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The Danish Dilemma: What the Euro Crisis has Wrought

May 31, 2012
Denmark, like Switzerland, offers negative interest rates.  This is not just bills either, but in Denmark's case, rates are negative through the 2-year tenor.  Swiss rates are negative through the 4-5 year sector.  The Danish situation is similar to Switzerland's.  
As money seeks refuge from the uncertainty in the euro zone, especially w…
The Danish Dilemma: What the Euro Crisis has Wrought The Danish Dilemma: What the Euro Crisis has Wrought Reviewed by Marc Chandler on May 31, 2012 Rating: 5
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Concrete Example of Potential Compromise in EMU

May 31, 2012
I have characterized my understanding of the euro zone investment climate as three no's:  No ECB backstop for sovereigns.  No joint bond.  No euro zone break-up.  That implies a prolonged period of slow growth.  It risks chronic political instability.
It also follows from this that I don't expect Greece to leave or be ejected from monetar…
Concrete Example of Potential Compromise in EMU Concrete Example of Potential Compromise in EMU Reviewed by Marc Chandler on May 31, 2012 Rating: 5
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Redenomination Risk: Is the Genie Out of the Bottle?

May 31, 2012
We have argued that the German effort to make the Greek election into a referendum on the euro was misguided. Greece made its decision to join more than a decade ago. Opinion polls indicate that this is still the case: Greek people, by an overwhelming majority, want to stay in EMU.
The memorandum of understanding has…
Redenomination Risk: Is the Genie Out of the Bottle? Redenomination Risk: Is the Genie Out of the Bottle? Reviewed by Marc Chandler on May 31, 2012 Rating: 5
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The SNB is Preventing Needed Adjustment

May 31, 2012
The Swiss National Bank does not miss an opportunity to remind market participants that it is determined to cap the Swiss franc's appreciation. The cost of imposing its will appears to be rising. The Financial Times today reports estimates of the magnitude of its intervention range from CHF20 bln to CHF100 bln in recent weeks. Such a wide r…
The SNB is Preventing Needed Adjustment The SNB is Preventing Needed Adjustment Reviewed by Marc Chandler on May 31, 2012 Rating: 5
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Month-End Adjustment Gives Brief Reprieve

May 31, 2012
The US dollar is mostly softer against major and emerging market currencies today.  Many observers will talk about the string of better than expected data from Europe and the polls that suggest the ND are ahead in Greece and that the Irish will easily support the fiscal pact in today's referendum.  Yet the risk is that the firmer tone in the …
Month-End Adjustment Gives Brief Reprieve Month-End Adjustment Gives Brief Reprieve Reviewed by Marc Chandler on May 31, 2012 Rating: 5
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Great Graphic: The Billion Dollar Question Great Graphic: The Billion Dollar Question Reviewed by magonomics on May 30, 2012 Rating: 5
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Creditors and Bureaucrats Push Back

May 30, 2012
The financial crisis has called into question political and economic orthodoxies. In Europe, EU officials and the ECB President have encouraged new bold thinking. Anything seems possible. Moreover, the push-back against austerity, which began prior to the French elections, perhaps when Draghi endorsed calls for a growth pact, also has re-open th…
Creditors and Bureaucrats Push Back Creditors and Bureaucrats Push Back Reviewed by Marc Chandler on May 30, 2012 Rating: 5
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Flash: EU Head Fake?

May 30, 2012
EU says it will consider allowing banks borrow directly from the ESM.  This is a head fake.  The ESM does not exist yet.  It is not ultimately the EU's decision.  The ECB and Germany will also have a say.  The reason that banks are unable to borrow directly from the ESM is that it lets the sovereign off the hook.  Borrowing from those facili…
Flash: EU Head Fake? Flash: EU Head Fake? Reviewed by Marc Chandler on May 30, 2012 Rating: 5
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One Driver: European Crisis

May 30, 2012
There is one main driver in the capital markets today and that is the heightened anxiety coming from the European debt crisis.  It is not that a significant new development took place, but rather investors appear to be struck by the paralysis of policy makers.  The Greek and French elections are still a couple weeks away, Spain seems nearly rudde…
One Driver: European Crisis One Driver: European Crisis Reviewed by Marc Chandler on May 30, 2012 Rating: 5
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Risks of ECB Rate Cut Next Week: Underestimated

