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UK Tuition Debate Begins

December 09, 2010
British press call it a hung parliament, but in countries it would be thought of a coalition government. And today is the first challenge to the UK coalition government and it is likely to pass the controversial bill to raise college tuition fees.
The political cost may be to see the Lib-Dem support continue to erode as it has since the election a…
UK Tuition Debate Begins UK Tuition Debate Begins Reviewed by Marc Chandler on December 09, 2010 Rating: 5
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The Treasury Conundrum

December 09, 2010
The sharp rise in bond yields emerged as an important market force in recent days. US Treasury yields are stabilizing today with note and bond yields near six month highs. The sell-off in US Treasuries in the past two days is the largest in a couple of years. It has caught the market wrong-footed in light of the disappointing jobs data last Friday…
The Treasury Conundrum The Treasury Conundrum Reviewed by Marc Chandler on December 09, 2010 Rating: 5
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A Few Thoughts on China

December 08, 2010
Three observations to share about China, regarding purchases of Japanese assets, suspension of 3-year debt auction for tomorrow and rate hike possibility.
First, Japan's MOF reported that China bought JPY262.6 bln of Japanese debt instruments in Oct. Its purchases were concentrated in the bills sector (JPY232 bln) and accounted for 23% of forei…
A Few Thoughts on China A Few Thoughts on China Reviewed by Marc Chandler on December 08, 2010 Rating: 5
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Russia Moving toward WTO Memebership

December 08, 2010
Russia is the last of the major countries that has not joined the World Trade Organization. The importance of the WTO may not be so much in liberalizing trade as negotiations take years. The WTO predecessor was GATT, which some suggested stood for the general agreement to talk and talk. Rather the value of the WTO may be in conflict resolution. Th…
Russia Moving toward WTO Memebership Russia Moving toward WTO Memebership Reviewed by Marc Chandler on December 08, 2010 Rating: 5
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Dollar Drivers Re-Examined

December 08, 2010
In recent weeks, the US dollar's recovery from the Sept-Oct decline seemed to be largely a function of the deteriorating situation in Europe. U.S. economic data generally surprised on the upside, the with notable exception of the November jobs report, but growth in Q4 looks to be around the pace seen in Q3 and in any event, not sufficient to b…
Dollar Drivers Re-Examined Dollar Drivers Re-Examined Reviewed by Marc Chandler on December 08, 2010 Rating: 5
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US Yields Jump, Dollar Advances: Game Changer?

December 07, 2010
When I wrote in my first post of the day that I expected the euro, which was bid in Europe and appeared moving toward $1.3400, to come off to $1.3300 and possibly $1.3250 in North America and maybe into tomorrow, several readers dismissed this as unwarranted bullishness. In many ways I too am surprised that this objective was nearly met, with toda…
US Yields Jump, Dollar Advances: Game Changer? US Yields Jump, Dollar Advances: Game Changer? Reviewed by Marc Chandler on December 07, 2010 Rating: 5
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India: Will the Tortoise Pass the Hare ?

December 07, 2010
India's Finance Ministry raised its economic forecast for the year ending March 31, 2011. Back in Feb it had forecast 8.25%-8.75% growth and today increased that forecast to as much as 9.1%. Ironically, the increase in the growth pace is not expected to be accompanied by higher inflation. The revisions to growth appear to be at least in part d…
India: Will the Tortoise Pass the Hare ? India: Will the Tortoise Pass the Hare ? Reviewed by Marc Chandler on December 07, 2010 Rating: 5
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Need to Look Past Irish Austerity

December 07, 2010
(For my earlier post on this topic click here.)

By most reckoning the Irish parliament will approve the government's austere budget, the fourth emergency budget since 2008. This may help ensure that Ireland secures the aid package it did not really want in the first place. Besides that, little else will be resolved. Oh, the country will have …
Need to Look Past Irish Austerity Need to Look Past Irish Austerity Reviewed by Marc Chandler on December 07, 2010 Rating: 5
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Trade Rec to Sell Dollar vs JPY Update

December 07, 2010
On Nov 30,we recommended selling dollar-yen with a tight stop just above JPY84.40. Initially, we looked for JPY82.80 and then possibly JPY81.80. The dollar fell to its lowest level since Nov 12th today near JPY82.35, but has bounced back strongly. Those who followed us may want to take profits near here.
The major driver of the trade has weakened…
Trade Rec to Sell Dollar vs JPY Update Trade Rec to Sell Dollar vs JPY Update Reviewed by Marc Chandler on December 07, 2010 Rating: 5
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Irish Budget, US Tax Compromise, Strong UK Mfg Output

December 07, 2010
There does not appear to be the basis of agreement among European officials of what to do next to stem the financial crisis. Neither expanding the EFSF nor issuing so-called E-bonds has found strong support. A German-Netherlands-Austria axis has been sufficient to stymie additional reforms at this juncture and peripheral bonds continue to be under…
Irish Budget, US Tax Compromise, Strong UK Mfg Output Irish Budget, US Tax Compromise, Strong UK Mfg Output Reviewed by Marc Chandler on December 07, 2010 Rating: 5
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South Korea: Free Trade Agrement, Foreign Demand for Assets, and Near-Term Outlook for KRW South Korea: Free Trade Agrement, Foreign Demand for Assets, and Near-Term Outlook for KRW Reviewed by Marc Chandler on December 06, 2010 Rating: 5
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UK Politics--Thursday Vote is Key

