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Great Graphic: 2-Year Rate Differential and Euro

January 31, 2013
We constructed this Great Graphic on Bloomberg.  It shows the collapse of the premium the US offered over Germany on two-year government obligations.  It also shows how shifting interest rates weighed on the dollar against the euro. 

More broadly, it shows how the dollar's exchange rate against the euro tracks the 2-year interest rate differ…
Great Graphic: 2-Year Rate Differential and Euro Great Graphic: 2-Year Rate Differential and Euro Reviewed by Marc Chandler on January 31, 2013 Rating: 5
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Quiet into Month End

January 31, 2013
A fragile calm hangs over the foreign exchange market. as the month winds down.   There have been some sizable moves in the underlying asset markets, month-end portfolio and hedge adjustments seem modest.  Over the course of the month, global equities have rallied.  Of note, among the majors the weakness of the Swiss franc (vs euro) and the Japan…
Quiet into Month End Quiet into Month End Reviewed by Marc Chandler on January 31, 2013 Rating: 5
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US GDP Poor, but Weakness Exaggerated US GDP Poor, but Weakness Exaggerated Reviewed by Marc Chandler on January 30, 2013 Rating: 5
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Great Graphic: Consumer Confidence and S&P 500

January 30, 2013
This Great Graphic comes from Sober Look blog. It shows how well the Conference Board's measure of consumer confidence tracked the S&P 500.  However, more recently there has been notable divergence.  
It is easy to slip into a causal argument whereby increased confidence "causes" people to buy stocks.  Yet we know that for most …
Great Graphic: Consumer Confidence and S&P 500 Great Graphic: Consumer Confidence and S&P 500 Reviewed by Marc Chandler on January 30, 2013 Rating: 5
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Interest Rates Drive Divergence in FX

January 30, 2013
The euro has raced higher, with the $1.35 level convincingly breached and the option structure rumored to be struck near $1.3550 taken out.   The US dollar has moved to new highs against the Japanese yen  near JPY91.40.  Beneath both lay interest rate considerations.  
There is more evidence today that a tightening of euro area financial conditio…
Interest Rates Drive Divergence in FX Interest Rates Drive Divergence in FX Reviewed by Marc Chandler on January 30, 2013 Rating: 5
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CNBC Video Clip: FX Outlook CNBC Video Clip: FX Outlook Reviewed by Marc Chandler on January 29, 2013 Rating: 5
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Swiss Anomaly: Still Negative Nominal Rates?

January 29, 2013
A dominant meme in the foreign exchange market is that the world has taken an important step away from the edge of the abyss.  It may have been led by three words from ECB's Draghi (as in "whatever it takes"), but has been complimented by a number of other steps, including the IMF mea culpa for under-estimated the fiscal multiplier,…
Swiss Anomaly: Still Negative Nominal Rates? Swiss Anomaly: Still Negative Nominal Rates? Reviewed by Marc Chandler on January 29, 2013 Rating: 5
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Great Graphic: What are Chinese Consumers Buying?

January 29, 2013
This Great Graphiccomes from the Financial Times, which drew it from Euromonitor.  The charts look at three categories of consumer goods, beauty and personal care, packaged food and soft drinks.  
Western aesthetic are a powerful draw and western brands dominate the beauty and personal care products.  The market share of these top five firms has i…
Great Graphic: What are Chinese Consumers Buying? Great Graphic: What are Chinese Consumers Buying? Reviewed by Marc Chandler on January 29, 2013 Rating: 5
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Flattish Consolidation Featured

January 29, 2013
The potential for turnaround Tuesday is resolving itself into flattish consolidation in the foreign exchange market.  The light news stream is also denying participants of fresh trading incentives.  The strongest of the major currencies today, the yen, Australian dollar and British pound have been the weakest in recent sessions.  The week's b…
Flattish Consolidation Featured Flattish Consolidation Featured Reviewed by Marc Chandler on January 29, 2013 Rating: 5
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Great Graphic: Central Bank Balance Sheet Changes

January 28, 2013
This Great Graphic was posted on Sober Look, which got it from Credit Suisse.    It shows the change in central bank balance sheets over the past six months. 
Going forward, the Bank of England has ended its gilt purchase program and the bar to resuming it seems relatively high here in Q1.  The pace of BOJ asset purchases may accelerate a bit af…
Great Graphic: Central Bank Balance Sheet Changes Great Graphic: Central Bank Balance Sheet Changes Reviewed by Marc Chandler on January 28, 2013 Rating: 5
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The Explanatory Power of Interest Rate Developments

January 28, 2013
The euro has risen almost 2% against the US dollar thus far this year, while the yen has fallen about 4.5% against the greenback.  Beneath this divergence may be a common consideration:  Interest rate developments.  
One of the key developments has been the steep backing up of short-term European interest rates.  Consider that the implied yield o…
The Explanatory Power of Interest Rate Developments The Explanatory Power of Interest Rate Developments Reviewed by Marc Chandler on January 28, 2013 Rating: 5
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Contours of the FX Markets in the Week Ahead