May 29, 2012
The ECB meets next week. We suspect the market is underestimating the risk that the ECB responds to the string of poor economic data. Recall that after contracting in Q4 11 the euro area economy stagnated in Q1 12. It was Germany's 0.5% expansion in Q1 that allowed the area to avoid a second consecutive quarterly contraction. 
The recent d…
Risks of ECB Rate Cut Next Week: Underestimated Risks of ECB Rate Cut Next Week: Underestimated Reviewed by Marc Chandler on May 29, 2012 Rating: 5
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CNBC Interview with Sue Herera: Euro Outlook CNBC Interview with Sue Herera: Euro Outlook Reviewed by Marc Chandler on May 29, 2012 Rating: 5
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Euro and Yen and the S&P 500: Correlations Revisited

May 29, 2012
We continue to track the correlation of foreign currencies and the US S&P 500. There are two noteworthy developments we bring to your attention today. Methodologically we look at percentage change of the foreign currency and the percentage change in the S&P 500. The result is the correlation of returns, which is what is important to …
Euro and Yen and the S&P 500: Correlations Revisited Euro and Yen and the S&P 500: Correlations Revisited Reviewed by Marc Chandler on May 29, 2012 Rating: 5
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Spain: Serving Too Many Masters

May 29, 2012
In recent weeks, we have been highlightingthe twin challenges Spain faces: the banks and the regions. Separately either could force Madrid into the arms of the Troika. However, Prime Minister Rajoy appears to have staked his political credibility on not seeking international assistance. This hubris will prove his nemesis, and this is an area i…
Spain: Serving Too Many Masters Spain: Serving Too Many Masters Reviewed by Marc Chandler on May 29, 2012 Rating: 5
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Greece and Spain Compete for Limelight

May 29, 2012
Spain is giving Greece a run for its money in terms of who can generate the most stress.  Recent polls suggest that the New Democracy and PASOK can lead the next government in Greece  Greek bonds are slightly firmer on the day.  Spain's support for Bankia raises more questions than it solves and Spanish bonds continue to trade heavily and Spa…
Greece and Spain Compete for Limelight Greece and Spain Compete for Limelight Reviewed by Marc Chandler on May 29, 2012 Rating: 5
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Greece: The Unvarnished Truth

May 28, 2012
A series of weekend polls in Greece showed some movement in the electorate and put the New Democracy ahead of Syrzia.  This is important because which ever party comes in first gets an extra 50 seats in the 300-seat chamber.  The polls suggest the New Democracy and PASOK could retain the reins of government.  
Yet a false dilemma has been present…
Greece: The Unvarnished Truth Greece: The Unvarnished Truth Reviewed by Marc Chandler on May 28, 2012 Rating: 5
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Memorial Day Update

May 28, 2012
The US dollar is broadly lower in relatively subdued activity. The major development over the weekend that has encouraged some reduction of risk averseness is several polls in Greece that showed the New Democracy pulling ahead of Syriza. Global equity markets are mostly higher, with the MSCI Asia Pacific Index gaining about 0.75% and the most …
Memorial Day Update Memorial Day Update Reviewed by Marc Chandler on May 28, 2012 Rating: 5
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Speculative Positioning and Technical FX Outlook

May 26, 2012
The intensification of the European debt crisis continues to overwhelm all other considerations in the global capital markets. The corrective bounce we anticipated on May 17 largely fell shy of the technical objectives as the European officials appeared to continue to drift toward a Greek exit. In addition, the flash PMI readings from the euro z…
Speculative Positioning and Technical FX Outlook Speculative Positioning and Technical FX Outlook Reviewed by Marc Chandler on May 26, 2012 Rating: 5
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Note on Spain: Regions and Banks Compete for Attention

May 25, 2012
NOTE:   after this post, S&P announced it was cutting the ratings of 5 Spanish banks--and affirmed the ratings on nine others, keeping a negative outlook on five.  A couple ( Banco Popular and Bankia) are below investment grade. 

