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Financial Repression

May 31, 2011
With crisis comes new vocabulary. Out of the Great Depression came the use of the word "recession" to denote the end of a business cycle rather than crises, panics, and depressions, which had previously been used.
The recent crisis has given rise to many new words, including "haircut", "re-profiling" and the "Vie…
Financial Repression Financial Repression Reviewed by Marc Chandler on May 31, 2011 Rating: 5
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The Significance of the Euro: A Primer

May 31, 2011
Europe’s monetary union is simply one of the most important experiments of our time. Can the countries whose wars against each other shaped to a large extent the past millennium, if not longer, form a sustainable monetary union without political union?
This experiment is being tested currently under conditions of dramatic imbalances among the part…
The Significance of the Euro: A Primer The Significance of the Euro: A Primer Reviewed by Marc Chandler on May 31, 2011 Rating: 5
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Dollar Mostly Heavy, Euro Optimism, Positive Technicals

May 31, 2011
The US dollar is mostly lower, led by the euro.  The news stream has turned more positive regarding Greece. 
First reports suggest that part of the conditions for new aid will likely include a loss of sovereignty.  Previously, Greece's statistical collection agency had to have a Eurostat representative.  Now it seems that European representati…
Dollar Mostly Heavy, Euro Optimism, Positive Technicals Dollar Mostly Heavy, Euro Optimism, Positive Technicals Reviewed by Marc Chandler on May 31, 2011 Rating: 5
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Dollar Upside Move Over?

May 27, 2011
The US dollar has generally trended higher in recent weeks, but provided that it does not recover today, I suspect its upside correction may very well be over.  In euro is trading at new highs for the week today and the Australian dollar and British pound are at new two week highs.   Frankly, there is some contradictory evidence and it needs to be…
Dollar Upside Move Over? Dollar Upside Move Over? Reviewed by Marc Chandler on May 27, 2011 Rating: 5
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Juncker is Talking Junk...Again, Sending Euro Lower

May 26, 2011
The leader of the euro zone finance ministers Juncker is again triggering heightened anxiety and cutting short the euro's push above $1.4200 for new highs this week.  Juncker is quoted saying that Greece will not make its deficit target this year and more importantly may not get the next tranche of aid from the EU/IMF.  The euro has dropped mo…
Juncker is Talking Junk...Again, Sending Euro Lower Juncker is Talking Junk...Again, Sending Euro Lower Reviewed by Marc Chandler on May 26, 2011 Rating: 5
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Dollar Setback

May 26, 2011
The US dollar is mostly lower today.  The typically short run relationships don't see to be working well at the moment, which in turn keep conviction levels low.  The euro is at the highs for the week and sterling is actually at its best level since May12.  Equities are mostly higher, while commodities are mostly lower.  US-German 2-year sprea…
Dollar Setback Dollar Setback Reviewed by Marc Chandler on May 26, 2011 Rating: 5
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Turn Around Tuesday Challenged?

May 24, 2011
Turn Around Tuesday unfolded in Asia and early Europe as equity markets gain (after the 1% loss in the US on Monday) and the euro and dollar bloc currencies rallied.  However, news that Greek opposition leader Samaras opposed additional austerity measures, but would suipport state asset sales, is proving challenging. This stalled the euro's mo…
Turn Around Tuesday Challenged? Turn Around Tuesday Challenged? Reviewed by Marc Chandler on May 24, 2011 Rating: 5
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CNBC: Should You Invest in Europe? CNBC: Should You Invest in Europe? Reviewed by magonomics on May 23, 2011 Rating: 5
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Dollar Extends Gains, Euro Pounded

May 23, 2011
The US dollar is broadly higher.  Three events have taken place and they all point in the same direction:  1) The three-notch downgrade of Greece on Friday was following by shift in the Italian debt outlook to negative from stable, 2)  Spanish and German elections which weaken the current governments, 3) softer than expected euro zone and Chinese …
Dollar Extends Gains, Euro Pounded Dollar Extends Gains, Euro Pounded Reviewed by Marc Chandler on May 23, 2011 Rating: 5
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Ratings, Who Next?

May 22, 2011
News that S&P had put the US on credit watch saw some hand wringing and chin wagging, but the investor class did not sell US Treasuries.  As noted previously, just before that Fitch had put China's local long term debt on credit watch for possible downgrade and it went unobserved and uncommented on by many.  Before the weekend as the euro …
Ratings, Who Next? Ratings, Who Next? Reviewed by Marc Chandler on May 22, 2011 Rating: 5
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IMF Leadership and German Debt Problems

May 20, 2011
Europe will always have an excuse for a European should head up the IMF.   They will be reluctant to allow some one from the emerging countries take the top spot, but that day is coming. Frankly I don't think it really matters. DSK lost his last bid for French presidency. He was given the IMF as a consolation prize. Largarde will likely be out…
IMF Leadership and German Debt Problems IMF Leadership and German Debt Problems Reviewed by Marc Chandler on May 20, 2011 Rating: 5
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Spain--Deficit Problems Worse Next Week than Last Week?

