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Some Technical Thoughts

December 30, 2011
Euro:   It has not closed above its 20-day moving average since late October.  It comes in now $1.3120 and falling around 20 ticks a day.  Ahead of there resistance is likely to be encountered in the $1.3000-50 area.  The 50 day moving average crossed below the 200 day (golden cross) in early October.    Volatility has trended lower most of the mo…
Some Technical Thoughts Some Technical Thoughts Reviewed by Marc Chandler on December 30, 2011 Rating: 5
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Dollar Finishing Year Mixed, Second Annual Gain Against Euro

December 30, 2011
The US dollar is narrowly mixed as activity winds down. The main price action to note is that the euro fell through the JPY100 level for the first time since mid-2001. For the most part, the dollar is confined to yesterday's ranges against the major currencies.
Emerging market currencies are finishing the year in mixed fashion as well. Interve…
Dollar Finishing Year Mixed, Second Annual Gain Against Euro Dollar Finishing Year Mixed, Second Annual Gain Against Euro Reviewed by Marc Chandler on December 30, 2011 Rating: 5
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Euro Slump Extended, Mediocre Italian Bond Auction, Poor Hungarian Debt Sale Euro Slump Extended, Mediocre Italian Bond Auction, Poor Hungarian Debt Sale Reviewed by Marc Chandler on December 29, 2011 Rating: 5
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Great Graphic: Global Debt Clock from The Economist Great Graphic: Global Debt Clock from The Economist Reviewed by magonomics on December 28, 2011 Rating: 5
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Italy Raises Funds, Market Still MIA

December 28, 2011
A favorable reception to Italy's debt sales failed to breathe fresh life into the moribund foreign exchange market.  The euro continues to trade in last Thursday's range of $1.3017-$1.3119.  It continues to trade within the range seen on Monday, when much of the world was still on Christmas break, and it was confined to $1.3035-$1.3083.���…
Italy Raises Funds, Market Still MIA Italy Raises Funds, Market Still MIA Reviewed by Marc Chandler on December 28, 2011 Rating: 5
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Japan and China: Small Beer

December 26, 2011
The main financial development over the Christmas holiday was an apparent agreement between Japan and China on a wide range of financial issues. The two key aspects are an effort to settle more of the bilateral trade in yen or yuan and that Japan will apply to buy Chinese bonds next year.
Japanese officials had already signaled interest in buying …
Japan and China: Small Beer Japan and China: Small Beer Reviewed by Marc Chandler on December 26, 2011 Rating: 5
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Happy Holidays from Marc to Market!

December 25, 2011
Well I'm Jewish, but my webmaster (and let's face it she is running the show here) thought I should put some holiday spirit on the site. So I give you Last Christmas by Wham! as the (clearly superior) Taylor Swift cover doesn't have a music video.

Happy Holidays from Marc to Market! Happy Holidays from Marc to Market! Reviewed by magonomics on December 25, 2011 Rating: 5
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Consolidation in FX

December 22, 2011
A consolidative tone has emerged after yesterday's powerful reversals after the warm reception to the initiation of the ECB's 3-year funding facility. Although the argument advanced in this space is that banks will 1) use the funds as a liquidity cushion, 2) service own liabilities, and 3) to the limited extent they increase sovereign bond…
Consolidation in FX Consolidation in FX Reviewed by Marc Chandler on December 22, 2011 Rating: 5
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More Thoughts on ECB's Liquidity Provisions

December 21, 2011
Many observers seem to be looking at the 523 banks that took 489.1 bln euros from the ECB's 3-year repo operation and recognize it to be on the upper end of expectations. Yet the situation is more complicated and the injection of new liquidity is not nearly as much.
Note that the ECB provided funds in three different facilities. 169 bln was …
More Thoughts on ECB's Liquidity Provisions More Thoughts on ECB's Liquidity Provisions Reviewed by Marc Chandler on December 21, 2011 Rating: 5
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Classic Buy Rumor Sell Fact after LTRO

December 21, 2011
The euro extended its rally to a six day high, just shy of $1.32 before the results of the ECB's allotment.  The results were at the upper end of expectations and the euro was returned to session  lows.  A classic buy the rumor of a strong demand and sell the fact.  Expectations seemed to have crept higher.    The larger short squeeze in the …
Classic Buy Rumor Sell Fact after LTRO Classic Buy Rumor Sell Fact after LTRO Reviewed by Marc Chandler on December 21, 2011 Rating: 5
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Interview with Global Finance Magazine Interview with Global Finance Magazine Reviewed by magonomics on December 20, 2011 Rating: 5
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ECB's Long-Term Repo Operation

December 20, 2011
The ECB will conduct its first 3-year repo operation tomorrow. Yet it is already having an influence on the capital markets. Some banks are thought to have been buying short-term Spanish and Italian bonds that will ostensibly be used for collateral, for example. In turn the generally good reception last week to the Spanish 5-year bond auction and …
ECB's Long-Term Repo Operation ECB's Long-Term Repo Operation Reviewed by Marc Chandler on December 20, 2011 Rating: 5
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Euro Squeezed Higher, Takes Others With It, Positive Newstream

December 20, 2011
Successful Spanish and Greek bill auctions and better than expected German IFO caught the market wrong-footed, if the record net speculative short at the IMM is anything to go by.  The euro has shot up to almost $1.3090 and pulled up the other major currencies and emerging market currencies in its wake.    The greenback also surrendered nearly all…
Euro Squeezed Higher, Takes Others With It, Positive Newstream Euro Squeezed Higher, Takes Others With It, Positive Newstream Reviewed by Marc Chandler on December 20, 2011 Rating: 5
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Riksbank Meets Tuesday, Market Risks Disappointment

