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The Tragedy that is Spain

March 05, 2012
The Greek PSI will be resolved one way or the other this week. Early reports suggest a weak start and the triggering of collective action clauses and credit default swaps remain a distinct possibility. Portugal is next and, although the credit dynamics and implementation of reforms are superior to Greece, the risk remains high that it will need a …
The Tragedy that is Spain The Tragedy that is Spain Reviewed by Marc Chandler on March 05, 2012 Rating: 5
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Dollar Bid, Critical Events Loom

March 05, 2012
The US dollar is posting modest gains against most of the major and emerging market currencies to start what is likely to be among the most important weeks here in the first quarter, with numerous central banks meeting, first tier economic data and the deadline for the Private Sector Involvement (PSI) in Greece. The yen is bucking the generalizati…
Dollar Bid, Critical Events Loom Dollar Bid, Critical Events Loom Reviewed by Marc Chandler on March 05, 2012 Rating: 5
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Note on Commitment of Traders

March 03, 2012
There have been several interesting changes to the net speculative positions in the currency futures over the past week through Feb 28.  While not capturing the reversals in the euro and sterling at the end of the week, the data is still revealing.   The most notable change has been that the net speculative position has swung from short to long yen…
Note on Commitment of Traders Note on Commitment of Traders Reviewed by Marc Chandler on March 03, 2012 Rating: 5
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Why Portugal

February 29, 2012
The periphery bonds have generally rallied this year. Ireland's 10-year bond yield is off 138 bp and Italy's is off 179 bp, for example. The Iberian peninsula stands out as an exception. The Spanish 10-year benchmark yield is down only 4 bp and that includes today's 5 bp decline. Portugal is the real outlier. The 10-year yield is up 20…
Why Portugal Why Portugal Reviewed by Marc Chandler on February 29, 2012 Rating: 5
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Last Thoughts on LTRO

February 28, 2012
At this late date there still seems to be a great deal of misunderstanding and uncertainty surrounding Wed's 3-year LTRO by the ECB.
Ironically even the size of the first LTRO is unclear. Many observers and the media continue to cite the take down as 523 bln euros. That is true, but is misconstrued. The bulk of that amount reflected the rolli…
Last Thoughts on LTRO Last Thoughts on LTRO Reviewed by magonomics on February 28, 2012 Rating: 5
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Waiting for LTRO

February 28, 2012
The consolidative tone that was seen yesterday in the foreign exchange market has largely carried over into today's session as the market awaits tomorrow's 3-year funding operation by the ECB.  The major currencies are largely confined to yesterday's trading ranges.  
The market took that S&P downgrade of Greece to "selective d…
Waiting for LTRO Waiting for LTRO Reviewed by Marc Chandler on February 28, 2012 Rating: 5
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A Crude Put?

February 27, 2012
Arguably the rise in oil prices pose a new threat to the world economy. If oil prices stay elevated, it risks a policy response. Strategic reserves could be tapped as they were last year in a coordinated fashion. In addition, the risks of a new round of Federal Reserve asset purchases would seem to increase with the price of oil. Bernanke delivers…
A Crude Put? A Crude Put? Reviewed by Marc Chandler on February 27, 2012 Rating: 5
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Letting it Ride on LTRO

February 15, 2012
It appeared that the brinkmanship tactics had pushed Greece over the edge on Feb 12 as Athens was set ablaze in protest. Now it appears that the European finance ministers are slipping over the edge. Strong doubts remain, and are being expressed, about whether a second aid package is throwing good money after bad.
Papademos has failed to deliver. A…
Letting it Ride on LTRO Letting it Ride on LTRO Reviewed by Marc Chandler on February 15, 2012 Rating: 5
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Europe Still Dominates (the headines)

February 15, 2012
The vagaries of Europe's debt crisis continues to be the most important driver of the short-term price action in the foreign exchange market.  Indications that Greek New Democracy leader Samaras would sign a letter of commitment to the aid agreement helped the euro stabilize after the sell-off in response to the postponement of the Eurogroup m…
Europe Still Dominates (the headines) Europe Still Dominates (the headines) Reviewed by Marc Chandler on February 15, 2012 Rating: 5
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Schrodinger’s Cat in Athens

February 12, 2012
The Austrian physicist Erwin Schrodinger offered a thought experiment to illustrate the incompleteness of the Copenhagen interpretation of quantum mechanics and sub-atomic particles in 1935. In the experiment, Schrodinger’s cat is placed in a box with a device that is triggered by a single particle’s behavior. If activated, the device kills the ca…
Schrodinger’s Cat in Athens Schrodinger’s Cat in Athens Reviewed by Marc Chandler on February 12, 2012 Rating: 5
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Reflections on the New Collateral Rules

February 10, 2012
It is not just that a Greece deal continues to prove elusive that is challenging the euro.  Market participants are also digesting the implications of the ECB collateral rule changes.  While it appears more likely that the ECB will not cut the main repo rate in March, as previously appeared to be the case, the collateral rule changes mean that the…
Reflections on the New Collateral Rules Reflections on the New Collateral Rules Reviewed by Marc Chandler on February 10, 2012 Rating: 5
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2010 Metropolitan GDP Explained

February 08, 2012
The GDP of the Denver, CO area was about $157 bln, slightly less than the enterprise value of Google.

