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FX is in Slo Mo

August 31, 2011
The foreign exchange market is a bit like a soap opera these days.  There is a major/macro story arc. Currently that is one of slowing or subdued growth among the major industrialized countries.  It is characterized by ongoing but slow recovery from the 2007-2009 financial and economic crisis.  And this despite historic amounts of fiscal and monet…
FX is in Slo Mo FX is in Slo Mo Reviewed by Marc Chandler on August 31, 2011 Rating: 5
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U.S. Spending Eases Q3 Worries

August 29, 2011
News that US personal consumption expenditures rose 0.8% in July should go a long way toward easing anxiety that the world;s largest economy is slipping into a new contraction.  It means that even if Aug and Sept consumption slips back to trend (~0.2%) and no other major surprises, Q3 GDP is looking no lower than 1.5%.  This of course is nothing t…
U.S. Spending Eases Q3 Worries U.S. Spending Eases Q3 Worries Reviewed by Marc Chandler on August 29, 2011 Rating: 5
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Nothing New from Bernanke

August 26, 2011
The much anticipated Bernanke speech in Jackson Hole is under-whelming. He did not break any new ground. While much of the recent history is re-hashed, the only forward looking guidance is to reaffirm the recent FOMC statement and boilerplate language about being prepared to deploy its range of tools as appropriate. He did not go into much detail …
Nothing New from Bernanke Nothing New from Bernanke Reviewed by Marc Chandler on August 26, 2011 Rating: 5
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Why I am Going to Worry about Italy on my Summer Vacation

August 26, 2011
I am about to take a two week vacation (though will update the blog). I had some time off earlier in the summer, but it was dominated by the concerns of a father of a Little League baseball pitcher. Rather than worrying about mechanics and scoring, I will be contemplating the tragedy that is Europe and I think Italy is the keystone.
Italy is the l…
Why I am Going to Worry about Italy on my Summer Vacation Why I am Going to Worry about Italy on my Summer Vacation Reviewed by Marc Chandler on August 26, 2011 Rating: 5
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Waiting for Godot

August 26, 2011
Bernanke's Jackson Hole speech is the main event.   The way the market has traded this week, despite most observers playing down the likelihood of a new policy announcement, many are positioned for something.  Disappointment would still seem to be the greater  risk.   The S&P 500 is up 1.6% on the week even after yesterday's decline of…
Waiting for Godot Waiting for Godot Reviewed by Marc Chandler on August 26, 2011 Rating: 5
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CNBC: Trading Block, Gold Broken for Good? CNBC: Trading Block, Gold Broken for Good? Reviewed by magonomics on August 25, 2011 Rating: 5
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Thursday in FX: Wait and See Mode

August 25, 2011
Trading in the major currencies is choppy but largely directionless.  Bernanke's speech tomorrow is seen as the near-term key.  The Greek situation is still devolving as the dispute over collateral threatens to transform the small orderly restructuring into a larger disorderly event.   Yet the euro remains firm, above the 20-day moving average…
Thursday in FX: Wait and See Mode Thursday in FX: Wait and See Mode Reviewed by Marc Chandler on August 25, 2011 Rating: 5
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Looking for Alternatives: Indonesia

August 24, 2011
The favorite safe havens have been the Swiss franc and Japanese yen. The policy response has encouraged some participants to look for an alternative.
Norway is often seen as an alternative safe haven. It is a large net international creditor and has relatively financial system and robust economy. New oil finds in the North Sea and the national oil…
Looking for Alternatives: Indonesia Looking for Alternatives: Indonesia Reviewed by Marc Chandler on August 24, 2011 Rating: 5
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Much Heat, Little Light

August 24, 2011
There have been a number of important developments, but the US dollar remains confined to relatively narrow trading ranges.  There is a heightened degree of anxiety that does not appear to be being reflected in the currency markets.  It is not simply Bernanke's Jackson Hole speech on Friday, ahead of which markets are trading as if they are an…
Much Heat, Little Light Much Heat, Little Light Reviewed by Marc Chandler on August 24, 2011 Rating: 5
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Bloomberg: Global Currency Markets, U.S. Economy, Fed Policy Bloomberg: Global Currency Markets, U.S. Economy, Fed Policy Reviewed by magonomics on August 23, 2011 Rating: 5
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Now for Something Completely Different: WPA