December 19, 2011
In recent days the Swedish krona has been among the strongest of the major currencies. It continues to trade like a high beta euro in the sense that it seems to move in the same direction of the euro but more so. The recent low in the euro was in the middle of last week near $1.2950. The dollar's high against the krona, the highest since last …
Riksbank Meets Tuesday, Market Risks Disappointment Riksbank Meets Tuesday, Market Risks Disappointment Reviewed by Marc Chandler on December 19, 2011 Rating: 5
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CNBC: Markets Seek Merriment CNBC: Markets Seek Merriment Reviewed by magonomics on December 19, 2011 Rating: 5
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Europe's Three No's in Two Parts: Part II

December 18, 2011
European Bond The ECB, as illustrated by the Fitch comments, is seen to be the key protagonist and the pressure is more acute on it to act.  Yet it steadfastly refuses, though since the resumption of its bond purchase program, it has acquired almost the same amount of bonds as Spain and Italy have sold in the primary market.
Europe's Three No's in Two Parts: Part II Europe's Three No's in Two Parts: Part II Reviewed by Marc Chandler on December 18, 2011 Rating: 5
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Europe's Three No's in Two Parts: Part I

December 18, 2011
The European debt crisis is the single most important driver of the global capital markets and will continue to be so well into next year.  While observers have their favorite proposals how the crisis can be addressed and closure finally brought to the crisis, which is extending into its third year, most do not seem politically realistic.
Europe's Three No's in Two Parts: Part I Europe's Three No's in Two Parts: Part I Reviewed by Marc Chandler on December 18, 2011 Rating: 5
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Dollar Softer, Likely Temporary

December 15, 2011
Contrary to much speculation in the markets yesterday, France's sovereign credit worthiness has not been downgraded. Euro zone flash PMIs were slightly better than expected (though still below 50) and Spain raised much more money in its bond sales ( 6 bln euros vs 2.5-3.5 bln).  This helped spark a largely short-covering led euro bounce and ha…
Dollar Softer, Likely Temporary Dollar Softer, Likely Temporary Reviewed by Marc Chandler on December 15, 2011 Rating: 5
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The Euro and the S&P 500: Correlation Update

December 14, 2011
(This follows up on posts here and here.) One of the characteristics of the investment climate that we have tracked over the course of the year is the tight relationship between the euro and the S&P 500. The following observations are based correlations conducted on percentage change of the euro and the S&P 500.

The 60-day rolling correlat…
The Euro and the S&P 500: Correlation Update The Euro and the S&P 500: Correlation Update Reviewed by Marc Chandler on December 14, 2011 Rating: 5
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Norway Surprises and Ongoing Funding Woes

December 14, 2011
Norges Bank cut its official deposit rate by 50 bp to 1.75%. Most were looking for a 25 bp move, but some local banks had been warning of a 50 bp. The central bank was clearly concerned about the knock-on effects from the euro zone, but also noted that market funding for Norwegian banks was less accessible.
The dollar funding pressure continues to…
Norway Surprises and Ongoing Funding Woes Norway Surprises and Ongoing Funding Woes Reviewed by Marc Chandler on December 14, 2011 Rating: 5
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Flat Bounce Means Euro Downside Not Over

December 14, 2011
The euro barely managed to move above reaction high seen in New York yesterday near $1.3050.  There is widespread talk of large demand in front of $1.30 and the low thus far today is $1.3005.  Stops are thought to be below, so a break could see strong follow through, once though bids are absorbed. 
Flat Bounce Means Euro Downside Not Over Flat Bounce Means Euro Downside Not Over Reviewed by Marc Chandler on December 14, 2011 Rating: 5
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FOMC--Rare Non-Event

December 13, 2011
In an unusual but not unexpected fashion, the last FOMC meeting was as much of a non-event as such a gathering ever is. The FOMC left policy unchanged. This includes not only interest rates of course, but also its asset purchase program and its communication policy.
FOMC--Rare Non-Event FOMC--Rare Non-Event Reviewed by Marc Chandler on December 13, 2011 Rating: 5
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Misconceptions

December 13, 2011
Market participants, including economists and strategists are prone to confusing what they believe should be the case with what will be the case.

Paul Krugman's recent post recognizes this: "It's actually quite remarkable", the Nobel-prize winning economist wrote, "how many sensible people base their analysis on the presumpt…
Misconceptions Misconceptions Reviewed by Marc Chandler on December 13, 2011 Rating: 5
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Nervous Calm over Currency Market

December 13, 2011
A good reception to a Spanish bill auction and a some what better than expected German ZEW investor survey helped stabilize the risk sentiment which had been battered yesterday.  The major foreign currencies are mostly firmer on the day, but the modest gains have left the short-term momentum indicators a bit over-extended.  This would seem to favo…
Nervous Calm over Currency Market Nervous Calm over Currency Market Reviewed by Marc Chandler on December 13, 2011 Rating: 5
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Risk Off Monday

December 12, 2011
The US dollar is firm against all the major and emerging market currencies.  Equity markets are lower, giving back all of Friday's gains and more.  The euro has dropped 1% and the next level of support is seen near $1.3200. 
Risk Off Monday Risk Off Monday Reviewed by Marc Chandler on December 12, 2011 Rating: 5
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Three Key Developments

December 11, 2011
Three events took place last week that will shape the general investment climate in the weeks and months ahead.
Pump it Up The ECB significantly increased its liquidity provisions. Some observers seem to be disappointed that the ECB did not flout its own legal mandate and indicate it would buy an unlimited amount of peripheral bonds.
This should not…
Three Key Developments Three Key Developments Reviewed by Marc Chandler on December 11, 2011 Rating: 5
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The Long and Short of It

December 09, 2011
The most important take away from this week's developments is that there will be no European joint bond and no substantial change in the ECB's sovereign bond purchase program AND that the euro and monetary union will survive.
The Long and Short of It The Long and Short of It Reviewed by Marc Chandler on December 09, 2011 Rating: 5
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Draghi Turns Spigots, but Still a Drag

December 08, 2011
The ECB has giveth and taketh away today, leaving the market pessimistic about the outcome of tomorrow's summit.

