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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

November 30, 2010
The Federal Reserve's QEII has been widely criticized by politicians, though received somewhat greater support by central bankers. Maybe the ECB should consider it own variant of quantitative easing.
A couple of large investment houses have argued that Europe needs a large fiscal transfer from the wealthy (primarily Germany) to the poor (large…
Maybe the ECB Should Consider QE Maybe the ECB Should Consider QE Reviewed by Marc Chandler on November 30, 2010 Rating: 5
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Consider Selling Dollar-Yen

November 30, 2010
The dollar has surprised many by rallying this month after QEII was announced. The crisis in Europe has overwhelmed other considerations. But the dollar has also rallied against the yen, reaching its highest levels since late Sept yesterday. There are three reasons to expect the dollar to come off against the yen.
First, the higher volatility and …
Consider Selling Dollar-Yen Consider Selling Dollar-Yen Reviewed by Marc Chandler on November 30, 2010 Rating: 5
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Europe's Crisis Deepens

November 30, 2010
There is one major driver in capital markets and it is the the widening crisis in Europe. Month end demand for euros has been more than offset by concern that Europe is experiencing a systemic and existential challenge. Pressure is evident outside of the periphery, which has up until now been the main focus. Spanish, Italian and Belgian bonds are …
Europe's Crisis Deepens Europe's Crisis Deepens Reviewed by Marc Chandler on November 30, 2010 Rating: 5
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In A Disappointing Europe, Sweden Stands Out

November 29, 2010
Europe is engulfed in a financial crisis that is also becoming a political crisis. Sweden stands out as an exception and we affirm our expectation of the krona's out performance in period ahead.
Sweden's economy contracted 5.3% last year but has rebounded smartly this year. Q3 GDP was reportedly earlier today and at 2.1% quarter-over-quart…
In A Disappointing Europe, Sweden Stands Out In A Disappointing Europe, Sweden Stands Out Reviewed by Marc Chandler on November 29, 2010 Rating: 5
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Euro Comes Off Further in Early NY

November 29, 2010
The euro continues to come under pressure and is making new lows in early North American turn over despite talk of interest from an Asian central bank. The euro has slipped below its 200-day moving average (~$1.3130) for the first time since Sept 21. The 50% retracement of the rally from early June through early November index comes in around $1.3…
Euro Comes Off Further in Early NY Euro Comes Off Further in Early NY Reviewed by Marc Chandler on November 29, 2010 Rating: 5
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Market Unconvinced, Euro Tumbles

November 29, 2010
The global capital markets are not impressed with the European efforts to stabilize the situation. The euro continues to struggle to sustain even the most modest of upticks and the relief in the European sovereign bond market is hardly convincing. The 85 bln euro package provided to Ireland is less than meets the eye insofar as 17.5 bln comes from…
Market Unconvinced, Euro Tumbles Market Unconvinced, Euro Tumbles Reviewed by Marc Chandler on November 29, 2010 Rating: 5
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CNBC: Euro Crisis: Solvency vs. Liquidity CNBC: Euro Crisis: Solvency vs. Liquidity Reviewed by magonomics on November 24, 2010 Rating: 5
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American Monetary Association: Making Sense of the Dollar American Monetary Association: Making Sense of the Dollar Reviewed by magonomics on November 24, 2010 Rating: 5
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Dollar Remains Firm

November 23, 2010
The US dollar remains firm as nervousness over the Korean peninsula and the ongoing turmoil in Europe. A number of shots fired between North and South Korea coincide with fresh reports of North Korean progress in its nuclear weapons program and some reports suggesting an earlier transition of power domestically weighed helped lifted the dollar dur…
Dollar Remains Firm Dollar Remains Firm Reviewed by Marc Chandler on November 23, 2010 Rating: 5
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Thumbnail Sketch of Portugal

November 22, 2010
This note is not intended to be comprehensive. The goal is simply to highlight the vulnerabilities of Portugal. Three key issues seem most important to me: debt, external position, productivity.
Portugal's sovereign debt is about 86% of GDP, while high, what is really important is the private sector debt. At almost 240% of GDP, it is among the…
Thumbnail Sketch of Portugal Thumbnail Sketch of Portugal Reviewed by Marc Chandler on November 22, 2010 Rating: 5
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Spain: Mind the Queue

