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The Other UK Spectacle: Elections and Referendum

April 29, 2011
The Royal Wedding (and Kate Middleton) are capturing the world's attention, but there is another event around the corner that may be more notable for investors. On May 5th the UK will hold its first referendum since the mid-1970s. It is on the general voting style and it will likely keep the current "1st past the post" system. On the…
The Other UK Spectacle: Elections and Referendum The Other UK Spectacle: Elections and Referendum Reviewed by Marc Chandler on April 29, 2011 Rating: 5
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Dollar Losses Extended

April 29, 2011
The US dollar fell to record lows against the Swiss franc and has fallen to new multi-year lows against the yuan.  Pressure remains against most of the major currencies.  The trend continues to be your friend, until it is not.  Today is the ninth consecutive day that the euro is gaining against the dolllar. 
The Swiss franc turned better bid follo…
Dollar Losses Extended Dollar Losses Extended Reviewed by Marc Chandler on April 29, 2011 Rating: 5
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Fox News: Will the Dollar Continue to Decline? Fox News: Will the Dollar Continue to Decline? Reviewed by magonomics on April 28, 2011 Rating: 5
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IS EMU Debt Crisis Morphing into a Euro Positive Force?

April 28, 2011
We argue that a key driver lifting the euro has been the divergent monetary policies of the Federal Reserve and the ECB. When investors perceive the European debt crisis becoming acute, it has eclipsed the main driver and weighed on the euro episodically in recent months. However, the increased speculation (and therefore risk) that Greece restruct…
IS EMU Debt Crisis Morphing into a Euro Positive Force? IS EMU Debt Crisis Morphing into a Euro Positive Force? Reviewed by Marc Chandler on April 28, 2011 Rating: 5
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Dollar Heavy, Sell Shallow Bounces Prevails

April 28, 2011
The US dollar is lower.  If that sounds like a broken record is should.  The euro is higher today for the eighth consecutive session, the longest streak in several years.  The dollar's weakness ought not be seen as a flight from the US as US asset prices--bonds and stocks--continue to do well. 
Nor do I think carry really captures what is goin…
Dollar Heavy, Sell Shallow Bounces Prevails Dollar Heavy, Sell Shallow Bounces Prevails Reviewed by Marc Chandler on April 28, 2011 Rating: 5
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Thinking about Haircuts

April 27, 2011
What a cruel month April has been to the peripheral debt markets. Greek 10-year yields have risen 349 bp, more than the cumulative increase over the previous 11 months. Portugal's 10-year yield has risen 180 bp this month and 190 bp over the previous 11 months. Of the three, Ireland has performed best with the 10-year yield rising 42 bp this m…
Thinking about Haircuts Thinking about Haircuts Reviewed by Marc Chandler on April 27, 2011 Rating: 5
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FX Developments

April 27, 2011
The US dollar is more mixed today, ahead of the FOMC statement and Bernanke press conference.  The euro pushed above $1.47 in Asia, partly on the back of cross rate gains against the yen following S&P cut of the sovereign outlook for Japan and the outlook for half dozen public institutions.  JGBs were not impacted, but the yen did soften.  
In…
FX Developments FX Developments Reviewed by Marc Chandler on April 27, 2011 Rating: 5
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FOMC Preview

April 26, 2011
Whatever thunder the FOMC meeting usually has is being stolen this week by the first of Bernanke's quarterly press conferences tomorrow. In fairness, the FOMC's statement is unlikely to change substantively from the mid-March statement. The press conference has potential to be more disruptive, but even here it is best to keep in mind the d…
FOMC Preview FOMC Preview Reviewed by Marc Chandler on April 26, 2011 Rating: 5
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Dollar Soft

April 26, 2011
The US dollar remains soft.  The euro has rebounded back above $1.46 after having been pushed briefly through the $1.45 level, despite the  periphery in Europe remaining under pressure.  Sterling is the main exception to the dollar weakness story and the dovish comments from BOE's Weale before the weekend, coupled with the softer  CBI trends s…
Dollar Soft Dollar Soft Reviewed by Marc Chandler on April 26, 2011 Rating: 5
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Japan Update

April 25, 2011
Since April 8th, the Japanese yen has been the strongest of the major currencies. Yet as is often the case, the yen's performance in the foreign exchange market does not appear to be a reflection of the Japanese economy.
On the contrary, the situation in Japan is arguably even worse than the somber economic data would suggest. The power shorta…
Japan Update Japan Update Reviewed by Marc Chandler on April 25, 2011 Rating: 5
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GDP, Policy Mixes and Sterling-Yen Trade Idea