The ECB delivered the much expected 25 bp rate cut, though the decision was not unanimous. There was some immediate disappointment by some players positioned for the outside chance of a 50 bp move. The ECB addressed the liquidity an…
Draghi Turns Spigots, but Still a Drag Draghi Turns Spigots, but Still a Drag Reviewed by Marc Chandler on December 08, 2011 Rating: 5
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Wrestling with the Imponderables: Worrisome Signs

December 07, 2011
Opinion polls and surveys are finding an increasing number of people expect one or more countries to leave the euro zone. Investors are anxious. What is to be done ? What makes this so difficult is that there are so many moving parts and possibilities. The way the question is asked often conditions the answers.
The initial reaction to what happen…
Wrestling with the Imponderables: Worrisome Signs Wrestling with the Imponderables: Worrisome Signs Reviewed by Marc Chandler on December 07, 2011 Rating: 5
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Key Disagreements at Late Stage Weigh on Euro

December 07, 2011
The EU Summit begins in a little less than 24 hours and the signals coming from European officials are anything but encouraging.  We did not expect the kind of closure than many investors want to emerge from this meeting.  We did expect some important steps toward erecting the scaffolding to facilitate great fiscal union. 

There are several areas o…
Key Disagreements at Late Stage Weigh on Euro Key Disagreements at Late Stage Weigh on Euro Reviewed by Marc Chandler on December 07, 2011 Rating: 5
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Two Developments Push Euro Lower in Europe

December 07, 2011
Asia extended the euro's recovery, but developments in Europe have seen it surrender the earlier gains and move back toward the lows seen in North America yesterday near $1.3360.  The relatively light participation in the ECB's 84-day dollar auction and signs that even at this late date there are key disagreements among euro zone officials…
Two Developments Push Euro Lower in Europe Two Developments Push Euro Lower in Europe Reviewed by Marc Chandler on December 07, 2011 Rating: 5
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Liquidity is the Word

December 06, 2011
The Bank of England introduced a new contingency liquidity facility--Extended Collateral Term Repo (ECTR) Facility. The purpose is to have a facility in place in case there is a market wide shortage of sterling liquidity. This is currently not a problem, so the facility is preemptive in nature.
Liquidity is the Word Liquidity is the Word Reviewed by Marc Chandler on December 06, 2011 Rating: 5
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Euro Recovers After S&P Slam

December 06, 2011
The euro sold off amid the rumors of the S&P decision to put on credit watch 15 euro zone countries.  Spared was Greece, in a world of its own, and Cyprus, which was already on credit watch.  It sold off further in Asia, but Europe has shrugged it off and, with the help of a monster manufacturing orders report from Germany has fully recovered …
Euro Recovers After S&P Slam Euro Recovers After S&P Slam Reviewed by Marc Chandler on December 06, 2011 Rating: 5
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CNBC: Focus on Europe and ECB CNBC: Focus on Europe and ECB Reviewed by Marc Chandler on December 05, 2011 Rating: 5
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China and Europe

December 05, 2011
Many observers mistakenly think that because China is not a parliamentary democracy that is it monolithic. Yet repeatedly we have seen this is not the case. Many officials at the PBOC, for example,seem more sympathetic to a more flexible currency regime, while officials more involved with commerce and trade are more opposed.
China and Europe China and Europe Reviewed by Marc Chandler on December 05, 2011 Rating: 5
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US Dollar Softer on Slightly Better News Stream

December 05, 2011
The US dollar is beginning the week on a softer note, but well within recent ranges.  Most of this week's key events lie ahead.   The day earlier than planned and somewhat larger Italian austerity plan coupled with talk of ECB purchases has helped send Italian bond yields sharply lower, with the 10-year yield falling over 50 bp toward 6%.  Spa…
US Dollar Softer on Slightly Better News Stream US Dollar Softer on Slightly Better News Stream Reviewed by Marc Chandler on December 05, 2011 Rating: 5
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March to Folly: Underestimating Germany and the ECB

December 04, 2011
The House of Finance is accustomed to a cacophony of opinions and voices. Rarely out of the free market place of ideas has such a strong consensus emerged: Germany and the ECB must capitulate.
The ECB must act as a backstop and support the bond markets ofthe heavily indebted euro zone members. Germany must relent and permit the issuance of Eurobon…
March to Folly: Underestimating Germany and the ECB March to Folly: Underestimating Germany and the ECB Reviewed by Marc Chandler on December 04, 2011 Rating: 5
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Some Thoughts on the U.S. Jobs Report and Implications

December 02, 2011
As often is the case, economic data can be a bit of a Rorschach test, in that reasonable people can see and value different aspects of the report. This holds for today's US employment report. The headlines were good--140k private sector jobs were created, near expectations, back months were revised up by 72k, and the unemployment rate fell une…
Some Thoughts on the U.S. Jobs Report and Implications Some Thoughts on the U.S. Jobs Report and Implications Reviewed by Marc Chandler on December 02, 2011 Rating: 5
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Hard Asset Investor: No Race to Debase Hard Asset Investor: No Race to Debase Reviewed by magonomics on December 01, 2011 Rating: 5
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Short Note on Canada

December 01, 2011
The Canadian dollar has appreciated about 1.5% since the start of the week. The general investment environment has improved compared to last week and the Canadian dollar responded well to yesterday's central bank swap line decision and the stronger than expected Q3 GDP (3.5% annualized vs 3.0% consensus). Yet the Canadian dollar has under-perf…
Short Note on Canada Short Note on Canada Reviewed by Marc Chandler on December 01, 2011 Rating: 5
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Fasten Your Seatbelts: A Week that Can Rock your World