May 20, 2011
European officials have been successful in establishing a firewall around Spain and insulating it from the crisis in the peripheral. That firewall may be tested shortly.
Spain holds local and regional elections on Sunday ahead of the national election next year. Socialist Prime Minister Zapatero has already indicated he will not seek re-election. …
Spain--Deficit Problems Worse Next Week than Last Week? Spain--Deficit Problems Worse Next Week than Last Week? Reviewed by Marc Chandler on May 20, 2011 Rating: 5
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Swiss Franc Eclipses the Euro

May 20, 2011
The decline in the euro after firming in Asia to almost $1.4350 was the dominant feature in the European session and into early in the North American session today. However it is now being eclipsed by developments in Hungary.
Specifically, Hungary's government and banks have reportedly reached an agreement to fix the CHF-HUF exchange rate for …
Swiss Franc Eclipses the Euro Swiss Franc Eclipses the Euro Reviewed by Marc Chandler on May 20, 2011 Rating: 5
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Euro Drops, Dollar Flat

May 20, 2011
There is one feature of the foreign exchange market and that is the euro's failure at the $1.4350 resistance area, that corresponds to the 50-day moving average and the high from last Friday when the euro posted an outside down day.  After spending the quiet Asian session on firm footing, as soon as Europe came in they sold it off. 
Euro Drops, Dollar Flat Euro Drops, Dollar Flat Reviewed by Marc Chandler on May 20, 2011 Rating: 5
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Currencies and Oil

May 19, 2011
The relationship between oil and currencies is no more stable that the relationship between the S&P 500 and currencies. As we noted yesterday in our look at the correlation between a handful of currencies and the S&P 500, it is not that there is no relationship, but rather that the relationship is far from stable. One cannot deduce the cor…
Currencies and Oil Currencies and Oil Reviewed by Marc Chandler on May 19, 2011 Rating: 5
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Dollar Down, Mostly

May 19, 2011
The US dollar has come under pressure, but well within the recent ranges, as the break of the greenback's upside momentum this week is slowly encouraging the bears to re-emerge.   The FOMC minutes, which got so much ink play, discussed exit strategies but not the key for investors--timing. 
Weaker than expected Japanese GDP figures for the Jan…
Dollar Down, Mostly Dollar Down, Mostly Reviewed by Marc Chandler on May 19, 2011 Rating: 5
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Currencies and Equities

May 18, 2011
Many medium term investors are interested in the relationship between currencies and the equity market. There is also a sense among many observers that the market is moving in waves of risk on and risk off. To help shed light on the issue, we looked at the correlation between several currencies and the US S&P 500. From a methodological point o…
Currencies and Equities Currencies and Equities Reviewed by Marc Chandler on May 18, 2011 Rating: 5
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Mixed Dollar Remains Choppy

May 18, 2011
The US dollar is mixed against the majors.  This makes talk of risk-on and risk-off a greater simplification than is often the case. The yen is stronger and the Swiss franc is flattish to softer.  Sterling and the Australian dollar are lower, but the euro and New Zealand dollar are stronger.  Commodities and equities are higher and are firmer. 
The…
Mixed Dollar Remains Choppy Mixed Dollar Remains Choppy Reviewed by Marc Chandler on May 18, 2011 Rating: 5
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More Thoughts on Greece

May 17, 2011
The European finance ministers approved an aid package for Portugal. Ireland is still seeking better terms. Although France's effective corporate tax rate is lower than Ireland's, Sarkozy is reportedly refusing to sanction some easier terms (lower rates extension of maturities on the aid package) unless Ireland makes a compromise on its ta…
More Thoughts on Greece More Thoughts on Greece Reviewed by Marc Chandler on May 17, 2011 Rating: 5
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Europe's Political Climate Impacts the Debt Crisis Response

May 17, 2011
The policy response to the European debt crisis is critical and that response is function of European politics. There have been a number of developments in European politics that investors should be aware of.
Germany: The crisis has revealed the Germany's economic and financial power, but the elite and people seem divided about projecting comm…
Europe's Political Climate Impacts the Debt Crisis Response Europe's Political Climate Impacts the Debt Crisis Response Reviewed by Marc Chandler on May 17, 2011 Rating: 5
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Dollar Mixed, Underlying Themes Reemerge