News that Spain's Catalonia region is seeking support from Madrid provided the headline trigger to the euro'…
Note on Spain: Regions and Banks Compete for Attention Note on Spain: Regions and Banks Compete for Attention Reviewed by Marc Chandler on May 25, 2012 Rating: 5
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Seeking Redemption in Europe

May 25, 2012
Last November, the Germany's economic advisor council, known as the Wisemen, recommended a redemption fund in the euro zone as an alternative to joint bond proposals and as a strategy to put the region's debt on a sustainable path. At the time, proposal seemed to die an ignoble death, but it has been resurrected this week. Reports sugge…
Seeking Redemption in Europe Seeking Redemption in Europe Reviewed by Marc Chandler on May 25, 2012 Rating: 5
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Calmer Tone Ahead of the Weekend

May 25, 2012
A nervous and fragile calm has settled over the global capital markets.   The dollar has been thus far confined to yesterday's ranges against sterling and the euro, and attempts to push the dollar higher faltered against the yen and Swiss franc, leaving the greenback is narrowly mixed on the day.  European equities are mostly slightly firmer,…
Calmer Tone Ahead of the Weekend Calmer Tone Ahead of the Weekend Reviewed by Marc Chandler on May 25, 2012 Rating: 5
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Great Graphic: Greece and Euro Zone Macros

May 24, 2012
Here is a Great Graphic from Thomson Reuters depicting the Greek economy in comparison with the overall euro zone.  The fact that Greece so under-performed Europe since on set of the crisis is well known and appreciated.  However, it is noteworthy that Greece was generally under-performing even prior to the crisis.   The crisis has exacerbated t…
Great Graphic: Greece and Euro Zone Macros Great Graphic: Greece and Euro Zone Macros Reviewed by Marc Chandler on May 24, 2012 Rating: 5
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Yen Drivers and CPI

May 24, 2012
Japan reports April CPI on Friday. The national headline rate is expected to be 0.4-0.5% after the 0.5% reading in March. This was the highest since November 2008. The BOJ's target is 1%. No one really expects the target will be achieved in this year or next. The fall in commodity prices and the rise of the yen (nearly 8% on a trade weigh…
Yen Drivers and CPI Yen Drivers and CPI Reviewed by Marc Chandler on May 24, 2012 Rating: 5
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Dollar Stabilizes, Europe News Stream Poor

May 24, 2012
The US dollar is little changed is little changed against most of the major foreign currencies, European equities have higher, gold and oil prices are firmer.It is as if investors are taking a breath after recent aggressive activity. The dollar initially extended its gains before the momentum faded in the European morning. It was not the news strea…
Dollar Stabilizes, Europe News Stream Poor Dollar Stabilizes, Europe News Stream Poor Reviewed by Marc Chandler on May 24, 2012 Rating: 5
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EU Summit Dinner Ends: No Dessert

May 23, 2012
The euro came off in a knee-jerk fashion following the conclusion of the EU Summit dinner.  The press statements indicate that nothing concrete came of it, but it did raise the stakes for the end of June formal summit. Since midday in the US on Wednesday, the euro has been in a clear $1.2550-$1.2600 range.  The euro went from the top end of the r…
EU Summit Dinner Ends: No Dessert EU Summit Dinner Ends: No Dessert Reviewed by Marc Chandler on May 23, 2012 Rating: 5
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EU Summit Dinner Menu: Indigestion

May 23, 2012
The EU informal summit will be held over a dinner and despite the attention it is receiving, it still seems unreasonable to expect anything concrete. Negotiating positions will be staked out, but most of the issues will require greater negotiations. June or even July seems a more likely time frame for yet another "comprehensive solution.&qu…
EU Summit Dinner Menu: Indigestion EU Summit Dinner Menu: Indigestion Reviewed by Marc Chandler on May 23, 2012 Rating: 5
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Dollar Snaps Back

May 23, 2012
The US dollar is broadly higher in Asia and Europe.  Comments by Greece's Papademos put the cat among the pigeons and the euro, and the foreign currencies more broadly, have been unable to recover.  We had anticipation a correction and although we got it, we had expected it to continue a bit longer and deeper.  The speed of the reversal is le…
Dollar Snaps Back Dollar Snaps Back Reviewed by Marc Chandler on May 23, 2012 Rating: 5
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ELA Does not Stand for Exaggeration, Lies and Assumptions

May 22, 2012
ELA is the acronym for Emergency Lending Assistance. This is direct lending by the national central bank, with ECB authorization to local banks with more liberal collateral requirements. The national central bank is responsible/liable for the funds not the euro system.
Last week when the ECB announced that four Greek banks were no longer able to…
ELA Does not Stand for Exaggeration, Lies and Assumptions ELA Does not Stand for Exaggeration, Lies and Assumptions Reviewed by Marc Chandler on May 22, 2012 Rating: 5
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Feint and Parry and the Three No's