November 22, 2010
The euro has rallied to about $1.3786. This is just beyond my initial target of $1.3770, which corresponds to a simple retracement objective of the euro's slide since the day after QEII was announced and the day before the stronger than expected US jobs report at the start of the month. Since the euro had been recovering since the middle of la…
Spain: Mind the Queue Spain: Mind the Queue Reviewed by Marc Chandler on November 22, 2010 Rating: 5
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Euro Bounces On Irish Request

November 21, 2010
Ireland has apparently request assistance. Details still not know. Conflicting reports on size. Euro trades higher, but I remain suspicious. My target has been $1.3770, with potential of another cent if this is broken Many are arguing that save Ireland and systemic risk addressed. I am less sanguine because I think the market may turn its attentio…
Euro Bounces On Irish Request Euro Bounces On Irish Request Reviewed by Marc Chandler on November 21, 2010 Rating: 5
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Ireland and the US

November 19, 2010
Market participants are rightfully focused on the contagion of Ireland within Europe. However, the depth of US corporate ties to Ireland may surprise many investors. The value-added of majority owned affiliates of US companies account for more than a fifth of Ireland's GDP. This is the greatest share that American affiliates account for in any…
Ireland and the US Ireland and the US Reviewed by Marc Chandler on November 19, 2010 Rating: 5
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Things Must Change to Remain the Same

November 19, 2010
The U.S. dollar declined in September and October as the market priced in the likelihood that the Federal Reserve would resume buying Treasuries. From late August through the actual QEII announcement itself, the dollar declined about 7.6% on the major trade-weighted index and almost 6% against a broader trade-weighted basket. In that same period, …
Things Must Change to Remain the Same Things Must Change to Remain the Same Reviewed by Marc Chandler on November 19, 2010 Rating: 5
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Near-Term Dollar Outlook

November 19, 2010
The US dollar is finishing the week on a soft tone after having seen the post-QEII gains extended at the start of the week. The news stream is light. China did announce a 50 bp increase in reserve requirements and although this created a wobble in the market, the currencies quickly recovered.
Near-Term Dollar Outlook Near-Term Dollar Outlook Reviewed by Marc Chandler on November 19, 2010 Rating: 5
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Has Greece Been Resolved?

November 18, 2010
One might be forgiven for thinking that a 110 bln euro EU/IMF package would suffice for Greece and stabilize the situation as IMF packages typically do over time. However, over the past month 10-year Greek yields have 260 bp and talk of debt restructuring continues to be heard.
The government presented its final 2011 budget today as EC/IMF/ECB off…
Has Greece Been Resolved? Has Greece Been Resolved? Reviewed by Marc Chandler on November 18, 2010 Rating: 5
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Anticipating the Irish Relief Rally

November 18, 2010
Officials from the EU, IMF and ECB are in Dublin today to assess the magnitude of the aid needed and to negotiate the terms. Ireland does have a trump card, though may lack the political will to use it. It was among the first countries to guarantee bank debt. It could find German Chancellor Merkel is right.
Merkel is right in that burden shar…
Anticipating the Irish Relief Rally Anticipating the Irish Relief Rally Reviewed by Marc Chandler on November 18, 2010 Rating: 5
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Spain's Funding Needs Continue

November 17, 2010
While Ireland, Greece, and Portugal do not have to sell any more bonds this year, Spain, on the other hand, has three more bond auctions this year and three more bill auctions. Spain seeks to sell up to 4 bln euros of bonds tomorrow. In December it will hold two bond auctions--Dec 2 and Dec 16. The latter date coincides with an EU Summit.
Spain…
Spain's Funding Needs Continue Spain's Funding Needs Continue Reviewed by Marc Chandler on November 17, 2010 Rating: 5
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EM Currencies: What is Real?

November 17, 2010
China reported higher than expected CPI figures (4.4%) last week and many suspect that the official measure understates actual inflation. There is much concern about the policies that China may implement to contain inflation in addition to traditional monetary policy tools like higher rates and higher reserve requirements. There are some heterodox…
EM Currencies: What is Real? EM Currencies: What is Real? Reviewed by Marc Chandler on November 17, 2010 Rating: 5
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Europe: Unresolved

November 17, 2010
The US dollar is little changed against the major currencies. The foreign currencies are bouncing along the trough. The market is vulnerable to headline news from Europe, but a EU/IMF bailout package does not appear imminent for Ireland and the government appears to be pinning its hopes on bringing the 2011 budget and 4-year plan forward to next w…
Europe: Unresolved Europe: Unresolved Reviewed by Marc Chandler on November 17, 2010 Rating: 5
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TIC Data Shows Americans Not Big Buyers of Foreign Assets