May 17, 2011
The US dollar is broadly mixed, losing ground against the euro, sterling and dollar bloc, but gaining against the the Swiss franc and even more so against the Japanese yen.  Commodity prices are firmer.  Equities were lower in Asia and began lower in Europe before recovering.  
The dollar reached its best level against the yen since April 27.  The …
Dollar Mixed, Underlying Themes Reemerge Dollar Mixed, Underlying Themes Reemerge Reviewed by Marc Chandler on May 17, 2011 Rating: 5
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Dollar Mixed on Monday

May 16, 2011
The dollar is mostly firmer, but without much momentum as the market awaits fruther developments. 
The euro recovered from the dip below $1.4050, but ran out of steam near $1.4150, which was previously support.    The European finance ministers meeting begins shortly, and approval of Portugal's package may be the only concrete action that emer…
Dollar Mixed on Monday Dollar Mixed on Monday Reviewed by Marc Chandler on May 16, 2011 Rating: 5
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European Leaders Hanging from their own Petard

May 15, 2011
European leaders are hanging from their petard.The aid package put together barely a year ago, and belatedly at that, is proving insufficient for Greece.The Irish package is hardly six months old and is under review.Portugal’s package is likely to receive endorsement by the euro zone finance ministers at the summit on Monday and Tuesday.  The euro…
European Leaders Hanging from their own Petard European Leaders Hanging from their own Petard Reviewed by Marc Chandler on May 15, 2011 Rating: 5
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Big Picture Thinking: The Euro, Greece, Europe, ECB

May 14, 2011
There have been a number of developments in Europe over the past several days and the euro has broken down. Its nine cent decline in nine days demands attention. The 5 and 20 day moving average have generated bearish technical signals, led by sterling, followed by the euro, and confirmed by the Swiss franc. Other bearish technical developments hav…
Big Picture Thinking: The Euro, Greece, Europe, ECB Big Picture Thinking: The Euro, Greece, Europe, ECB Reviewed by Marc Chandler on May 14, 2011 Rating: 5
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Market Lacks Conviction

May 10, 2011
The US dollar is mostly firmer today, but the market lacks near-term conviction.   After last Friday's unscheduled mini-EU summit, it seemed like key officials recognized that something more needs to be done for and with Greece, shy of asking it to leave the monetary union and shy of a default, but today it is far less clear that the political…
Market Lacks Conviction Market Lacks Conviction Reviewed by Marc Chandler on May 10, 2011 Rating: 5
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Importance of Boeing

May 09, 2011
Given the size of the US economy, it is not usual for a particular company to impact macro economic data. Yet Boeing's report before the weekend has negative implication for April durable and factory orders data, and to a less extent US exports.
Arguably the Boeing report was overshadowed by the US jobs report and the speculation about Greece&…
Importance of Boeing Importance of Boeing Reviewed by Marc Chandler on May 09, 2011 Rating: 5
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CNY/CNH: Chinese Financial Review

May 09, 2011
On April 18, S&P cut its credit outlook for US Treasuries from stable to negative. This was seen as a clear warning that if the US politicos cannot agree on a sustainable fiscal adjustment plan, the US triple-A rating was at risk. This shot across the bow, on the heels of President Obama’s proposed alternative to the Ryan plan, was widely disc…
CNY/CNH: Chinese Financial Review CNY/CNH: Chinese Financial Review Reviewed by Marc Chandler on May 09, 2011 Rating: 5
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Euro Recovery Tentative

May 09, 2011
The US dollar is softer, but in terms of price action there are two developments.  The first is the recovery of the euro from the sell-off before the weekend on the Greek exit rumors.  The euro recover to a high near $.14440 in early Europe before steadying.  The second feature is the strength of the dollar bloc, perhaps haleped by the recovery in…
Euro Recovery Tentative Euro Recovery Tentative Reviewed by Marc Chandler on May 09, 2011 Rating: 5
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Significance of the EU Gathering on May 6

May 08, 2011
The unscheduled meeting between several euro zone finance ministers, Eurogroup head Juncker, EU Monetary Affairs Commissioner Rehn, ECB President Trichet and a few other senior officials was important.  It marks the official recognition that the year-old Greek aid package is not working. This does not mean that Greece is about to exit monetary uni…
Significance of the EU Gathering on May 6 Significance of the EU Gathering on May 6 Reviewed by Marc Chandler on May 08, 2011 Rating: 5
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Update ECB Poliltics

May 06, 2011
A German paper is reporting that Chancellor Merkel is not accepting the fait accompli that is being delivered to have Bank of Italy Governor Draghi replace Trichet when his term expires in early Q4.
Since Weber submitted his resignation, Merkel has been without a German candidate for ECB head. Recall that previously she had done a lot of "hor…
Update ECB Poliltics Update ECB Poliltics Reviewed by Marc Chandler on May 06, 2011 Rating: 5
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Dollar Consolidates Yesterday's Gains