December 06, 2010
Some observers are talking about M&A activity and sterling. Vodafone is said to be close to selling its nearly 45% stake in mobile operators SFR to France's Vivendi for about 3.6 bln euros. Yet it is only giving sterling a bit of comfort as the broader dollar move takes its toll. The $1.5650 area corresponds with a 50% retracement of the s…
UK Politics--Thursday Vote is Key UK Politics--Thursday Vote is Key Reviewed by Marc Chandler on December 06, 2010 Rating: 5
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European Weight Returns

December 06, 2010
The pessimism over the US dollar expressed last Friday after the disappointing US jobs data has eased. The market's focus has turned back to Europe. Finance ministers meet today and tomorrow and appear hopelessly divided over how to restore market confidence. The IMF reportedly is calling for an increase in the EFSF and ECB bond purchases. Bel…
European Weight Returns European Weight Returns Reviewed by Marc Chandler on December 06, 2010 Rating: 5
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Bernanke and Bond Buying, and Some Thoughts about Early Next Week

December 03, 2010
Federal Reserve Chairman Bernanke will tell the "60 Minutes" audience on Sunday that he does not rule out buying more than $600 bln of Treasuries.  This helped lift the euro to new session highs late in the day.  This is important and caps a volatile day and week.  
There are several take-aways from this week.  First the debt dynamics in …
Bernanke and Bond Buying, and Some Thoughts about Early Next Week Bernanke and Bond Buying, and Some Thoughts about Early Next Week Reviewed by Marc Chandler on December 03, 2010 Rating: 5
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US Jobs Data: As Disappointing as it Gets

December 03, 2010
US employment data is wholly disappointing.  Job creation much less than expected, unemployment rate jumps, hourly earnings flat and work week flat. The back month revisions pale in comparison to the disappointment.
US Jobs Data: As Disappointing as it Gets US Jobs Data: As Disappointing as it Gets Reviewed by Marc Chandler on December 03, 2010 Rating: 5
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Trichet's Feint Works for the Moment

December 03, 2010
The ECB must be pleased with itself.   The strategic ambiguity card that Trichet played yesterday is succeeding in supporting the peripheral bond markets and a relaxation of prices in the credit default swaps market.  Because the ECB never indicated a amount of sovereign bonds it would buy, an increase, as we have saw last week and this week, does…
Trichet's Feint Works for the Moment Trichet's Feint Works for the Moment Reviewed by Marc Chandler on December 03, 2010 Rating: 5
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Some Thoughts on US Jobs Report

December 02, 2010
The November US jobs report is slated for release tomorrow and there does not seem to be any reason not to look for a relatively robust report. The usual inputs have been uniformly constructive. This includes, the ADP report, the weekly initial jobless claims (especially the week in which the survey was conducted) and the ISM reports.
More general…
Some Thoughts on US Jobs Report Some Thoughts on US Jobs Report Reviewed by Marc Chandler on December 02, 2010 Rating: 5
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Thoughts on ECB

December 02, 2010
European officials must have known they were going to disappoint the market with the decision to simply postpone draining liquidity. The firewall around Greece failed. The firewall around Ireland has failed. The politicians have dropped the ball and the left Trichet holding the bag. Many from the periphery appeared to lobby the ECB to help out. Tr…
Thoughts on ECB Thoughts on ECB Reviewed by Marc Chandler on December 02, 2010 Rating: 5
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ECB Does Bare Minimum

December 02, 2010
The ECB has done the bare minumum by pushing out its plans to withdraw liquidity.  Previously it was expected to take place in early Q1 and now it has been delayed to early Q2 at the earliest.  This is hardly a solution.  It kicks part of the ball down the road, but banks locked out of the wholesale market will remain locked out.     Trichet has a…
ECB Does Bare Minimum ECB Does Bare Minimum Reviewed by Marc Chandler on December 02, 2010 Rating: 5
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ECB Front and Center: Can Do Little, but Disappoint?

December 02, 2010
Today is the most important ECB meeting in several months. Nervousness ahead of it has encouraged some modest position adjusting across asset classes. Given that the Irish aid package failed to stabilize the markets, many are looking at the ECB step into the breach. It seems that there are only four potential courses of action. The first is simply…
ECB Front and Center: Can Do Little, but Disappoint? ECB Front and Center: Can Do Little, but Disappoint? Reviewed by Marc Chandler on December 02, 2010 Rating: 5
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Water, Wheat and Russia

December 01, 2010
In a time when there is much discussion of peak oil and the idea that other commodities are less abundant or more costly to access, one issue that might not get enough attention among investors is the shortage of water. Some political scientists, for example, have suggested that the next war in the Middle East may be over water not oil.
Grain is v…
Water, Wheat and Russia Water, Wheat and Russia Reviewed by Marc Chandler on December 01, 2010 Rating: 5
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Euro Bounce, Sustainable?

December 01, 2010
Ideas that at its meeting tomorrow the ECB may take additional measures to stem the financial crisis that has threatened this week to spread outside the periphery and toward countries like Belgium, are prompting some position adjustment in both the foreign exchange and fixed income markets. While observers are not at a loss at making recommendatio…
Euro Bounce, Sustainable? Euro Bounce, Sustainable? Reviewed by Marc Chandler on December 01, 2010 Rating: 5
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