November 16, 2010
There has been a great outcry that the Fed's signalling of QEII last Aug (Bernanke Jackson Hole) triggered large capital outflows from the US, driving the dollar down and overwhelming emerging market countries, forcing them to erect capital controls. The TIC data does not confirm that.
TIC Data Shows Americans Not Big Buyers of Foreign Assets TIC Data Shows Americans Not Big Buyers of Foreign Assets Reviewed by Marc Chandler on November 16, 2010 Rating: 5
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Austria Balks at Greece, EMU Bedeviled by more than Ireland

November 16, 2010
News reports indicate that Austria is refusing to release its 190 mln euro share of the EU bailout for Greece because it has not met its budget commitments. The Fin Min Proell says that after reviewing the latest data, there is "no reason, from Austria's point of view" to allow the December tranche to be paid.
Recall that yesterday E…
Austria Balks at Greece, EMU Bedeviled by more than Ireland Austria Balks at Greece, EMU Bedeviled by more than Ireland Reviewed by Marc Chandler on November 16, 2010 Rating: 5
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Dollar Little Changed, Irish News Still Pending

November 16, 2010
The US dollar is litlte changed against the major currencies, with ther notable exception of sterling, which is slipping below $1.60, depsite the slightly larger than expected rise in the UK CPI and the Australian dollar, which is off more than 0.5% despite RBA minutes that were seen initially as slightly hawkish, keeping the door open to addition…
Dollar Little Changed, Irish News Still Pending Dollar Little Changed, Irish News Still Pending Reviewed by Marc Chandler on November 16, 2010 Rating: 5
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SDR Weighting, Not So Much About USD as JPY

November 16, 2010
A little more than a year ago the PBOC governor proposed a supra-national reserve asset, like the IMF's Special Drawing Rights (SDRs) to supplant the role of the US dollar. While the proposal does not appear to be the basis of recent G20 discussions, the topic continues to capture the imagination of market participants.
Every five years the IMF…
SDR Weighting, Not So Much About USD as JPY SDR Weighting, Not So Much About USD as JPY Reviewed by Marc Chandler on November 16, 2010 Rating: 5
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Asian Currencies Tumbled Monday, What will Tuesday Bring ?

November 15, 2010
Asian currencies sold off on Monday. Foreign investors were sellers of numbers regional equity markets (Indonesia, Philippines, Taiwan and Thailand) and currencies amid heightened fears of additional tightening and/or capital controls. Although China did not appear to overtly tighten policy after the 4.4% CPI was reported last week, many continue …
Asian Currencies Tumbled Monday, What will Tuesday Bring ? Asian Currencies Tumbled Monday, What will Tuesday Bring ? Reviewed by Marc Chandler on November 15, 2010 Rating: 5
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Europe Confirms Increased Sovereign Bond Purchases Last Week

November 15, 2010
The ECB confirmed market talk that it had stepped up if sovereign bond purchases last week as the debt strains reached crisis levels. The European central banks bought 1.074 bln euros vs 711 mln the prior week. This is the most in several months. It is not technically QE because the ECB sterilizes the effect on money supply by draining the same am…
Europe Confirms Increased Sovereign Bond Purchases Last Week Europe Confirms Increased Sovereign Bond Purchases Last Week Reviewed by Marc Chandler on November 15, 2010 Rating: 5
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New Week, Dollar Remains Firm

November 15, 2010
Today is the seventh consecutive session in which the euro has recorded a lower high. It has been making lower lows as well, but that streak is under threat today if North American participants do not extend today's losses through the $1.3575 area. A break of $1.3550 could spur another cent decline in quick order, though a larger barrier is ru…
New Week, Dollar Remains Firm New Week, Dollar Remains Firm Reviewed by Marc Chandler on November 15, 2010 Rating: 5
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Euro Logic

November 11, 2010
I have been warning that a convincing break of $.13650 could signal another quick two cent decline. I think that given the volatility we are best served taking it one ppiece at a time. So, the first move that we should be looking to retrace is the euro's advance form early Sept near $1.2644 and the high was set on Nov 4 near $1.4280. The 38.2%…
Euro Logic Euro Logic Reviewed by Marc Chandler on November 11, 2010 Rating: 5
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CNBC: US Faces Critics on the Buck CNBC: US Faces Critics on the Buck Reviewed by magonomics on November 11, 2010 Rating: 5
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Dollar Flat, Euro Heavy