August 23, 2011
With the US economy stalling in H1 and poor survey data, it is hardly surprising that Bernanke's Jackson Hole speech is anxiously awaited for fresh signals about how the Federal Reserve will respond.
Yet, unlike a year ago, the risk of deflation has all but disappeared. Core CPI is just below 2% and core PCE in Q2 stood at 2.1% (compared with 0…
Now for Something Completely Different: WPA Now for Something Completely Different: WPA Reviewed by Marc Chandler on August 23, 2011 Rating: 5
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Sentiment and Real Activity

August 22, 2011
Sentiment indicators have been unequivocally poor in the US, but real sector data appears to be faring somewhat better.   This point is underscored by today's releases of the July Chicago Fed's National Activity Index.  The market expected a -0.48 reading and it came out at -0.06.  This actually represents an increase from the upwardly rev…
Sentiment and Real Activity Sentiment and Real Activity Reviewed by Marc Chandler on August 22, 2011 Rating: 5
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Sweden Update

August 22, 2011
Capital preservation has once again has become mantra. The safety offered by Japan and Switzerland are meeting resistance from policy makers. As the market looks for alternatives, the Swedish krona has much to offer, including a relatively robust economy, low public debt and a current account surplus.
However, the economy is slowing, led by indus…
Sweden Update Sweden Update Reviewed by Marc Chandler on August 22, 2011 Rating: 5
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Thoughts at the End of a Tumultuous Week

August 19, 2011
This has been an extremely tumultuous week throughout the capital and commodity markets. August itself has been a cruel month. The German stock market has lost around a quarter of its value. A marked slow down in the US and Europe in Q2 has given rise double dip fears in the former and compounding difficulty achieving deficit targets in the latter…
Thoughts at the End of a Tumultuous Week Thoughts at the End of a Tumultuous Week Reviewed by Marc Chandler on August 19, 2011 Rating: 5
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Yen Update

August 18, 2011
The Japanese economy is recovering from disruption of the earthquake/tsunami. Supply chains have mostly been re-established. The economic contraction is likely to end this quarter. However, the yen strength is not a function of the domestic economic performance. Yet market participants seem to intuitively understand the yen's strength more tha…
Yen Update Yen Update Reviewed by Marc Chandler on August 18, 2011 Rating: 5
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Canada Update

August 17, 2011
The US dollar fell to 4-year lows against the Canadian dollar late last month near CAD0.94. In the tumultuous markets in the first half of August, the US dollar rallied about 6.5% into August 9th to briefly poke through CAD1.0 for the first time since early Feb. With today's weakness, the US dollar has surrendered a little more than a third of…
Canada Update Canada Update Reviewed by Marc Chandler on August 17, 2011 Rating: 5
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Wednesday's Buzz

August 17, 2011
The global capital markets may be more stable than a week ago, but the tone remains fragile. Asia equities reversed earlier losses and the MSCI Asia Pacific rose about 0.5%, for the third consecutive gain. Of note, foreign investors were net buyers of Philippine shares for the first time since Aug 3. European bourses are mostly lower as yesterday’…
Wednesday's Buzz Wednesday's Buzz Reviewed by Marc Chandler on August 17, 2011 Rating: 5
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CNBC: Euro Banks and China's Currency CNBC: Euro Banks and China's Currency Reviewed by magonomics on August 16, 2011 Rating: 5
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Interesting Case of Malaysia

August 16, 2011
Malaysia will report July CPI figures and Q2 GDP data on Wednesday. The data is expected to show that inflation pressures remain near 2-year highs of around 3.5% year-over-year. With the o/n policy rate at 3.0%, Bank Negara has been under pressure to raise rates. It has hiked rates once this year after three hikes last year.
However, what blunts t…
Interesting Case of Malaysia Interesting Case of Malaysia Reviewed by Marc Chandler on August 16, 2011 Rating: 5
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Merkel /Sarkozy, King's Letter and Asia Update

August 16, 2011
Global equities are unable to match yesterday’s US 2% rise which put the S&P 500 close back up 1200 for the first time since August 3. Asian shares did manage to rise for the second consecutive session, but the gains were trimmed following news of Germany’s disappointing Q2 GDP of 0.1% (quarter-over-quarter) and the MSCI Asia-Pacific Index fin…
Merkel /Sarkozy, King's Letter and Asia Update Merkel /Sarkozy, King's Letter and Asia Update Reviewed by Marc Chandler on August 16, 2011 Rating: 5
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CNBC: Markets, So Far so Good CNBC: Markets, So Far so Good Reviewed by magonomics on August 15, 2011 Rating: 5
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Mexico Update: Peso Poised to Recover

August 15, 2011
The Mexican peso has been among the worst performing of the more actively trading currencies against the dollar since the start of the month. Yet in the coming weeks, if a more stable tone in the markets emerge, the peso is a likely candidate for out-performance.
There are two main considerations for this optimism. First, the slide in the peso of …
Mexico Update: Peso Poised to Recover Mexico Update: Peso Poised to Recover Reviewed by Marc Chandler on August 15, 2011 Rating: 5
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Bretton Woods, R.I.P.