The GDP of Tallahasse, FL was only 1% more than the net worth of facebook founder Mark Zuckerberg.

2010 Metropolitan GDP Explained 2010 Metropolitan GDP Explained Reviewed by magonomics on February 08, 2012 Rating: 5
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Has the Euro Broken Out?

February 07, 2012
The euro has risen to about $1.3270 today, the highest level since December 12th.  Some observers are attributing the euro strength to creeping optimism that a Greek deal is nearly at hand.  Color me skeptical.  
Fed Chairman Bernanke's comments, the first since the employment report, remains decidedly dovish and this seems to be a better expla…
Has the Euro Broken Out? Has the Euro Broken Out? Reviewed by Marc Chandler on February 07, 2012 Rating: 5
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Tuesday Surprises

February 07, 2012
The US dollar remains confined to recent trading ranges against the major currencies as the European session gets under way.  The Asian session already had two surprises for the market.  The first, that the Reserve Bank of Australia defied expectations and left rates on hold was a genuine surprise and produced a market reaction.  The Australian do…
Tuesday Surprises Tuesday Surprises Reviewed by Marc Chandler on February 07, 2012 Rating: 5
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Six Observations about the FX Market

February 03, 2012
1. Of the three central banks that meet next week, Australia, UK and euro zone, the first two are expected to ease monetary policy (rate cut and new asset purchases respectively) but those two currencies have easily outperformed the euro over the past week, suggesting monetary policy expectations is not the only driver, or even a significant drive…
Six Observations about the FX Market Six Observations about the FX Market Reviewed by Marc Chandler on February 03, 2012 Rating: 5
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PSI: So What? So Yesterday

January 29, 2012
The market has been focused on the negotiations over the private sector involvement in reducing Greece’s debt burden. The optimism that a deal would be reached shortly was one of the factors that helped the euro gain around 4 cents against the dollar in recent days. Although progress was reported over the weekend, contrary to some expectations, …
PSI: So What? So Yesterday PSI: So What? So Yesterday Reviewed by Marc Chandler on January 29, 2012 Rating: 5
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Lisbon Woes, Headed on the Road to Athens

January 27, 2012
European officials have insisted that Greece is unique. Many market participants do not believe them. Portugal appears to be headed down that same road. While we have warned in the past of risks that Portugal would need a second aid package, it is only since S&P joined the other major rating agencies in rating Portuguese debt below investment …
Lisbon Woes, Headed on the Road to Athens Lisbon Woes, Headed on the Road to Athens Reviewed by Marc Chandler on January 27, 2012 Rating: 5
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Deja Vu All Over Again?

January 26, 2012
There is an eerie sense we have been here before.  The dollar rallied following the announcement of QE2 in early November 2010.  The strength continued into early 2011.  Then Trichet began threatening rate hikes.  At first it seem ludicrous--that his tough talk was going to get the market's to do his heavy lifting, though as we know, the ECB d…
Deja Vu All Over Again? Deja Vu All Over Again? Reviewed by Marc Chandler on January 26, 2012 Rating: 5
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Seven Observations about Commitment of Traders in FX

January 22, 2012
The Commodity Futures Trading Commission requires futures traders to identify whether they have an underlying business interest (commercials) or if they don't (non-commercials). Commercial positions are thought to be banks or businesses hedging. Non-commercials accounts are understood as a proxy for speculators.
Market participants tend to foc…
Seven Observations about Commitment of Traders in FX Seven Observations about Commitment of Traders in FX Reviewed by Marc Chandler on January 22, 2012 Rating: 5
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Grokking the Canadian Dollar in Three Correlations

January 20, 2012
I have written recently of the euro's correlation with the S&P 500.  I concluded that although the correlation has weakened, it remains elevated.  We vigilantly monitor that relationship because it seems that it is representative of the risk-on/risk-off rubric that still is so influential for both short-term traders and longer term investo…
Grokking the Canadian Dollar in Three Correlations Grokking the Canadian Dollar in Three Correlations Reviewed by Marc Chandler on January 20, 2012 Rating: 5
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