May 22, 2012
In the diplomatic dance in Europe, investors are rightfully confused what is a feint and negotiating tactic and what is parry or strategic principle. A new French president and changing tone in Europe appears to have re-opened debates that had previously seemed closed. The range of possibilities all of the sudden seems large again--joint bonds,…
Feint and Parry and the Three No's Feint and Parry and the Three No's Reviewed by Marc Chandler on May 22, 2012 Rating: 5
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Correction within the Correction

May 22, 2012
The US dollar is broadly higher today.  The key question for market participants is whether this is the beginning of the resumption of the greenback's bull move or is it a simply part of the market churn.   Given market positioning and the fact that the Greek election is still a month away, we are viewing today's price action is as correc…
Correction within the Correction Correction within the Correction Reviewed by Marc Chandler on May 22, 2012 Rating: 5
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Shifting Agenda and Ideological Rigidities

May 21, 2012
Over the weekend, Germany's I.G. Metall reached an agreement with employers in Baden-Wuerttemberg for a wage increase that will likely set the tone for other regions and industries. The 4.3% pay increase covers the year from May 1. However, the previous contract expired at the end of March, so the new deal really covers 13 months, which puts…
Shifting Agenda and Ideological Rigidities Shifting Agenda and Ideological Rigidities Reviewed by Marc Chandler on May 21, 2012 Rating: 5
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FX Outlook

May 21, 2012
The week begins off with a consolidative tone.It was the alignment of technical and fundamental factors following the election results earlier this month that allowed for the strong trend moves in the foreign exchange market.Arguably the most important consideration is that the divergence between the two has emerged.While a resolution of the Europ…
FX Outlook FX Outlook Reviewed by Marc Chandler on May 21, 2012 Rating: 5
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FX: Speculative Positioning and Technical Outlook

May 19, 2012
The heightened risks to the European monetary union following the election results in both Greece and France earlier this month continued to drive the foreign exchange market. In the week through May 15, speculative participants in the currency futures generally either added to shorts or cut longs.
Although the fundamental drivers have not change…
FX: Speculative Positioning and Technical Outlook FX: Speculative Positioning and Technical Outlook Reviewed by Marc Chandler on May 19, 2012 Rating: 5
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Spain: Double Barrel Disappontment

May 18, 2012
The fact that Spanish bank shares have rallied today (3.1% at pixel time) and have easily outperformed the market (IBEX up 0.3%) following Moody's downgrade of 16 Spanish banks should be understood as a bit of a fluke.   Some observers will use this price action as evidence that rating agencies are laggards.  While there can be little doubt t…
Spain: Double Barrel Disappontment Spain: Double Barrel Disappontment Reviewed by Marc Chandler on May 18, 2012 Rating: 5
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Half Dozen Observations as Week Winds Down

May 17, 2012
This has been an important week in terms of price action throughout the capital market.  The down draft in the equity markets, most foreign currencies, most commodities, is both a cause and effect of rattled investors.    
Often it seems that market sentiment tends to overshoot in one direction and then the other. Sentiment is clearly in one dire…
Half Dozen Observations as Week Winds Down Half Dozen Observations as Week Winds Down Reviewed by Marc Chandler on May 17, 2012 Rating: 5
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Them Are Fightin' Words

May 17, 2012
The debate about Greece's future in the monetary union is mis-framed and this leads to faulty analysis by investors and policy makers.     Even if European integration is incomplete, and there is no fiscal union, members of the monetary union should be thought of as if states in the United States in many important ways.  Joining EMU should be…
Them Are Fightin' Words Them Are Fightin' Words Reviewed by Marc Chandler on May 17, 2012 Rating: 5
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Late Dollar Longs Vulnerable

May 17, 2012
Perhaps it is the California air, where I am on a business trip, but it seems that the euro bears have run their course for the time being and a corrective phase may be unfolding.   The late buyers of dollars against most of the major and emerging market currencies look vulnerable.
Just like I brought to your attention the importance of the gaps…
Late Dollar Longs Vulnerable Late Dollar Longs Vulnerable Reviewed by Marc Chandler on May 17, 2012 Rating: 5
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US Economy Update: Still No QE3

May 16, 2012
The recent string of US economic data does not change our view that renewed asset purchases by the Federal Reserve as early as next month as some have suggested  remains unlikely.  The data does warn that Q1 GDP is likely to be revised lower, toward almost half of the Q4 '11 3.0% pace.
The data suggests the economy is likely back in the middl…
US Economy Update: Still No QE3 US Economy Update: Still No QE3 Reviewed by Marc Chandler on May 16, 2012 Rating: 5
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Great Graphic: Future of the Workforce Great Graphic: Future of the Workforce Reviewed by magonomics on May 16, 2012 Rating: 5
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Fear Overwhelms Everythng, Drives Dollar Higher