November 11, 2010
The US dollar is little changed against most of the major foreign currencies and is mostly firmer against the emerging markets. The two main exceptions are the euro, which, while holding above yesterday's lows, continues to struggle to sustain even modest upticks. Although the North American session may be less active on account of the bank ho…
Dollar Flat, Euro Heavy Dollar Flat, Euro Heavy Reviewed by Marc Chandler on November 11, 2010 Rating: 5
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Euro Erosion

November 10, 2010
Irish woes appear to be the main culprit dragging the euro down to its lowest level since Oct 20. A break of the $1.3650-80 area could signal another two cent decline in the coming days.
The flight into German bunds for safety is helping the dollar via the interest rate differential channel.
Euro Erosion Euro Erosion Reviewed by Marc Chandler on November 10, 2010 Rating: 5
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Dollar Mixed, Sterling Stellar

November 10, 2010
The US dollar is mixed today. The euro was sold to $1.3735 which is seen as the lower end of the recent trading range managed to recover in Europe. Sterling has been the outperformer as the Bank of England's quarterly inflation report gave no hope for a resumption of asset purchases any time soon. UK gilts tumbled, but sterling rallied more th…
Dollar Mixed, Sterling Stellar Dollar Mixed, Sterling Stellar Reviewed by Marc Chandler on November 10, 2010 Rating: 5
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Sweden Update

November 09, 2010
The Swedish krona has generally trended higher against the euro since the global financial crisis bottomed toward the end of Q1 2009. The euro recorded its multi-year lows against the krona in late Sept near SEK9.09.
A less aggressive trajectory of rate hikes signaled by the central bank and some disappointing data had encouraged some profit-taking…
Sweden Update Sweden Update Reviewed by Marc Chandler on November 09, 2010 Rating: 5
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Source of Liquidity: Japan and the US

November 09, 2010
Many observers continue to see the US as the main source of capital flowing into the emerging markets, prompting several to impose capital controls of various kinds. The September capital and current account data reported earlier today underscores our difficulty with the popular narrative.
The MOF reported that Japanese investors purchases JPY3.18…
Source of Liquidity: Japan and the US Source of Liquidity: Japan and the US Reviewed by Marc Chandler on November 09, 2010 Rating: 5
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Dollar Pullbacks Shallow

November 09, 2010
The dollar remains mostly firmer and the better tone in recent days continues. It is not just that US rates are rising, but also that German rates are slipping as tensions remain acute in the peripheral despite successful Greek bill auction and better performance in the Irish banking sector today.
The Federal Reserve’s QEII is going to face critic…
Dollar Pullbacks Shallow Dollar Pullbacks Shallow Reviewed by Marc Chandler on November 09, 2010 Rating: 5
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The Dollar: On Script

November 08, 2010
The outcome of the US midterm elections and Federal Reserve Open Market Committee meeting, coupled with the various economic reports, strengthens our base case scenario in which we expect the US dollar to generally trade higher as the 2010 winds down. Many expect the dollar to decline in the wake of the $600 bln Treasury buying program of the Fede…
The Dollar: On Script The Dollar: On Script Reviewed by Marc Chandler on November 08, 2010 Rating: 5
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Dollar Recovery Continues

November 08, 2010
The US dollar is bid. The initial attempt to drive it lower in Asia ran into a wall of buying. Follow through sellling was seen in Europe. Not only as the pressure on the peripheral debt markets, but Germany reported surpising weak industrial output. Industrial production fell 0.8% in Sept while the consensus forecast was for a 0.4%-0.5% rise. On …
Dollar Recovery Continues Dollar Recovery Continues Reviewed by Marc Chandler on November 08, 2010 Rating: 5
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Much Better than Expected Jobs Data, Dollar Bid

November 05, 2010
The US jobs data headline, details and Sept revision were better than expected and although the unemployment rate remains stubbornly high, the take away is net constructive and caps a week in which the US data has generally been better than expected.
The US grew 151k jobs in Oct after a 41k decline in Sept was initially -95k). Private sector emplo…
Much Better than Expected Jobs Data, Dollar Bid Much Better than Expected Jobs Data, Dollar Bid Reviewed by Marc Chandler on November 05, 2010 Rating: 5
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US Jobs and European Woes Vie for Attention

November 05, 2010
The US dollar is generally doing better today, but this seems to be position squaring ahead of the US jobs data. In my work, I have empahsizeed short-term intreest rate differentials between the US and German (2-year notes) that has done a good job of tracking the euro-dollar exchange rate. Today it stands at 57 bp in Germany's favor, the smal…
US Jobs and European Woes Vie for Attention US Jobs and European Woes Vie for Attention Reviewed by Marc Chandler on November 05, 2010 Rating: 5
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Wil Canada's Employment Provide Insight into US Jobs?