May 06, 2011
The US dollar is largely steady, having trouble extending yesterday's recovery but not giving much back either.  The Australian dollar is a notable exception, boosted by hawkish guidance from the central bank.  This has strengthened market conviction for additional rate hikes. 
The re-opening of Japanese markets has  coincided with a somewhat s…
Dollar Consolidates Yesterday's Gains Dollar Consolidates Yesterday's Gains Reviewed by Marc Chandler on May 06, 2011 Rating: 5
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Trichet Less Dovish

May 05, 2011
Trichet's comments seem less hawkish than the market had anticipated and the euro is coming off sharply. While recognizing policy remains accommodative, he is using none of the word cues that point to a June hike. Euribor yields has fallen 8-13 bp in response to that sense. He said that price pressures are not broad based. This is forcing the …
Trichet Less Dovish Trichet Less Dovish Reviewed by Marc Chandler on May 05, 2011 Rating: 5
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Choppy Price Action in FX

May 05, 2011
There are a couple of standout developments in the FX market today.
First, the yen has strengthened and now the dollar is trading below JPY80.  This is the lowest level since the coordinated intervention back in March.  However, the move is orderly and volatility is only slightly firmer, but well off the pre-intervnetion levels.  I understand the p…
Choppy Price Action in FX Choppy Price Action in FX Reviewed by Marc Chandler on May 05, 2011 Rating: 5
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Dollar Mixed

May 04, 2011
The US dollar is mixed today.  The dollar-bloc is softer, led by the New Zealand dollar.  Th yen and Swiss franc are slightly softer as well.  The euro is firmer, as the pullback to $1.4780 in Asia was snapped up.  The persistent purchases of euro on relatively modest corrections and the rising interest rates suggest the late positioning in favori…
Dollar Mixed Dollar Mixed Reviewed by Marc Chandler on May 04, 2011 Rating: 5
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Thoughts on Portugal's Package

May 03, 2011
Portugal's caretaker Prime Minister Socrates appears to have negotiated a better deal than Greece and Ireland.  The plan actually sanctions larger deficits that Socrates are pressed for, under pressure pressure from the EU and ECB when he was a minority government.  This is simply astounding.  
Less than two months ago, Socrates proposed addit…
Thoughts on Portugal's Package Thoughts on Portugal's Package Reviewed by Marc Chandler on May 03, 2011 Rating: 5
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Odds the Euro Reaches $1.60

May 03, 2011
The euro is struggling to extend its advancing streak to the eleventh session. However, the main driver, of divergent monetary policy stances remains intact. In fact, news today that 3-month Euribor is at 2-year highs and 3-month Libor was fixed at its lowest level since March 2010, illustrates this force.
The word signals by Trichet on Thursday w…
Odds the Euro Reaches $1.60 Odds the Euro Reaches $1.60 Reviewed by Marc Chandler on May 03, 2011 Rating: 5
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Euro Streak Ends ?

May 03, 2011
The euro has advanced for ten consecutive sessions coming into today.  Yesterday's failure to establish a foothold above $1.49 appears to have triggred a bout of profit-taking and the euro has retreated to yesterday's lows. 
Profit-taking is also being seen in the dollar bloc.  The Reserve Bank of Australia left rates on hold for the sixth…
Euro Streak Ends ? Euro Streak Ends ? Reviewed by Marc Chandler on May 03, 2011 Rating: 5
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CNBC: Turning Point for Commodities & Dollar? CNBC: Turning Point for Commodities & Dollar? Reviewed by magonomics on May 02, 2011 Rating: 5
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Catalysts for Change in the FX Driver

May 02, 2011
The main driver that has led to a persistent decline in the US dollar through the last several months is the divergent thrust of monetary policy. It has left the Federal Reserve as a laggard in the global cycle and, in turn, has left the dollar with little support. Indeed after performing well following the announcement of QEII last November, the …
Catalysts for Change in the FX Driver Catalysts for Change in the FX Driver Reviewed by Marc Chandler on May 02, 2011 Rating: 5
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Dollar Mostly Firmer, but Euro even Firmer

May 02, 2011
The greenback is licking its recently inflecting wounds and has begun the week on somewhat firmer footing against most of the majors, except the euro and Swedish krona.  London markets are closed and so turnover appears soemwhat lighter than usual.  The general tone is consolidative in nature.  Outside of the death of Bin Laden, there were three d…
Dollar Mostly Firmer, but Euro even Firmer Dollar Mostly Firmer, but Euro even Firmer Reviewed by Marc Chandler on May 02, 2011 Rating: 5
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