May 16, 2012
There driver of the capital markets today has a name:  Fear.  It has overwhelmed nearly every other consideration and is driving the dollar higher against all the major and emerging market currencies.  
Even the Japanese yen is not match today.  Despite narrow interest rate differentials and heightened anxiety, the dollar is trading at its best l…
Fear Overwhelms Everythng, Drives Dollar Higher Fear Overwhelms Everythng, Drives Dollar Higher Reviewed by Marc Chandler on May 16, 2012 Rating: 5
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Greece, Versailles, and the Future of EMU

May 15, 2012
No last minute miracle has the Greeks headed to new elections next month. Syriza's Tsipras appears to believe he has much to gain from a new round of elections. Polls put Syriza in first place, though the margin of error makes it look more like a dead heat with the New Democracy, led by Samaras. Samaras was a significant obstacle to reaching a…
Greece, Versailles, and the Future of EMU Greece, Versailles, and the Future of EMU Reviewed by Marc Chandler on May 15, 2012 Rating: 5
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Bloomberg Surveillance: Greece Bloomberg Surveillance: Greece Reviewed by magonomics on May 15, 2012 Rating: 5
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Great Graphic: GDP Performance

May 15, 2012
Here is a Great Graphic of how many of the major European economies and the US have performed over the past four years.  The US has pursued unconventional monetary and fiscal policy.  The UK has pursued unorthodox monetary policy and orthodox fiscal policy.  Europe has pursued a bit of an unorthodox monetary policy (3-year LTROs, limited SMP and …
Great Graphic: GDP Performance Great Graphic: GDP Performance Reviewed by Marc Chandler on May 15, 2012 Rating: 5
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Muted Turn Around Tuesday

May 15, 2012
A more stable tone it evident in the global capital markets today.   Risk aversity is being pared, it appears, across the board.   Asian equities followed suit after the US indices fell on Monday, but European equities are firmer, with the French market leading the way.  
Bond markets are mostly lower.  Commodities steadier after both oil and go…
Muted Turn Around Tuesday Muted Turn Around Tuesday Reviewed by Marc Chandler on May 15, 2012 Rating: 5
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Germany: Does a Leopard Change its Spots?

May 14, 2012
There has been much buzz in the markets that Germany is on the verge of its most important shift since the crisis began. Two official comments have captured some imaginations. The first is that Jens Ulbrich, the head of the Bundesbank's economics department, told parliament's finance committee that going forward, Germany may have inflation…
Germany: Does a Leopard Change its Spots? Germany: Does a Leopard Change its Spots? Reviewed by Marc Chandler on May 14, 2012 Rating: 5
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Dollar Least Ugly

May 14, 2012
The US dollar is broadly higher against the major and emerging market currencies to start the week. Of note, the euro broke $1.30 last week and is breaking $1.29 today.  Sterling is near its lowest level in a month and barely held above the $1.6050 area.  The Australian dollar has busted through parity for the first time since late December '…
Dollar Least Ugly Dollar Least Ugly Reviewed by Marc Chandler on May 14, 2012 Rating: 5
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China Cuts Required Reserves

May 12, 2012
The People's Bank of China reduced the amount of money banks must hold by about CNY350-CNY400 bln (~$60 bln).  It is a 50 bp reduction in the required reserve ratio (RRR), effective May 18.  It is the third cut in six months.  The precise timing is always impossible to predict, but it was widely expected. 
In fact, two consideration was behin…
China Cuts Required Reserves China Cuts Required Reserves Reviewed by Marc Chandler on May 12, 2012 Rating: 5
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Commitment of Traders and Technical Outlook FX

May 12, 2012
In the week ending May 8, speculative players generally bought dollars against the major currencies in the futures market according to the latest Commitment of Traders report.  There were two notable exceptions, the yen and sterling.  Short yen positions were reduced and long sterling positions were added.  
Last week, we noted that after a perio…
Commitment of Traders and Technical Outlook FX Commitment of Traders and Technical Outlook FX Reviewed by Marc Chandler on May 12, 2012 Rating: 5
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Great Graphic: International Home Ownership