November 04, 2010
Tomorrow will be the seventh time this year that Canada reports its monthly employment data 90 minutes before the US releases its report.
In the past six times this year, the deviation of Canada's actual report from consensus identified the direction of the US miss four times. In Jan, Canada and US data were weaker than expected. February was …
Wil Canada's Employment Provide Insight into US Jobs? Wil Canada's Employment Provide Insight into US Jobs? Reviewed by Marc Chandler on November 04, 2010 Rating: 5
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QEII QED

November 04, 2010
The US dollar chopped around in the immediate post-Fed markets. Although weaker the dollar did not break down in Asia (except against the New Zealand dollar on the back of a strong employment report), but it has been sold off hard in Asia.
Risk assets--equities, commodities are in demand and bonds, especially in Europe have been sold off. The Euro…
QEII QED QEII QED Reviewed by Marc Chandler on November 04, 2010 Rating: 5
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Fed's QEII Anti-Climactic

November 03, 2010
The dollar has sold off on the news that the Federal Reserve will buy $600 bln of Treasuries over the next 8 months. It will relax its 35% self-imposed limited per security. This is in additon to the $35 bln per month it anticipated form the mortgage securites maturing. Its economic assessment and inflation assessments appear little changed.
Fed's QEII Anti-Climactic Fed's QEII Anti-Climactic Reviewed by Marc Chandler on November 03, 2010 Rating: 5
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Euro-Dollar Update

November 03, 2010
I identified and continue to track key forces that offer insight into the euro dollar exchange rate.
To monitor the near-term trend, we have used the 5 and 20 day moving averages. They have done a fairly good job of capturing this year's big trend moves with minimal whipsaws. The 5-day average crossed below the 20-day last Thursday for the fir…
Euro-Dollar Update Euro-Dollar Update Reviewed by Marc Chandler on November 03, 2010 Rating: 5
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Will Focus Shift to Europe?

November 03, 2010
With the FOMC looming, the market essentially yawned at the US election results, which gave the Republicans control of the House of Representatives by margin that looks to be at the high end of expectations. The GOP appear to have stopped shy of taking the Senate. An extension of the 2001 and 2003 tax cuts look increasingly likely. The China bill …
Will Focus Shift to Europe? Will Focus Shift to Europe? Reviewed by Marc Chandler on November 03, 2010 Rating: 5
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Chinese Yuan Update

November 02, 2010
There are two devleopments in China to note:
1. The yuan appreciated in the spot market earlier today, after staging a relatively large decline yesterday. At today's best dollar level, the yuan had weakened about 0.85% against the dollar over the past two weeks. It seemed that the yuan spot losses were a function of a) more stable tone in the …
Chinese Yuan Update Chinese Yuan Update Reviewed by Marc Chandler on November 02, 2010 Rating: 5
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The Next 36 Hours

November 02, 2010
The US dollar is trading heavily though within the recent ranges against most of the major currencies ahead of the conclusion of the FOMC meeting which is widely expected to result in a new round of long-term asset purchases.
The thunder today has been stolen by the Reserve Bank of Australia. Last month it defied market expectations by not raising…
The Next 36 Hours The Next 36 Hours Reviewed by Marc Chandler on November 02, 2010 Rating: 5
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Greek Woes

November 01, 2010
Sunday Greek deputy Prime Minister Pangalos told a local paper that in theory debt restructuring should not be completely ruled out, though the deficit would need to be dealt with first. He argued against "demonizing" debt restructuring.
This obviously has antagonized investors. The Greek 10-year yield rose 18 bp today after rising 120 b…
Greek Woes Greek Woes Reviewed by Marc Chandler on November 01, 2010 Rating: 5
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Yen and Japanese Corporate Earnings