January 28, 2013
There are two main forces shaping exchange rates.  The first is the continued depreciation of the Japanese yen and the second is the appreciation of the euro.  
The newly elected government in Japan is pursuing an aggressive stimulative policy to strengthen the economy and finally arrest deflation.  Many, however, doubt that the combination of ne…
Contours of the FX Markets in the Week Ahead Contours of the FX Markets in the Week Ahead Reviewed by Marc Chandler on January 28, 2013 Rating: 5
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Great Graphic: Behavior of US Capital

January 27, 2013
This Great Graphic comes from the Economist's Buttonwood blog, which in turn, it got from Andrew Lapthorne, a Societe Generale economist.  Together they tell an interesting story about the behavior of Corporate America that is consistent with the sketch we provided in our skeptical response to arguments of financial repression. 
Beginning wit…
Great Graphic: Behavior of US Capital Great Graphic: Behavior of US Capital Reviewed by Marc Chandler on January 27, 2013 Rating: 5
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Cool Video: Potential in Action Cool Video: Potential in Action Reviewed by Marc Chandler on January 26, 2013 Rating: 5
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Currency Positioning and Technical Outlook: Interesting Contrarian Opportunities Currency Positioning and Technical Outlook: Interesting Contrarian Opportunities Reviewed by Marc Chandler on January 26, 2013 Rating: 5
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Great Graphic: Yen Since Onset of the Financial Crisis

January 25, 2013
This Great Graphic, created on Bloomberg, shows the US dollar against the Japanese yen since the beginning of the financial crisis.  The dollar fell almost 40% from the peak in 2007 until the low in 2011.  
It has now pulled back, with the help of verbal guidance from Japanese officials, new evidence that deflation has not loosened it's grip …
Great Graphic: Yen Since Onset of the Financial Crisis Great Graphic: Yen Since Onset of the Financial Crisis Reviewed by Marc Chandler on January 25, 2013 Rating: 5
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Three Impulses Dominate FX at the Week's End

January 25, 2013
As the week draws to a close, there are three independent drivers in the foreign exchange market.  The first two are the weakness in the yen and sterling.  The third is the push higher in the euro.  
We had not expected the dollar to close above JPY90 in North America yesterday and it has not looked back.  Comments from some Japanese officials, s…
Three Impulses Dominate FX at the Week's End Three Impulses Dominate FX at the Week's End Reviewed by Marc Chandler on January 25, 2013 Rating: 5
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Cool Video: Bank Lending in US and UK

January 25, 2013
This Cool Video comes from the Economist.  Although the story of bank lending is more complicated than is told here, I think you'll agree that this is a reasonably good job for a 90 second comparison between the US and the UK experience.
Cool Video: Bank Lending in US and UK Cool Video: Bank Lending in US and UK Reviewed by Marc Chandler on January 25, 2013 Rating: 5
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Ten Things You Should Know about the LTRO

January 24, 2013
1. Banks that borrowed from the ECB under the Long Term Repo Operation (LTRO) can begin repaying, if they want. Banks must notify the ECB on a weekly basis about how much they want to repay. The ECB will publish amount to be paid back and the number of banks every Friday for the next few years, starting tomorrow.
2. Banks borrowed roughly 1 tril…
Ten Things You Should Know about the LTRO Ten Things You Should Know about the LTRO Reviewed by Marc Chandler on January 24, 2013 Rating: 5
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Yen Falls Back

January 24, 2013
The main feature in the foreign exchange market is the slide in the Japanese yen.  For the first time this week, Japanese banks were sellers of the yen, perhaps encouraged by official comments and a larger than expected trade deficit.  Others may have been emboldened by the Japanese selling and the yen continued to sell-off through the Europe…
Yen Falls Back Yen Falls Back Reviewed by Marc Chandler on January 24, 2013 Rating: 5
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Currency Wars: Causes and Consequences

January 23, 2013
The Realist understanding of international affairs is that it is a realm of competition.  The competition is multi-faceted, taking place in politics and economics.  It has a cultural dimension.  It takes place even in the writing of history.  
This competition spills over into the foreign exchange market.  It did not begin with the unorthodox pursu…
Currency Wars: Causes and Consequences Currency Wars: Causes and Consequences Reviewed by Marc Chandler on January 23, 2013 Rating: 5
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Choppy Consolidation Featured

January 23, 2013
Global capital markets are characterized by choppy consolidative activity.  In the foreign exchange market, two major currencies stand out, the yen and sterling.  
The Japanese yen which is continuing trade higher following the outcome of the much anticipated BOJ meeting that seemingly resulted appearance of easing without really doing very much.�…
Choppy Consolidation Featured Choppy Consolidation Featured Reviewed by Marc Chandler on January 23, 2013 Rating: 5
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Great Graphic: Euro, Stocks and Volatility

January 22, 2013
The relationship between the euro, volatility and the S&P 500 is far from stable. In light of recent developments, it may be helpful to update our analysis.
1. The implied 3-month euro volatility has increased from the 5-year lows seen in the middle of last November near 6.4% to move above 9.0% at the end of last week. It has eased a bit, w…
Great Graphic: Euro, Stocks and Volatility Great Graphic: Euro, Stocks and Volatility Reviewed by Marc Chandler on January 22, 2013 Rating: 5
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Great Graphic: Value-Added Trade