May 11, 2012
Here is a Great Graphic from Bank of America  on the extent of home ownership in a number of countries.  The chart is from last year, so it likely picks up 2010 data. 
I know I was surprised, and you might be also, to learn that Singapore and China had wider home ownership than the US.  That Ireland and UK did may not be so surprising as home ow…
Great Graphic: International Home Ownership Great Graphic: International Home Ownership Reviewed by Marc Chandler on May 11, 2012 Rating: 5
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Some (Belated) Thoughts about Canada's Jobs Data

May 11, 2012
Canada reported April jobs data earlier today.    Canada grew 58.2k jobs after 82.3k in March.  Unlike what we have seen in the US, the participation rate actually rose as 72.5k people joined the workforce. 
The actual jobs growth was 6-fold greater than expected and the March-April period was the strongest in 30 years.  Yet, perhaps there is le…
Some (Belated) Thoughts about Canada's Jobs Data Some (Belated) Thoughts about Canada's Jobs Data Reviewed by Marc Chandler on May 11, 2012 Rating: 5
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Spain's Pain Endures, Bank Reform 4.0

May 11, 2012
This is not a good day for Spain. The day began with the EU Commission revising its estimates for the Spanish economy. The contraction is now expected to be considerably deeper. Rather than contract 1% as the EU previously projected, now it is expected to shrink by 1.8%. The deficit this year, which was originally supposed to be 4.4% and PM Rajoy …
Spain's Pain Endures, Bank Reform 4.0 Spain's Pain Endures, Bank Reform 4.0 Reviewed by Marc Chandler on May 11, 2012 Rating: 5
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Dollar Mixed, Market Digesting Developments

May 11, 2012
There are conflicting impulses for the capital markets today and this is contributing to the mixed dollar tone.   News from JP Morgan initially triggered risk-off tactics and the euro re-tested the $1.29 level, making new lows for the move.  It recovered later in the session, perhaps helped by some reports suggesting some potentially encouraging …
Dollar Mixed, Market Digesting Developments Dollar Mixed, Market Digesting Developments Reviewed by Marc Chandler on May 11, 2012 Rating: 5
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A Thumbnail Sketch of US Economy: No QE3

May 10, 2012
The US reports April PPI Friday and after the unexpectedly large decline in April import prices (-0.5%), there is downside risk to the Bloomberg consensus estimate of no change on the month. Import prices are up 0.5% year-over-year, the smallest increase since late 2009.
The trend lower in commodity prices is likely to be picked up in the PPI fi…
A Thumbnail Sketch of US Economy: No QE3 A Thumbnail Sketch of US Economy: No QE3 Reviewed by Marc Chandler on May 10, 2012 Rating: 5
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The Comity of Europe: Ten Points

May 10, 2012
With increased talk of a country leaving the euro zone, or even of the end of the whole project, it is worth sketching out our view. Here are the main points of our view of Europe.
1. EMU itself is a culmination of two trends: 1) the integration of western Europe since the 1950s and 2) efforts to keep Germany wedded to the fortunes of Europe. The…
The Comity of Europe: Ten Points The Comity of Europe: Ten Points Reviewed by Marc Chandler on May 10, 2012 Rating: 5
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Great Graphic: Why Solar Energy is at a Tipping Point Great Graphic: Why Solar Energy is at a Tipping Point Reviewed by magonomics on May 10, 2012 Rating: 5
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Is It Time to Stop Fighting Mumbai?

May 10, 2012
The rupee and Indian shares responded positively to new central bank measures to steady the currency, which has fallen more than 7% over the past three months and is the worst performing Asian currency. While recognizing the positive short term impact, we remain concerned that the domestic and international environment may not be conducive for a …
Is It Time to Stop Fighting Mumbai? Is It Time to Stop Fighting Mumbai? Reviewed by Marc Chandler on May 10, 2012 Rating: 5
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Calmer Tone Unlikely to Last

May 10, 2012
A somewhat calmer tone is evident in the global capital markets, but the underlying tone is fragile and the market appears merely to be catching its collective breath.  The Bank of England did not change interest rates not did it announce a change in its asset purchases, which means it joins the ECB and Fed on the sidelines. 
The major currencies…
Calmer Tone Unlikely to Last Calmer Tone Unlikely to Last Reviewed by Marc Chandler on May 10, 2012 Rating: 5
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Pressure in Europe Continues, Underpins Dollar and Yen