November 01, 2010
The strength of the yen is negative for the Japanese economy because it reinforces the deflationary forces and hurts corporate earnings may making exports less competitive. This is fine on a certain level of abstraction, deducing from first economic principles. The problem is in the details.
Three important Japanese companies with large foreign sa…
Yen and Japanese Corporate Earnings Yen and Japanese Corporate Earnings Reviewed by Marc Chandler on November 01, 2010 Rating: 5
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The Big Week Begins

November 01, 2010
The US dollar starts a critical week on the defensive. A new round of long-term asset purchases by the Federal Reserve coupled with a stronger than expected Chinese PMI weighed on the dollar and encouraged purchasing of so-called risk assets. Although the euro has flirted with the $1.40 level, we note it has only managed to close (the North Americ…
The Big Week Begins The Big Week Begins Reviewed by Marc Chandler on November 01, 2010 Rating: 5
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Q3 GDP No Barrier to QEII

October 29, 2010
Q3 US GDP rose 2%, in line with the expectations which had drifted slightly higher in recent weeks. Consumption contributed 1.8 percentage points to growth and auto output added 0.4 percentage points to growth. Inventories added 1.4 percentage points, while net exports subtracted 2 percentage points. Business spending on equipment and software rem…
Q3 GDP No Barrier to QEII Q3 GDP No Barrier to QEII Reviewed by Marc Chandler on October 29, 2010 Rating: 5
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Another Piece of the Yen Puzzle

October 29, 2010
Investors and policy makers are befuddled by the yen. Its strength continues to defy the traditional explanatory models that typically give a privileged position for the risk appetite, interest rate differentials, or external positions.
Earlier in October, the BOJ announced that it would purchase JPY5 trillion (~$61 bln) of various assets, includi…
Another Piece of the Yen Puzzle Another Piece of the Yen Puzzle Reviewed by Marc Chandler on October 29, 2010 Rating: 5
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Take Aways

October 29, 2010
The US dollar has recouped a good part of yesterday’s losses as the choppy range trading that has characterized recent trading continues. Despite a string of poor economic data, pointing to stronger deflation forces and weaker output in Japan, the yen is the strongest currency, posting across the board gains.
German retail sales were very disappoi…
Take Aways Take Aways Reviewed by Marc Chandler on October 29, 2010 Rating: 5
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More Thoughts about US Q3 GDP

October 28, 2010
The next string of US real sector reports are likely to solidify evidence that the economy is gradually recovering.
Tomorrow should kick of the string with the first look at Q3 GDP, but the string of data is likely to include auto sales in September, which appears to possibly be the strongest since the cash-for-clunker program ended last summer an…
More Thoughts about US Q3 GDP More Thoughts about US Q3 GDP Reviewed by Marc Chandler on October 28, 2010 Rating: 5
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EU Summit: Two Big Issues

October 28, 2010
The EU is holding a two day summit. There are two issues that are of interest to the foreign exchange market.
First, the German-France condominium reached an agreement about tightening up the deficit rule and the stick that would be used. The absence of automaticity has been criticized. It will be recalled that in 2003 France and Germany had breac…
EU Summit: Two Big Issues EU Summit: Two Big Issues Reviewed by Marc Chandler on October 28, 2010 Rating: 5
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Dollar in Yesterday's Range

October 28, 2010
The US dollar is weaker across the board today, but largely confined to yesterday’s trading ranges. Short-term participants are getting chopped up while long-term investors seem to have adjusted their positions and awaiting the passing of the significant event risk next week. Japan’s poor Sept retail sales (-3% vs consensus of -0.5%), nor the BOJ’…
Dollar in Yesterday's Range Dollar in Yesterday's Range Reviewed by Marc Chandler on October 28, 2010 Rating: 5
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Indonesia's Samurai May be Attractive Alternative to JGB

October 27, 2010
Indonesia is planning to issue a 10-year samurai bond next month and for fund managers who for benchmark purposes need exposure, this issue may be an attractive alternative to Japanese government bonds.
First, Indonesia's credit rating by S&P is BB. Our analysis suggests Indonesia is a good candidate for a ratings upgrade over the next 3-6…
Indonesia's Samurai May be Attractive Alternative to JGB Indonesia's Samurai May be Attractive Alternative to JGB Reviewed by Marc Chandler on October 27, 2010 Rating: 5
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Euro-Dollar Update