December 01, 2011
Starting today and running through next week, there is a key event nearly every day.  The reports suggesting that the EU may sanction bank bond guarantees through next year is also indicative of the kind of headline risk that will exist as Europe officials grapple with the crisis. This is also an important element that can help banks secure their …
Fasten Your Seatbelts: A Week that Can Rock your World Fasten Your Seatbelts: A Week that Can Rock your World Reviewed by Marc Chandler on December 01, 2011 Rating: 5
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Great Graphic: Making Sense of Europe Great Graphic: Making Sense of Europe Reviewed by magonomics on December 01, 2011 Rating: 5
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Wating for Another Shoe to Drop

December 01, 2011
The major currencies are consolidating in yesterday's broad trading ranges, but the "real" action is in the European bond markets, with acceptable auctions in Spain and France, helping support of a bond market rally that was already underway, encouraged by yesterday's step to increase access to dollar funding.   
Egan-Jones cut F…
Wating for Another Shoe to Drop Wating for Another Shoe to Drop Reviewed by Marc Chandler on December 01, 2011 Rating: 5
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FT Feature Video: Marc Chandler bets on Euro Survival FT Feature Video: Marc Chandler bets on Euro Survival Reviewed by magonomics on November 30, 2011 Rating: 5
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Official Action and Why Italy is Still at the Vortex

November 30, 2011
The focus is on next week's ECB meeting and the EU summit. Nearly every one is expecting a 25 bp rate cut and if expectations are wrong, it is more likely that it is because of more aggressive action, like a 50 bp cut, than less. Separately, it will also likely provide long-term refi operations. It currently has a 1 year repo outstanding and n…
Official Action and Why Italy is Still at the Vortex Official Action and Why Italy is Still at the Vortex Reviewed by Marc Chandler on November 30, 2011 Rating: 5
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Choppy Market: Push Me Pull You

November 30, 2011
There have been several developments and they have imparted conflicting impulses into the market.  The S&P downgrade of a number of large banks based on a new methodology that has been unfolding over the past couple of years comes at a poor time, when many banks, especially in Europe, are having funding problems and different measures of finan…
Choppy Market: Push Me Pull You Choppy Market: Push Me Pull You Reviewed by Marc Chandler on November 30, 2011 Rating: 5
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EuroGroup Meeting Day One

November 29, 2011
The first day of the eurogroup (European finance ministers) meeting results in two decisions.  The first is the approval to the next tranche of Greek aid.  It is about 5.8 bln euros.  This is the sixth disbursement and there is no reason to think that next year's disbursements won't be the same nail-biting exercise as this year's have …
EuroGroup Meeting Day One EuroGroup Meeting Day One Reviewed by Marc Chandler on November 29, 2011 Rating: 5
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CNBC: EFSF Bailout and the Euro CNBC: EFSF Bailout and the Euro Reviewed by magonomics on November 29, 2011 Rating: 5
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CNBC: QE3 and Europe in 3 Minutes CNBC: QE3 and Europe in 3 Minutes Reviewed by Marc Chandler on November 29, 2011 Rating: 5
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More Thoughts on End Game Scenarios

November 29, 2011
The euro zone finance ministers meet today and tomorrow. Approval of the next tranche of aid to Greece and an agreement on EFSF leveraging is sought. Yet the real deal is still a week away and that is the EU summit.
A year ago, we handicapped the likely end games to the European debt crisis. We attributed a 3% chance of a country leaving the union.…
More Thoughts on End Game Scenarios More Thoughts on End Game Scenarios Reviewed by Marc Chandler on November 29, 2011 Rating: 5
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Dollar Heavier as Position Squaring Dominates

November 29, 2011
After rallying in Europe yesterday, as weekend developments encouraged risk appetites, the euro and sterling retreated in North America.  That pullback went about as deep as possible without negating my expectation of corrective forces at the start of the week.  Despite more poor rating news and talk, those corrective forces remain intact today.��…
Dollar Heavier as Position Squaring Dominates Dollar Heavier as Position Squaring Dominates Reviewed by Marc Chandler on November 29, 2011 Rating: 5
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Risk Assets Jump, Smell Something, See Nothing

November 28, 2011
Equities, most foreign currencies and commodities have rallied.  It is not as if there has been a great deal of clarity over the weekend.  There have been a number of press reports that have been suggestive, but some, like the report that the IMF was preparing a massive loan program to Italy, has been denied. 
Hopes that the Tue-Wed Eurogroup meeti…
Risk Assets Jump, Smell Something, See Nothing Risk Assets Jump, Smell Something, See Nothing Reviewed by Marc Chandler on November 28, 2011 Rating: 5
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Weekend Developments and Their Significance Going Forward

November 27, 2011
There have been several important developments over the weekend which are likely to support the euro at the start of the week, after falling for the past four consecutive weeks and recording a 7-week low before the weekend. However, I continue to expect corrective gains in the euro will be short-lived and subject to headline risks. I still think t…
Weekend Developments and Their Significance Going Forward Weekend Developments and Their Significance Going Forward Reviewed by Marc Chandler on November 27, 2011 Rating: 5
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Euro Pressures Mount--Necessary for Eventual Resolution

November 25, 2011
Personal challenges may help one overcome certain modes of thought and behavior.  So too,  a crisis allow officials to transcend ideological constraints.  First principles and sacred cows can get sacrificed if political necessity is strong enough.  
Those that call for the ECB to substantially increase its sovereign bond purchases, or for Germany t…
Euro Pressures Mount--Necessary for Eventual Resolution Euro Pressures Mount--Necessary for Eventual Resolution Reviewed by Marc Chandler on November 25, 2011 Rating: 5
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CNBC: Case for German-led Fiscal Union CNBC: Case for German-led Fiscal Union Reviewed by Marc Chandler on November 23, 2011 Rating: 5
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What the End Game in the Euro Zone may Look Like