May 09, 2012
The US dollar and Japanese yen continue to be the biggest beneficiaries of the heightened tensions emanating from Europe.  Many see the seeming inability of the Greece to form a new government as increasing risk that it leaves monetary union.  With some a large asset manager and an investment bank claiming the Fed is going to resume its asset purc…
Pressure in Europe Continues, Underpins Dollar and Yen Pressure in Europe Continues, Underpins Dollar and Yen Reviewed by Marc Chandler on May 09, 2012 Rating: 5
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Greece is Worrisome, but Don't Forget about Spain

May 08, 2012
Greece's difficulty in putting together a government is weighing on euro sentiment. Although Belgium went without a government for more than a year, Greece does not have that luxury. The Troika is set to visit Athens next week for the periodic progress report. Another 11.5 bln euro in savings in needed to be identified by the end of June, oth…
Greece is Worrisome, but Don't Forget about Spain Greece is Worrisome, but Don't Forget about Spain Reviewed by Marc Chandler on May 08, 2012 Rating: 5
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Uncertainty High, Dollar Firm

May 08, 2012
The US dollar remains mostly firmer against major and emerging market currencies.  Things are still up in the air.  Soft UK housing price data and BRC sales figures have gotten the chins wagging again about the possibility that the BOE extends its gilt purchases at Thursday's MPC meeting.  Wider than expected Australian trade deficit (A$1.59 …
Uncertainty High, Dollar Firm Uncertainty High, Dollar Firm Reviewed by Marc Chandler on May 08, 2012 Rating: 5
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Review of Gap Theory and FX Outlook

May 07, 2012
In a 24-hour a day market like foreign exchange and especially a currency pair like the euro-dollar exchange rate where daily turnover is estimated at nearly $1 trillion a day, gaps in the price action are rare.
There are different types of gaps and they are associated with different market conditions. Given that the euro and Swiss gaps remain u…
Review of Gap Theory and FX Outlook Review of Gap Theory and FX Outlook Reviewed by Marc Chandler on May 07, 2012 Rating: 5
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Greece's Future Remains within EMU

May 07, 2012
The electoral outcome in Greece appears to be producing a fragmented parliament and will likely increase the platform for those parties that are more hostile to additional austerity and perhaps even the euro zone projected.
Nevertheless, we suspect much of the talk today about a Greek exit is exaggerated. The policy "prediction" web si…
Greece's Future Remains within EMU Greece's Future Remains within EMU Reviewed by Marc Chandler on May 07, 2012 Rating: 5
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Initial Anxiety Stemmed, More Later and 6 Observations

May 07, 2012
The mostly as expected election results sparked a quick but dramatic bout risk-off activity. Equities have been sold (with Greek equities crushed, off more than 6% late in the local session, with a 13% loss in financials) and core bonds are firm, including French bonds.   In fact, the French premium over Germany in both the short (2-year) and long…
Initial Anxiety Stemmed, More Later and 6 Observations Initial Anxiety Stemmed, More Later and 6 Observations Reviewed by Marc Chandler on May 07, 2012 Rating: 5
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Currency Futures Positioning and Technical Outlook

May 05, 2012
The new Commitment of Traders report covers the week through May 1 and it shows that the dollar was sold by speculators across the board.  The net short euro, yen and Swiss franc positions were pared, while the net long sterling, Canadian and Australian dollars and Mexican peso positions were extended.  However, the dramatic price action in the d…
Currency Futures Positioning and Technical Outlook Currency Futures Positioning and Technical Outlook Reviewed by Marc Chandler on May 05, 2012 Rating: 5
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A Little Color on the Disappointing Jobs Data

May 04, 2012
There is little that can be said about the disappointing US employment data.  Yet given the weakness of the ADP report and the softness of many of the regional Fed April surveys, the disappointment might not be as great as the stale surveys would have suggested. 
There is little positive in the report except perhaps that the back month revisions…
A Little Color on the Disappointing Jobs Data A Little Color on the Disappointing Jobs Data Reviewed by Marc Chandler on May 04, 2012 Rating: 5
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Some Interesting Developments by SNB and Norway's SWF

May 04, 2012
The Swiss National Bank reported its reserve figures yesterday and the increase in its sterling holdings are notable and may help explain the its relative strength, despite data a soft real sector reports, culminating in the news last week that, defying expectations, the UK economy contracted in Q1, the second consecutive quarter that the British…
Some Interesting Developments by SNB and Norway's SWF Some Interesting Developments by SNB and Norway's SWF Reviewed by Marc Chandler on May 04, 2012 Rating: 5
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Services, Jobs and Politics Dominate FX