October 27, 2010
My piece from last Friday suggested medium term investors begin cutting short dollar exposure. We identified three factors that should be tracked (moving averages, risk-reversal, and interest rate differentials).
1. The 5-day moving average of the euro is still poised to fall below the 20-day in the coming days. Sterling's moving averages turn…
Euro-Dollar Update Euro-Dollar Update Reviewed by Marc Chandler on October 27, 2010 Rating: 5
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FX Drivers

October 27, 2010
The US dollar is retaining its new found firm tone. Position adjusting ahead of next week’s key events continues to dominate, encouraged by the loss of the dollar’s downside momentum.
Softer Australian CPI (2.8% in Q3 from 3.1% in Q2 sent the Australian dollar down the most today, about 1.2% as rate hike ideas pulled back (scratched) or pushed out…
FX Drivers FX Drivers Reviewed by Marc Chandler on October 27, 2010 Rating: 5
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Euro Taking Another Leg Down

October 26, 2010
Into the European close, the euro has broken down further. A break below $1.3835 warns of the increased risk of a return to last week's low near $1.3700. The unwinding of long euro cross positions, especially against sterling seems to be a contributing factor. Yet, given the euro's strong gains against Swedish krona, Swiss francs some east…
Euro Taking Another Leg Down Euro Taking Another Leg Down Reviewed by Marc Chandler on October 26, 2010 Rating: 5
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Observations about the Yen Conundrum

October 26, 2010
The yen appears to simply trend higher regardless of the extension of the BOJ's QE and what happens in other markets. Neither the rising equity markets (risk-on) nor the widening on interest rate differentials (10-year) has been able to deter yen buying. The market appears to have turned cautious about pushing the dollar below JPY80. The G20 s…
Observations about the Yen Conundrum Observations about the Yen Conundrum Reviewed by Marc Chandler on October 26, 2010 Rating: 5
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Dollar Firm, but the Pound is Sterling

October 26, 2010
The US dollar is still consolidating/correcting its recent decline against most of the major currencies today. The notable exception is the British pound, where a considerably stronger than expected initial estimate of Q3 GDP (0.8% quarter-over-quarter vs 0.4% consensus) and an upgrade in its sovereign rating to stable from negative has bolstered …
Dollar Firm, but the Pound is Sterling Dollar Firm, but the Pound is Sterling Reviewed by Marc Chandler on October 26, 2010 Rating: 5
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Q3 US GDP Oct 29

October 25, 2010
The US reports Q3 GDP at the end of the week. Expectations appear to have crept up and now stand around 2%. This is after a disappointing 1.7% annualized growth in Q2.
Part of the improvement is expected to come from consumption, which is expected to tick up to 2.4% from 2.2%. This would be the strongest since before the crisis began. In the 2003-…
Q3 US GDP Oct 29 Q3 US GDP Oct 29 Reviewed by Marc Chandler on October 25, 2010 Rating: 5
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Dollar Slumps Post G20

October 25, 2010
The US dollar is broadly weaker in the wake of the G20 statement that appeared to encourage flowing in emerging markets and risk assets in general. Leading the move is the Australian dollar and Swedish krona. The larger than expected rise in Q3 PPI (1.3% vs 0.5% consensus) and hawkish comments from RBA Governor Stevens, coupled with anticipation o…
Dollar Slumps Post G20 Dollar Slumps Post G20 Reviewed by Marc Chandler on October 25, 2010 Rating: 5
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Euro Dollar Outlook

October 22, 2010
Executive Summary:We suspect the dollar’s decline against the euro is reaching its final stages. US interest rates appear to have largely priced in some form of quantitative easing by the Federal Reserve (though headline risk remains in terms of the actual decision) and European rates have risen to a price in the risk of an ECB rate hike in Q1 11.…
Euro Dollar Outlook Euro Dollar Outlook Reviewed by magonomics on October 22, 2010 Rating: 5
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Current Account Targets

October 22, 2010
US Treasury Secretary Geithner has proposing that G20 members restrain large current account imbalances. Over the last quarter of a century such ideas were mostly aimed against the US, however, like the currency war language, the US has coopted the issue and has managed to turn it around.
He is also turning on its head the traditional burden that …
Current Account Targets Current Account Targets Reviewed by Marc Chandler on October 22, 2010 Rating: 5
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Take Aways from This Week