November 23, 2011
A headline says that an investment bank survey found almost half the respondents expect at least one country to drop out of the euro zone next year. This is twice the percentage of a couple of months ago. While such a scenario cannot be ruled out, cost/benefit analysis still argues against a country leaving.
Greece is seen as the most likely c…
What the End Game in the Euro Zone may Look Like What the End Game in the Euro Zone may Look Like Reviewed by Marc Chandler on November 23, 2011 Rating: 5
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Euro Punched Lower by Series of Jabs

November 23, 2011
What was to be a subdued period in the markets is turning into a rout.  There have been a number of poor developments that have sent the US dollar broadly higher and has weighed on the highly correlated risk assets, equities, emerging market and commodities. 
The combination of Belgium apparently wanting to renegotiate the Dexia bail out and the p…
Euro Punched Lower by Series of Jabs Euro Punched Lower by Series of Jabs Reviewed by Marc Chandler on November 23, 2011 Rating: 5
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IMF is Lender of Last Resort to Sovereigns

November 22, 2011
Many observers are confused.  They cry for the ECB to "man up" and "do what it is supposed to do" and be the lender of last resort.  It does have that function for banks, not for sovereigns.  The lender of last resort to sovereigns in the IMF. 
The IMF has been grasping for new facilities to address the current crisis.  Today i…
IMF is Lender of Last Resort to Sovereigns IMF is Lender of Last Resort to Sovereigns Reviewed by Marc Chandler on November 22, 2011 Rating: 5
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India Update: INR Slumps, Policy Response Looming

November 22, 2011
As the dollar is in uncharted water against the INR, it is difficult to have much confidence technical levels of support or resistance. Talk of a new range for the dollar between INR54-INR56 seems reasonable, but the RBI may want to try to push the INR higher, breaking the one-way market and allowing corporations an change to adjust. Key dollar su…
India Update: INR Slumps, Policy Response Looming India Update: INR Slumps, Policy Response Looming Reviewed by Marc Chandler on November 22, 2011 Rating: 5
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ECB: Funding, Collateral, Outlook

November 22, 2011
In addition to data showing a broadening and deepening of the downturn and continued stress in the money markets, the ECB will also have new staff forecasts, which will likely acknowledge the slower growth and the inflation implications of the economic outlook. A particularly soft PMI data will encourage rate cut expectations. Looking further out,…
ECB: Funding, Collateral, Outlook ECB: Funding, Collateral, Outlook Reviewed by Marc Chandler on November 22, 2011 Rating: 5
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Dollar Softer Amid Consolidation

November 22, 2011
The US dollar is trading with a softer bias in what largely appears to be a consolidation.  The euro held support near $1.34, sterling near $1.56 and Aussie near $0.9800.  The news stream is light and corrective forces are seen in equities, which are mostly higher, and bond markets, which are mostly lower.  Emerging market currencies are also gen…
Dollar Softer Amid Consolidation Dollar Softer Amid Consolidation Reviewed by Marc Chandler on November 22, 2011 Rating: 5
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The Four Key Issues that are Dividing Europe

November 21, 2011
The ECB settled the purchase of almost 8 bln euros of sovereign bonds in the past week. This is a noticeable increase from the almost 4.5 bln euros settled in the prior week and it has managed to push Italian bond yields back below 7%. Nevertheless, funding pressure (the cost of swapping from euros to dollars, for example) remains elevated and the…
The Four Key Issues that are Dividing Europe The Four Key Issues that are Dividing Europe Reviewed by Marc Chandler on November 21, 2011 Rating: 5
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Dollar Bid as European Woes Dominate

November 21, 2011
News that the US super committee failed to reach an agreement has done little to eclipse the negative impulses coming from Europe.   Rajoy won no honeymoon in Spain despite achieving an outright majority in parliament.  Spain's 10-year bond yield is up around 15 bp today, the worst performer in the euro zone.  Moody's warned that rising de…
Dollar Bid as European Woes Dominate Dollar Bid as European Woes Dominate Reviewed by Marc Chandler on November 21, 2011 Rating: 5
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Fifth New Government in Periphery and Thoughts to Start Week

November 20, 2011
Spain is the latest euro zone country to change governments. Since the debt crisis materialized, Ireland, Portugal, Greece, Italy have new leaders. The exact vote is not clear and does not really matter for international investors. The important take away is that as expected the Popular Party (PP) won a clear absolute majority.
Rajoy, the new prim…
Fifth New Government in Periphery and Thoughts to Start Week Fifth New Government in Periphery and Thoughts to Start Week Reviewed by Marc Chandler on November 20, 2011 Rating: 5
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Yen Strength: FX Forensics

November 16, 2011
Japan's economy has recovered after three consecutive quarters of contraction.  The recovery is sharp but is likely to be short-lived with much of the pent up demand satiated and new disruptions in the form of the floods in Thailand and the fragility of the world economy. 
The yen and the Swiss franc were seen as safe haven currencies during th…
Yen Strength: FX Forensics Yen Strength: FX Forensics Reviewed by Marc Chandler on November 16, 2011 Rating: 5
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Austerity or Not: Spain is the Next Shoe to Drop Austerity or Not: Spain is the Next Shoe to Drop Reviewed by magonomics on November 16, 2011 Rating: 5
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ECB and Fed Action: Forget About It

November 16, 2011
Some press reports are linking the recovery in the euro to comments from Boston's Fed Rosengren who seemed to suggest that an intensification of the debt crisis could prompt a joint response by both the Federal Reserve and the ECB.   Immediately people thought about intervention and/or coordinated easing. Don't hold your breath for it. 
Ro…
ECB and Fed Action: Forget About It ECB and Fed Action: Forget About It Reviewed by Marc Chandler on November 16, 2011 Rating: 5
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Interview: Euro Remains Resilient in Face of EU Debt Fears Interview: Euro Remains Resilient in Face of EU Debt Fears Reviewed by magonomics on November 16, 2011 Rating: 5
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Yahoo Finance: Euro Remains Resilient in Face of EU Debt Fears Yahoo Finance: Euro Remains Resilient in Face of EU Debt Fears Reviewed by magonomics on November 16, 2011 Rating: 5
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Spain: Another Pain