January 22, 2013
This Great Graphic, from the Economist, utilizes the new data base created by the OECD and World Bank that we brought to your attention here. Rather than simply look at the dollar value of goods and services that cross national borders, it focuses on the value-added.   
The chart here shows breaks down electronic exports (2009) into their domesti…
Great Graphic: Value-Added Trade Great Graphic: Value-Added Trade Reviewed by Marc Chandler on January 22, 2013 Rating: 5
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Two Developments Rattle FX Market

January 22, 2013
There are two main drivers in the foreign exchange market today:  the much anticipated BOJ meeting and the much stronger than expected German ZEW survey.  
Anticipation of aggressive easing by the BOJ today has kept the yen on the defensive.  However, the combination of "sell the rumor and buy the fact"  activity and, arguably, some dis…
Two Developments Rattle FX Market Two Developments Rattle FX Market Reviewed by Marc Chandler on January 22, 2013 Rating: 5
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Great Graphic: Sourcing Boeing's 787 Dreamliner

January 21, 2013
This Great Graphic was on Business Insider, who says they found it on Zero Hedge, who got it from Goldman Sachs.  
It depicts the internationalization of the production of Boeing's 787 Dreamliner.  The supply chain draws in eight countries, in addition to the US, according to the picture. However, other reports suggest even more countries wer…
Great Graphic: Sourcing Boeing's 787 Dreamliner Great Graphic: Sourcing Boeing's 787 Dreamliner Reviewed by Marc Chandler on January 21, 2013 Rating: 5
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Eight FX Considerations for the New Week

January 21, 2013
The US dollar begins the week mostly firmer.  The notable exception is the Japanese yen, which has seen some position adjustment ahead of the outcome of the BOJ meeting tomorrow.  In Asia, and Europe thus far, the dollar has found support near its five day moving average and the 38.2% retracement of its latest leg up (from Jan 16), both of which c…
Eight FX Considerations for the New Week Eight FX Considerations for the New Week Reviewed by Marc Chandler on January 21, 2013 Rating: 5
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Great Graphic: Europe's Unit Labor Costs and Productivity

January 20, 2013
These Great Graphics were posted  Fabrizio Goria (@FGoria), a financial reporter for EuroIntelligence.  They draw on research by Societe Generale and data from Eurostat.  
I have posted graphs of Europe's unit labor costs before.  It is probably the best single indicator of not just external competitiveness, but also of internal robustness of…
Great Graphic: Europe's Unit Labor Costs and Productivity Great Graphic: Europe's Unit Labor Costs and Productivity Reviewed by Marc Chandler on January 20, 2013 Rating: 5
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Cool Video: Is Light a Particle or a Wave? Cool Video: Is Light a Particle or a Wave? Reviewed by Marc Chandler on January 19, 2013 Rating: 5
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Currency Positioning and Technical Outlook: Correction at Hand?

January 19, 2013
The technical tone of the major foreign currencies deteriorated in recent days.  It appears to be a cascading effect.  Favorite risk-on currencies, like the dollar-bloc, failed to participate in the move against the greenback.  The Swiss franc took the dubious honor of being the weakest currency last week, losing 2.2% against the dollar.

Sterlin…
Currency Positioning and Technical Outlook: Correction at Hand? Currency Positioning and Technical Outlook: Correction at Hand? Reviewed by Marc Chandler on January 19, 2013 Rating: 5
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Italy: Economy Rotting While Focus on Elections

January 18, 2013
The machinations of Italian politics, with the election next month, is overshadowing the underlying rot of the Italian economy.  Two developments today should be seen as a warning sign by investors. 
First, November industrial orders, understood to be a leading indicator, fell 0.5%.  This follows the 1% drop in November industrial output, reporte…
Italy: Economy Rotting While Focus on Elections Italy: Economy Rotting While Focus on Elections Reviewed by Marc Chandler on January 18, 2013 Rating: 5
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Dollar Finishing Week on Firm Note

January 18, 2013
The US dollar is trading firmly.  The official verbal commentary this week by Europe's Juncker and Japan's Amari were more disruptive noise a true signal.  These mis-directional cues whipsawed short-term participants and served to obscure what was really happening.  
One of the most important take aways, it seems, from this week's acti…
Dollar Finishing Week on Firm Note Dollar Finishing Week on Firm Note Reviewed by Marc Chandler on January 18, 2013 Rating: 5
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Great Graphic: New Insight into Global Trade

January 17, 2013
This Great Graphic is a new tool developed by the OECD and the World Trade Organization.   It allows a more sophisticated understanding of modern trade of goods and services in which the production process has been fragmented. It is not simply global supply chains that we are interest in, but the valued-added chains. The quaint counting of good…
Great Graphic: New Insight into Global Trade Great Graphic: New Insight into Global Trade Reviewed by Marc Chandler on January 17, 2013 Rating: 5
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Deep Dive: Financial Repression Reconsidered Deep Dive: Financial Repression Reconsidered Reviewed by Marc Chandler on January 17, 2013 Rating: 5
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