April 25, 2011
The US and UK report their first estimates of Q1 11 GDP this week. While the US economic data, like ISM readings suggest the US economy is enjoying reasonably good momentum, the GDP components are distinctly softer and suggest a disappointing sub-2% reading. Headwinds caused by higher oil prices, which appears to have been a factor cutting into co…
GDP, Policy Mixes and Sterling-Yen Trade Idea GDP, Policy Mixes and Sterling-Yen Trade Idea Reviewed by Marc Chandler on April 25, 2011 Rating: 5
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Monday Update

April 25, 2011
The US dollar is mostly softer in relatively quiet turnover as many in Europe are still celebrating the Easter holidays.  The main weight on the dollar continues to emanate from divergent interest rate paths.   The premium Germany offers over the US on 2-year sovereign paper was 20 bp at the end of last year.  Last week it reached 116 bp.
Monday Update Monday Update Reviewed by Marc Chandler on April 25, 2011 Rating: 5
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On Vacation for Two Weeks On Vacation for Two Weeks Reviewed by Marc Chandler on April 08, 2011 Rating: 5
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Fedreal Resereve Custody Holdings

April 08, 2011
The Federal Reserve has long competed with the private sector in offering custodial services to foreign central banks. The Federal Reserve reports is custodial holdings every week. In the most recent week, through Wednesday, custody holdings of Agencies and Treasuries actually fell by about $250 mln.
This is a bit a quirk and is the exception to t…
Fedreal Resereve Custody Holdings Fedreal Resereve Custody Holdings Reviewed by Marc Chandler on April 08, 2011 Rating: 5
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Capital Offense

April 08, 2011
A disproportionate amount of mind share has been devoted to the financial aspects of the crisis. Investors and policy makers may be being distracted by this over-emphasis and leaving them vulnerable for other aspects of the crisis. The underlying challenge is sustaining aggregate demand in the face of a shift of income shares toward profits and aw…
Capital Offense Capital Offense Reviewed by Marc Chandler on April 08, 2011 Rating: 5
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Dollar Hit, Market Turns Even more Aggressive

April 08, 2011
Far from the "buy the rumor sell the fact" type of activity after the ECB I had thought likely, the market has turned even more aggressive.  Euribor futures strip is implying even more aggressive tightening than it was prior to the ECB meeting and Trichet's press conference.  The euro has been up to $1.4420.  The $1.4500-$1.4600 area…
Dollar Hit, Market Turns Even more Aggressive Dollar Hit, Market Turns Even more Aggressive Reviewed by Marc Chandler on April 08, 2011 Rating: 5
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Don't Fret about the Potential Closure of the US Federal Government

April 07, 2011
Without a compromise, the US Federal Government may close down over the weekend. (Personally I am hoping for a West Wing-esq resolution) This is more a story of inconvenience for some services that may be disrupted and political theater than substantive political,financial or economic risk. Even the furloughed government workers are likely to be p…
Don't Fret about the Potential Closure of the US Federal Government Don't Fret about the Potential Closure of the US Federal Government Reviewed by Marc Chandler on April 07, 2011 Rating: 5
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Trichet, Trichet, Trichet or Not

April 07, 2011
The US dollar is mixed, though the euro is clearly lower ahead of the ECB meeting and, more importantly, Trichet's press conference.  Every one and their sister expects a 25 bp hike, but the guidance going forward is important, or maybe not. Observers recall that Trichet's past suggest that a tightening cycle is not at hand has not proved …
Trichet, Trichet, Trichet or Not Trichet, Trichet, Trichet or Not Reviewed by Marc Chandler on April 07, 2011 Rating: 5
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Portugal Bites the Bullet?