November 16, 2011
Pressure is mounting on Spain. The 10-year yield today is essentially back to where it was when the ECB broadened its sovereign bond purchase scheme to include Spanish and Italian bonds. On Oct 27, the 10-year yield was near 5.33%. Today it is 100 bp higher. This is not a very conducive environment for tomorrow's new benchmark offering (up to …
Spain: Another Pain Spain: Another Pain Reviewed by Marc Chandler on November 16, 2011 Rating: 5
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Roller Coaster Foreign Exchange Market, but Ride the Dollar

November 16, 2011
After falling in Asia to new lows since October 10, the euro rallied in  Europe, briefly turned positive on the day, before coming off hard.  The short squeeze higher seemed to be largely based on what will likely be proven untrue.  There were reports and speculation that the ECB would agreed to defend certain interest rate spreads for the periphe…
Roller Coaster Foreign Exchange Market, but Ride the Dollar Roller Coaster Foreign Exchange Market, but Ride the Dollar Reviewed by Marc Chandler on November 16, 2011 Rating: 5
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Meeting Capital Requirements in Europe and the Euro

November 15, 2011
There are a number of ways that European banks are moving to boost their Tier 1 capital and strengthen their balance sheets.
One tactic that is more evident in practice than in observation is adjusting the risk weighted optimization models of the projected capital need (~13.6 bln euros) by adjusting their models.
Meeting Capital Requirements in Europe and the Euro Meeting Capital Requirements in Europe and the Euro Reviewed by Marc Chandler on November 15, 2011 Rating: 5
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Political Theatre Intermission, Economic Drama Returns

November 15, 2011
The political theatre in Europe in recent weeks was a distraction.  With it easing as new governments come to the fore in Greece and Italy, investors can return to the economic drivers.   Investors appear to be focused on the vacuum and how the ECB is the only institution that can immediately address the situation, but is reluctant to do so.   It …
Political Theatre Intermission, Economic Drama Returns Political Theatre Intermission, Economic Drama Returns Reviewed by Marc Chandler on November 15, 2011 Rating: 5
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Five Uncommon Observations about Europe

November 14, 2011
The escalation of the European debt crisis and mounting evidence of new economic contraction have increased the scrutiny on the region. Yet it seems like many observers may be failing to grasp several important points, including the nature of the new governments, the Italian challenge, pressure on the ECB, risks of a euro zone break up and the com…
Five Uncommon Observations about Europe Five Uncommon Observations about Europe Reviewed by Marc Chandler on November 14, 2011 Rating: 5
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Thoughts on the Data in the Week Ahead and the Foreign Exchange Market

November 13, 2011
Economic data has been of tertiary concern to the market recently, overwhelmed by the drama in Europe. Given that the drama may die down, with new governments in Greece and Italy, the economic data may become somewhat more important.
U.S. The US production and consumption data are likely to confirm that the economic momentum from Q3 is carrying ov…
Thoughts on the Data in the Week Ahead and the Foreign Exchange Market Thoughts on the Data in the Week Ahead and the Foreign Exchange Market Reviewed by Marc Chandler on November 13, 2011 Rating: 5
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Week that Began with a Bang Ends with a Whimper

November 11, 2011
The foreign exchange is calmer and narrower ranges have prevailed. The political uncertainty appears gradually easing. A new Greek technocrat government is taking office in Greece and Italy's Senate will vote on the austerity measures and the Chamber of Deputies will vote on them over the weekend. This will pace the way for a technocrat govern…
Week that Began with a Bang Ends with a Whimper Week that Began with a Bang Ends with a Whimper Reviewed by Marc Chandler on November 11, 2011 Rating: 5
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CNBC: Apple, The Euro, & Bernanke CNBC: Apple, The Euro, & Bernanke Reviewed by magonomics on November 10, 2011 Rating: 5
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Euro Zone: Size Matters

November 10, 2011
The German Christian Democrats hold a party congress next weekend. There are a number of proposals that members are trying to get incorporate into the party position and platform. Many observers seem to be exaggerating the significance of some of the proposals that have been reported in the press.
One such proposal is to give the national central …
Euro Zone: Size Matters Euro Zone: Size Matters Reviewed by Marc Chandler on November 10, 2011 Rating: 5
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ECB Tries to Put the Genie Back in the Bottle

November 10, 2011
The sun has risen today and Italy is still there and so is Europe and monetary union, despite concerns about a point of no return being passed or some Rubicon has been crossed.  The combination of an acceptable Italian T-bill auction and apparently stepped up ECB buying has seen the Italian debt market recover some of yesterday's drubbing.   T…
ECB Tries to Put the Genie Back in the Bottle ECB Tries to Put the Genie Back in the Bottle Reviewed by Marc Chandler on November 10, 2011 Rating: 5
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Is Greece Italy's Future?