August 15, 2011
Richard Nixon unilaterally closed the gold window 40 years ago today.. No longer would the U.S. permit other countries to exchange their dollars for gold and by breaking that link, he ended the Bretton Woods international financial regime and ushered floating exchange rates that characterize the modern era.
Since nearly the day it died, there have…
Bretton Woods, R.I.P. Bretton Woods, R.I.P. Reviewed by Marc Chandler on August 15, 2011 Rating: 5
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Five Key Events for the New Week

August 15, 2011
There are five key events for investors this week. The first is the size of the ECB bond purchases. The market does not learn about these directly, but only indirectly through the size of the ECB’s sterilization operation. Until the resumption of its bond purchases, the ECB was sterilizing about 74 bln euros. The consensus is that the ECB’s announ…
Five Key Events for the New Week Five Key Events for the New Week Reviewed by Marc Chandler on August 15, 2011 Rating: 5
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A Euro Bond without Treasty Changes?

August 12, 2011
It has been long and widely recognized that a critical flaw in Europe is a monetary union without fiscal union. Although the founders of European integration back in the late 1950s seems to see the customs union as simply the first step toward greater union and were drawn to the idea of a United States of Europe, the desire seems to be lost on the…
A Euro Bond without Treasty Changes? A Euro Bond without Treasty Changes? Reviewed by Marc Chandler on August 12, 2011 Rating: 5
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Three Thoughts for Friday

August 12, 2011
The past two weeks have seen large disruptions in the global capital markets and various policy responses.  Market participants are having a difficult time getting a handle on these developments.  There are three things investors should consider before the weekend:  1) German-French meeting next week is suggestive of a new initiative, 2) FOMC deci…
Three Thoughts for Friday Three Thoughts for Friday Reviewed by Marc Chandler on August 12, 2011 Rating: 5
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Thoughts on the Big Picture: The Ugly Contest Just got Uglier

August 11, 2011
Summers are supposed to be fun and relaxing. Not this one. A combination of events in late July and early August caused market strains that have not been seen since those dark days in the fall of 2008 and winter of 2009. Policy makers responded, though options are more limited. The risk is that the investment waters remain treacherous into next ye…
Thoughts on the Big Picture: The Ugly Contest Just got Uglier Thoughts on the Big Picture: The Ugly Contest Just got Uglier Reviewed by Marc Chandler on August 11, 2011 Rating: 5
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Where There is So Much Smoke, Perhaps There is a Fire

August 11, 2011
There are two spotlights in Europe today. France and Switzerland and their problems are intertwined. Despite denials by various French officials, the market suspects there is sufficient smoke to indicate a fire. Reuters reports that an Asian bank has cut credit lines to top French banks and other counter-parties are considering the same.
The Frenc…
Where There is So Much Smoke, Perhaps There is a Fire Where There is So Much Smoke, Perhaps There is a Fire Reviewed by Marc Chandler on August 11, 2011 Rating: 5
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New Pressures

August 10, 2011
Market speculation that France was about to be downgraded has effectively been denied by the three top rating agencies, but it has offered little relief to the markets or to European (including French) bank shares.  There is speculation that a French bank is having serious difficulty and some talk of a French bank raising cash by selling gold forw…
New Pressures New Pressures Reviewed by Marc Chandler on August 10, 2011 Rating: 5
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Stabilization Taking Hold

August 10, 2011
Intra-day activity may still be a bit unsettled, but some semblance of stabilization is emerging.   Global equity markets are advancing in the wake of yesterday's neck-breaking moves in the US that left the S&P 500 4.75% higher net-net on the day.  Other bourses haven't matched that, but the direction is generally the same.   The dolla…
Stabilization Taking Hold Stabilization Taking Hold Reviewed by Marc Chandler on August 10, 2011 Rating: 5
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After the FOMC: Norway and the UK