May 04, 2012
There are three main considerations in the foreign exchange market today.  The weaker than expected euro zone services PMI, the US jobs report and that spate of European elections.  The US dollar is slightly firmer, but largely within yesterday's ranges. 
There is nothing good that can be truly said of the euro zone service PMI.  It fell shar…
Services, Jobs and Politics Dominate FX Services, Jobs and Politics Dominate FX Reviewed by Marc Chandler on May 04, 2012 Rating: 5
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Draghi Sparks Euro Recovery

May 03, 2012
The euro has recovered from the brief dip below $1.31 to rise through yesterday's North American high.  Draghi has not sounded as dovish as the market expected.   He recognizes that the economic outlook is less certain, but did not seem to be an in hurry to take more action. 
He indicated a rate cut was not even discussed today.  The impact …
Draghi Sparks Euro Recovery Draghi Sparks Euro Recovery Reviewed by Marc Chandler on May 03, 2012 Rating: 5
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Short Note Before ECB

May 03, 2012
The US dollar is modestly higher against the major foreign currencies, but there is not much momentum as the market awaits the US data and the ECB press conference.  Well received French and Spanish auctions have helped lift peripheral bond markets and European shares are firmer, with financials also participating today.  

Market developments are…
Short Note Before ECB Short Note Before ECB Reviewed by Marc Chandler on May 03, 2012 Rating: 5
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Latam Nationalizations: A Dog Bites Man Story?

May 02, 2012
That a couple of Latin American countries have recently announced the expropriation of foreign investors in the energy sector seems hardly like new news. After all, cycles of nationalization and privatization have unfolded for more than half a century. Moreover, the expropriation simply marked the latest illiberal measures by Argentina and Boliv…
Latam Nationalizations: A Dog Bites Man Story? Latam Nationalizations: A Dog Bites Man Story? Reviewed by Marc Chandler on May 02, 2012 Rating: 5
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Bloomberg: Interview with Megan Greene on Spain Bloomberg: Interview with Megan Greene on Spain Reviewed by magonomics on May 02, 2012 Rating: 5
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Dollar Recovers, Euro Area PMI Doesn't

May 02, 2012
The US dollar is broadly firmer against the major and most emerging market currencies.  The weaker than expected euro zone PMI data is triggering a position adjustment ahead of US jobs data on Friday and the weekend elections in France and Greece.  The poor economic data and Germany (both the BBK and Fin Min) call for no dilution of fiscal effort…
Dollar Recovers, Euro Area PMI Doesn't Dollar Recovers, Euro Area PMI Doesn't Reviewed by Marc Chandler on May 02, 2012 Rating: 5
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What is Up with the Yen and Why it may Not Last

May 01, 2012
The Japanese yen was hands down the best performing G10 currency in April, gaining about 3.3% against the dollar and 4.2% against the euro. It appeared to start the new month on a strong note, with the dollar falling to 2 month lows in early Asia. However, in a holiday-thin European session and then in the North American session, the yen was sold…
What is Up with the Yen and Why it may Not Last What is Up with the Yen and Why it may Not Last Reviewed by Marc Chandler on May 01, 2012 Rating: 5
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US Manufacturing Surprise

May 01, 2012
The US manufacturing ISM surprised the market in a favorable direction.  Rather than soften like the consensus expected, the diffusion index rose to 54.8 from 53.4.  This represents the strongest showing in eleven months.  The debate in the market has been over a soft landing in China, but this data (and the auto sales figures later) point to a s…
US Manufacturing Surprise US Manufacturing Surprise Reviewed by Marc Chandler on May 01, 2012 Rating: 5
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Bloomberg: Spain Debt, US Economy, Currencies Bloomberg: Spain Debt, US Economy, Currencies Reviewed by magonomics on May 01, 2012 Rating: 5
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May Day Surprises, Dollar Mixed

May 01, 2012
The May Day holiday has limited market participation, but has not prevented surprises.  The Reserve Bank of Australia kicked it off the celebration with a 50 bp rate cut. 
Although after the recent series of soft price data there was some risk (about a 1 in 3 chance according to market indications) of a 50 bp move, most observers, like ourselves…
May Day Surprises, Dollar Mixed May Day Surprises, Dollar Mixed Reviewed by Marc Chandler on May 01, 2012 Rating: 5
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