November 09, 2011
This seems to be the question on nearly every one's mind today, with Italian 10-year yields rocketing through the 7% threshold and a vicious cycle of rising yields, triggering more sales, leading to margin increases, spurring more sales. Does Italy now need to go to the EU and IMF with hat in hand?
Italian mythology borrowed much from ancient G…
Is Greece Italy's Future? Is Greece Italy's Future? Reviewed by Marc Chandler on November 09, 2011 Rating: 5
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Rome Burns

November 09, 2011
There is one overarching story today and it is Italy.  Berlusconi's resignation reveals political fragility of the euro zone''s third largest economy.  Lost on many observers is the fact that the Berlusconi phenomenon is just a much an effect as cause of the political paralysis.  As Italian yields move into panic zone, with the 10-year…
Rome Burns Rome Burns Reviewed by Marc Chandler on November 09, 2011 Rating: 5
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Thai Floods and Yen Appreciation

November 08, 2011
The dollar has slipped to almost JPY77.50, the lowest since the massive intervention last week. At today's lows, the dollar has given back almost 50% of what the intervention had achieved. It is still mind boggling the magnitude of the intervention. In one fell swoop the BOJ accounted for about 20% of the average daily yen turnover. In one fel…
Thai Floods and Yen Appreciation Thai Floods and Yen Appreciation Reviewed by Marc Chandler on November 08, 2011 Rating: 5
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Choppy Calm Ahead of Potential Storm

November 08, 2011
The major foreign currenices are little changed against the US dollar as the North American session begins.  The Italian vote (9:30 EDT/14:30 GMT) is the key event and news that Berlusconi's ally/rival Bossi, head of the Northern League, called for the PM's resignation increases the probability that the government falls.  Meanwhile the new…
Choppy Calm Ahead of Potential Storm Choppy Calm Ahead of Potential Storm Reviewed by Marc Chandler on November 08, 2011 Rating: 5
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Italy's Political Drama: Tuesday Climax?

November 07, 2011
The Italian Chamber of Deputies will vote on a minor formality regarding last year's budget report on Tuesday around 14:30 GMT (9:30 EDT), but it holds within it the potential to topple the second euro zone prime minister in less than a week.  
Greek Prime Minister Papandreou has stopped down in favor of a national unity government which has ye…
Italy's Political Drama: Tuesday Climax? Italy's Political Drama: Tuesday Climax? Reviewed by Marc Chandler on November 07, 2011 Rating: 5
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Italy Takes Limelight from Greece

November 07, 2011
With Greece moving to a political solution, Italy is moving to center stage.  A national unity government in Greece, with former ECB vice president Papademos seen as slightly more likely than current finance minister Venizelos.  The national unity government will likely secure the 180 super majority vote to approve the late Oct agreement with Euro…
Italy Takes Limelight from Greece Italy Takes Limelight from Greece Reviewed by Marc Chandler on November 07, 2011 Rating: 5
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What Europe Can Learn from the NY Mets, Eurocrat Occupation and Other Observations What Europe Can Learn from the NY Mets, Eurocrat Occupation and Other Observations Reviewed by Marc Chandler on November 06, 2011 Rating: 5
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Watch Switzerland on Monday

November 04, 2011
Switzerland reports its October consumer prices on Monday. This could be important. The Swiss National Bank's decision to cap the franc took place on the same day that the August CPI was reported (Sept 6). It showed a 0.3% month-over-month decline after a 0.8% decline in July. There are many observers who expect the SNB to lower its cap for th…
Watch Switzerland on Monday Watch Switzerland on Monday Reviewed by Marc Chandler on November 04, 2011 Rating: 5
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Friday Thoughts

November 04, 2011
The diverging economic data between Europe and the US was underscored in recent days.  The US economy expanded 2.5% at annualized rate in Q3 and early indications for Q4, including ISM, regional surveys, strongest auto sales in eight months, and the employment data, are constructive.  To be sure, the data does not point to spectacular growth.  In …
Friday Thoughts Friday Thoughts Reviewed by Marc Chandler on November 04, 2011 Rating: 5
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The Draw Down of the Fed's Custody Holdings Ends

November 03, 2011
The Federal Reserve reports its custody holdings for foreign central banks on a weekly average basis and on a Wednesday-to-Wednesday basis.  The data is reported every Thursday.  In this space I have been tracking a sustained decline in these holdings in recent weeks.   It now looks like the trend is over.   
On a weekly average basis, custody hold…
The Draw Down of the Fed's Custody Holdings Ends The Draw Down of the Fed's Custody Holdings Ends Reviewed by Marc Chandler on November 03, 2011 Rating: 5
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US Jobs Report and A Look at Youth/Education/Race and Unemployment

November 03, 2011
The US monthly jobs report is among the hardest of the high frequency data for the market to forecast. There are few inputs and the inputs are there are track the general trends but frequently deviate on a month-to-month basis.
The Bloomberg consensus is for the private sector to have added 125k private sector jobs in October, this is around the 3…
US Jobs Report and A Look at Youth/Education/Race and Unemployment US Jobs Report and A Look at Youth/Education/Race and Unemployment Reviewed by Marc Chandler on November 03, 2011 Rating: 5
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ECB Surprises and Greece says 'Never Mind'

November 03, 2011
The ECB surprised the market by cutting the key rates 25 bp.  This was Draghi's first meeting.  With the euro zone economy either in a recession or quickly headed into one, which in turn will help bring inflation off the 3% area, Draghi led the ECB to reversing the rate hike delivered four months ago. Around the same time, the Greek Prime Mini…
ECB Surprises and Greece says 'Never Mind' ECB Surprises and Greece says 'Never Mind' Reviewed by Marc Chandler on November 03, 2011 Rating: 5
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The Elusiveness of Currency Diversification

November 02, 2011
One challenge investors and portfolio managers is achieving diversification. Impressionistic views gained from every day experience are confirmed by a number of academic studies. Diversification in the international capital markets is becoming increasingly difficult. Bond markets have long been highly correlated. Equity markets have become increas…
The Elusiveness of Currency Diversification The Elusiveness of Currency Diversification Reviewed by Marc Chandler on November 02, 2011 Rating: 5
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FOMC as Expected, but Only a Dove Cries

November 02, 2011
The FOMC statement contained no surprises and no change in asset purchases.
The statement recognized somewhat better growth in Q3 (better than H1).  It said growth strengthened somewhat while previously it said growth remained slow.  Weakness in the labor market continued to be noted, but despite this and the depressed housing market conditions, it…
FOMC as Expected, but Only a Dove Cries FOMC as Expected, but Only a Dove Cries Reviewed by Marc Chandler on November 02, 2011 Rating: 5
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Hump Day and Beyond