August 09, 2011
Last week, the policy focus was on the Swiss National Bank, the BOJ and ECB. The SNB lowered its 3-month libor target and pumped up its money supply (sight deposits). This action seemed to force the BOJ's hand. Once the moved, if the BOJ didn't, it would have increased the upside risk on the yen as the "easier" safe haven play. T…
After the FOMC: Norway and the UK After the FOMC: Norway and the UK Reviewed by Marc Chandler on August 09, 2011 Rating: 5
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Markets Trying to Stabilize

August 09, 2011
The capital markets are beginning to show their first signs of stabilizing after follow through selling of equities and major foreign currencies, save the safe haven yen and Swiss franc, materialized. The market remains nervous and the situation remains fragile.
European economic data was poor, but the European bourses are recovering from the stee…
Markets Trying to Stabilize Markets Trying to Stabilize Reviewed by Marc Chandler on August 09, 2011 Rating: 5
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ECB's Pyrrhic Victory

August 08, 2011
The ECB has succeed in driving down Spanish and Italian yields sharply today. Italy's generic 2 and 10-year yields are off around 80 bp. Spanish yields have declined even more dramatically, with the 2-year off 110 bp and the 10 year yields off almost 90 bp.
These are greater declines than many would have expected. Some observers are trying to …
ECB's Pyrrhic Victory ECB's Pyrrhic Victory Reviewed by Marc Chandler on August 08, 2011 Rating: 5
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S&P Downgrade Implications and Possible Policy Response

August 07, 2011
Standard and Poor’s downgraded U.S. creditworthiness to AA+, becoming the first to remove the triple-A status from the world’s largest economy and largest debtor. Moreover, a negative outlook has been retained. The element of surprise lays in the timing more the in substance of the decision. Many, like us had expected a decision to be made after t…
S&P Downgrade Implications and Possible Policy Response S&P Downgrade Implications and Possible Policy Response Reviewed by Marc Chandler on August 07, 2011 Rating: 5
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BOJ, ECB Surprises, Makes for Treacherous Markets

August 04, 2011
The failure of euro zone and US officials to give the markets any sense of meaningful closure to their policy challenges is eliciting a response by central bankers.  Switzerland got the ball rolling yesterday, with a new attempt at quantitative easing and symbolic rate cut.  It has been joined by the BOJ, which announced an increase in its asset p…
BOJ, ECB Surprises, Makes for Treacherous Markets BOJ, ECB Surprises, Makes for Treacherous Markets Reviewed by Marc Chandler on August 04, 2011 Rating: 5
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Swiss Surprise, but France More Telling

August 03, 2011
The Swiss National Bank took the market by surprise by announcing what amounts to another version of quantitative easing.  Its first attempt was via foreign bond purchases and sales of Swiss franc for euro and dollars.  It failed miserably and leaving the august institution with significant paper losses.
This new attempt includes: 1) a formal ad…
Swiss Surprise, but France More Telling Swiss Surprise, but France More Telling Reviewed by Marc Chandler on August 03, 2011 Rating: 5
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Atlantic Council Interview: US Budget Deal Atlantic Council Interview: US Budget Deal Reviewed by magonomics on August 02, 2011 Rating: 5
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US Economic Headwinds Restrain the Dollar

August 02, 2011
The US dollar advanced in Asia and Europe but news of the first outright drop in US consumption in 2 years has seen the greenback surrender much of its earlier gains.  
June personal consumption expenditures fell 0.2% in June.  The consensus had looked for a small increase. Consumer spending on durable goods, a good cyclical indicator, has been fal…
US Economic Headwinds Restrain the Dollar US Economic Headwinds Restrain the Dollar Reviewed by Marc Chandler on August 02, 2011 Rating: 5
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A Few Observations about the US Deficit Deal

August 01, 2011
The deal that has been struck by party leaders in the US now needs rank and file support.  Some modifications even at this late date are possible, but there are several points that are worth considering at this juncture.  
First, even though the US has technically defaulted in the past (a similar episode as now took place in the late 1970s) a signi…
A Few Observations about the US Deficit Deal A Few Observations about the US Deficit Deal Reviewed by Marc Chandler on August 01, 2011 Rating: 5
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Two Major Developments at Start of the Week

August 01, 2011
There have been two major developments.  The first is what appears to be the basis of a US debt deal that will avoid a technical default and may in fact avoid an imminent downgrade of its credit rating.  The second development is batch of purchasing managers surveys that warn of powerful economic headwinds.
Two Major Developments at Start of the Week Two Major Developments at Start of the Week Reviewed by Marc Chandler on August 01, 2011 Rating: 5
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