October 22, 2010
The US dollar continues to trade choppily against the major foreign currencies as corrective pressures encounter the underlying bearish sentiment. The unexpected rise in the German IFO (107.6 vs consensus 106.5 and 106.8 in Sept) and talk of sovereign interest helped the euro recover after nearing $1.3850.
Sterling retested the week’s low near $1.…
Take Aways from This Week Take Aways from This Week Reviewed by Marc Chandler on October 22, 2010 Rating: 5
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Another Twist on Reserve Diversification

October 21, 2010
We have identified the interest rate differential theme as the major driver in the foreign exchange market. Another theme has also impacted the foreign exchange market is the diversification of new reserve accumulation. The focus here is primarily Asia. A number of central bank Asia are believed have intervened in the recent period. They buy dolla…
Another Twist on Reserve Diversification Another Twist on Reserve Diversification Reviewed by Marc Chandler on October 21, 2010 Rating: 5
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Strong Dollar Policy in Time for G20

October 21, 2010
The US dollar is mixed today and the real feature is the euro’s strength. Asian central bank reserve diversification and model-driven leveraged accounts appeared to help drive the euro higher. News that US Treasury Secretary Geithner suggested that the major currencies were in rough alignment sparked a short lived dollar bounce, with the greenback…
Strong Dollar Policy in Time for G20 Strong Dollar Policy in Time for G20 Reviewed by Marc Chandler on October 21, 2010 Rating: 5
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Yuan in the Hong Kong: The Logic

October 20, 2010
One of the surprises of the year has been the increased internationalization of the yuan, even though the capital account has not been liberated and the currency remains tightly managed.
We were skeptical of the significance of the yuan swap lines with other countries, primarily emerging markets. However,, more impressive has been the growth of a y…
Yuan in the Hong Kong: The Logic Yuan in the Hong Kong: The Logic Reviewed by Marc Chandler on October 20, 2010 Rating: 5
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ForexTV: Dollar and Quantitative Easing in Japan ForexTV: Dollar and Quantitative Easing in Japan Reviewed by magonomics on October 20, 2010 Rating: 5
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China Reducing Rare Earth Exports to US?

October 20, 2010
US-China trade tensions have intensified in recent days. At the end of last week, the US began an investigation into whether China is violating international trade rules by subsidizing its clean energy industries. This also involved whether its rare earth export quotas since 2005, with already high export taxes, are illegal.
The NY Times reports t…
China Reducing Rare Earth Exports to US? China Reducing Rare Earth Exports to US? Reviewed by Marc Chandler on October 20, 2010 Rating: 5
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Keeping the Eyes on the Prize

October 20, 2010
The US dollar is trading heavier today as Asia and Europe sold into the strong gains scored in North America yesterday following yesterday’s surprise Chinese rate hike. Of the majors, the euro and Australian dollar are leading the move, but given the magnitude of yesterday’s losses, these gains today are modest.
The dollar’s pullback after Asia in…
Keeping the Eyes on the Prize Keeping the Eyes on the Prize Reviewed by Marc Chandler on October 20, 2010 Rating: 5
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China Surprises with Hike

October 19, 2010
China has surprised the market with a 25 bp hike in the key 1-year deposit and lending rates. With the hike the deposit rate now stands at 2.5%. This is still below the inflation rate, which in Aug was 3.5%. This leave monetary policy very stimulative, even if not as much as previously. The lending rate now stands at 5.56%.
China Surprises with Hike China Surprises with Hike Reviewed by Marc Chandler on October 19, 2010 Rating: 5
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Choppy Correction Unfolding in FX

October 19, 2010
The US dollar is mixed in choppy turnover. The dollar initially saw late yesterday’s Geithner’s anti-devaluation talk inspired gains reverse in early Asia and the euro briefly pushed through the $1.40 level and sterling approached $1.5950.
However, Asian accounts sold into the foreign currency bounce. The better-than-rumored German ZEW survey saw …
Choppy Correction Unfolding in FX Choppy Correction Unfolding in FX Reviewed by Marc Chandler on October 19, 2010 Rating: 5
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A Look at a Half Full Glass

October 18, 2010
Anticipation of QEII in the US remains among the most potent forces in the capital markets. Bernanke's pre-weekend speech and two dovish speeches since--Evans and Rosengren (both voting members of the FOMC).
The case the Fed has built for the public is based on inflation being too low and clearly officials are concerned about the contraction i…
A Look at a Half Full Glass A Look at a Half Full Glass Reviewed by Marc Chandler on October 18, 2010 Rating: 5
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