April 06, 2011
Portugal's caretake Prime Minister bowed to international and domestic pressure and announced he was going to make a formal request for aid within the existing framework. This would seem to suggest a package, like Greece and Ireland, that covers the anticipated financing needs for three years. However, it is not clear that he has the authority…
Portugal Bites the Bullet? Portugal Bites the Bullet? Reviewed by Marc Chandler on April 06, 2011 Rating: 5
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Color on UK Surprise

April 06, 2011
The economic surprise of the day was UK industrial output, which fell 1.2% instead of rise the 0.4% the consensus expected. First let's look at the source of the disappointment and second, implications.
Weakness was seen in all three components of UK industrial output--mining, utilities and manufacturing. Mining and quarrying fell 2.8% and this…
Color on UK Surprise Color on UK Surprise Reviewed by Marc Chandler on April 06, 2011 Rating: 5
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Euro and Swiss franc Surge, Yen Weakens

April 06, 2011
The euro has shot higher, reaching 15 month highs, while the US dollar firms to 6 month highs against the yen.  The main driving for remains interest rates and interest rate expectations.  Strong German manufacturing underscores ECB rate hike inevitablity tomorrow, while the FOMC minutes and recent speeches by Fed leadership clearly indicates Trea…
Euro and Swiss franc Surge, Yen Weakens Euro and Swiss franc Surge, Yen Weakens Reviewed by Marc Chandler on April 06, 2011 Rating: 5
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Notes from Private Briefing with BOJ

April 05, 2011
The BOJ's rep office in NY invited a number of analysts to meet the Deputy Director of the stats office and hear a presentation about the economic impact from the recent disaster.
The key take away points from the BOJ is that disaster may not be as costly, but it will take a quite a while to fully recover. Specifically the govern initial estim…
Notes from Private Briefing with BOJ Notes from Private Briefing with BOJ Reviewed by Marc Chandler on April 05, 2011 Rating: 5
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DJ FX Trader Roundtable DJ FX Trader Roundtable Reviewed by magonomics on April 05, 2011 Rating: 5
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Canada Reserve Figures and More

April 05, 2011
The Bank of Canada reports its reserve figures every week. Today's report is interesting because it covers the joint intervention.
The Bank of Canada sold roughly $124 mln in yen. This follows the UK Treasury's admission that it sold about $150 mln of yen. The BOJ figures suggest it sold JPY692.5 bln (~$8.5 bln). What is particularly notew…
Canada Reserve Figures and More Canada Reserve Figures and More Reviewed by Marc Chandler on April 05, 2011 Rating: 5
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India: Foreign Investors Returning, Data Softens

April 05, 2011
Overseas investors have stepped up their purchases of Indian equities in recent days and have reversed the earlier outflows to be net purchasers here in 2011. Between last Thursday, March 31, Friday April 1 and yesterday April 4, foreign investors bought nearly $1 bln of Indian shares according to the Securities and Exchange Board. The net INR43.5…
India: Foreign Investors Returning, Data Softens India: Foreign Investors Returning, Data Softens Reviewed by Marc Chandler on April 05, 2011 Rating: 5
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Dollar Mostly Firmer, Sterling Higher

April 05, 2011
The US dollar is firmer against most of the major and emerging market currencies, with the notable exception being sterling, which has ben boosted a much stronger than expected services PMI (57.1 vs 52.6 in Feb).

Sterling reached $1.6250  but is over-extended on the short-term basis and a break back below $1.6200 would suggest the day's high i…
Dollar Mostly Firmer, Sterling Higher Dollar Mostly Firmer, Sterling Higher Reviewed by Marc Chandler on April 05, 2011 Rating: 5
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Five-Year/Five Year Forwards: US and Europe

April 04, 2011
The five-year/five year forward has been cited by various officials in the US and Europe as a useful metric of inflation expectations. It is interesting to review where they are in light of the ECB's likely hike this week and increased talk about inflation in the US as commodity prices, especially oil prices, continue to edge higher.
The US 5-…
Five-Year/Five Year Forwards: US and Europe Five-Year/Five Year Forwards: US and Europe Reviewed by Marc Chandler on April 04, 2011 Rating: 5
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The ECB and the Fed

April 04, 2011
If there is a single factor that was the main driver of US dollar in the first quarter, it would be the divergence between the trajectory of US and European monetary policy. The Federal Reserve is still engaged in easing monetary policy through unconventional purchase of Treasuries.
On its current path, QEII is worth something on the magnitude of …
The ECB and the Fed The ECB and the Fed Reviewed by Marc Chandler on April 04, 2011 Rating: 5
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Monday Overview

April 04, 2011
Out visiting clients in the second half of last week.  Still managed to monitor developments.  There are a number of take aways.  First, the best quarterly jobs performance since 2004 in the US failed to give the dollar a sustained lift.  This is because, with NY Fed's Dudley help, the market was reminded that US monetary policy has not yet re…
Monday Overview Monday Overview Reviewed by Marc Chandler on April 04, 2011 Rating: 5
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