November 02, 2011
Even though a great sense of stability appears to return to the markets after the blood-letting of Monday and Tuesday, there has been fresh developments on the ground to suggest these market moves will be sustained.  The purchasing managers surveys in Europe were generally poor with the region as a whole coming in at 47.1, down from 47.3 in the fl…
Hump Day and Beyond Hump Day and Beyond Reviewed by Marc Chandler on November 02, 2011 Rating: 5
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Evolution of Fed's Economic Views--to be Updated Tomorrow

November 01, 2011
The Federal Reserve holds a two day meeting that concludes near midday tomorrow. It will likely be the first meeting in a while where there is not change in the composition or size of the balance sheet and no fresh initiatives, like cutting the rate of interest paid on excess reserves, or guidance. The tweaks in the communication are likely to be …
Evolution of Fed's Economic Views--to be Updated Tomorrow Evolution of Fed's Economic Views--to be Updated Tomorrow Reviewed by Marc Chandler on November 01, 2011 Rating: 5
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Some Thoughts on the CDS Market and Greek Developments

November 01, 2011
There is much truth to the generalization that European banks took on direct exposure to European sovereigns through the bond market, while top banks took exposure through selling insurance, primarily CDS, on the sovereigns. The latest BIS data suggest that in H1 2011, US banks increased their CDS sales by almost $81 bln to $518 bln. Two thirds ar…
Some Thoughts on the CDS Market and Greek Developments Some Thoughts on the CDS Market and Greek Developments Reviewed by Marc Chandler on November 01, 2011 Rating: 5
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Dollar Recovery Continues

November 01, 2011
News of Greece's political gambit, fallout from haircut that is not a default, and poor economic data have seen risk come off in a big way after last week's near euphoria. While the euro never recovered from the news of that Greece will call a referendum, news that China's official PMI fell to 50.4 in Oct from 51.2 in Sept, contradicti…
Dollar Recovery Continues Dollar Recovery Continues Reviewed by Marc Chandler on November 01, 2011 Rating: 5
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Thoughts on the Greek Referendum

October 31, 2011
While I have consistently been highlighting the political risks in Greece that could throw a new monkey wrench into European plans and global capital markets, today's turn took me by surprise. The euro had been trading heavily all day and Italian bond yields were holding above 6%, despite talk of ECB purchases, and the French-bund spread was w…
Thoughts on the Greek Referendum Thoughts on the Greek Referendum Reviewed by Marc Chandler on October 31, 2011 Rating: 5
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German 55.5 bln euro Error to be Explored

October 31, 2011
It appears that an accounting error at FMS Wertmanagement, the bad bank for Hypo Real Estate, may have overstated the debt by 55.5 bln euros (~$77.7 bln). FMS. FMS has reportedly corrected its figures, to lower the debt by 24.5 bln in 2010 and by 31 bln euros for this year. The accounting adjustment will reduce Germany's debt/GDP by a couple o…
German 55.5 bln euro Error to be Explored German 55.5 bln euro Error to be Explored Reviewed by Marc Chandler on October 31, 2011 Rating: 5
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BOJ Shows Hand and Other Developments

October 31, 2011
The Bank of Japan intervened unilaterally in the foreign exchange market for the first time in three months and sent the dollar from JPY75.35, record lows, to JPY79.50 in two hours. Estimates put the size of the intervention at a new single day record near JPY6 trillion. The IMM Commitment of Traders showed the next speculative position had more t…
BOJ Shows Hand and Other Developments BOJ Shows Hand and Other Developments Reviewed by Marc Chandler on October 31, 2011 Rating: 5
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Six Events and a Few Things to Watch in the Week Ahead

October 30, 2011
Risk appetites returned in a big way in October, as equities, emerging markets, commodities and currencies all generally advanced and smartly so, recouping much of the ground lost in September. The events in the week ahead will likely set the tone for the month of November. They include three central bank meetings (RBA, Fed and ECB), two data poin…
Six Events and a Few Things to Watch in the Week Ahead Six Events and a Few Things to Watch in the Week Ahead Reviewed by Marc Chandler on October 30, 2011 Rating: 5
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To Forgive is Divine

October 27, 2011
Markets rallied strongly in response to the European developments. Yet it is an exaggeration to think that this rekindled risk appetites as the whole month of October has seen equities, emerging markets, commodities and foreign currencies trend higher, recovering from their neck-breaking, wealth-destroying plunge in September. Still the advance on…
To Forgive is Divine To Forgive is Divine Reviewed by Marc Chandler on October 27, 2011 Rating: 5
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Look to Fade Relief Rally

October 27, 2011
Big sigh of relief that European officials delivered the bare minimum amount of details of the new plan, which are largely as had been anticipated here and elsewhere. The broad outlines consist of a 50% haircut on private sector holdings of Greek bonds, leveraging the EFSF 4-5x for firepower of around 1 trillion euros, 9% Tier 1 capital by mid-201…
Look to Fade Relief Rally Look to Fade Relief Rally Reviewed by Marc Chandler on October 27, 2011 Rating: 5
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A Follow Up to the Absence of a Muni Crisis in the US

October 26, 2011
On October 4th I wrote "One Crisis that Did not Materialize", which discussed the fact that the fears of hundreds of billions of dollar losses from defualts in the municipal bond market proved wide of the mark. Many were skeptical. Here is the latest data.
The Rockefeller Institute's analysis of Census Bureau data found that prelimin…
A Follow Up to the Absence of a Muni Crisis in the US A Follow Up to the Absence of a Muni Crisis in the US Reviewed by Marc Chandler on October 26, 2011 Rating: 5
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Australia: Rate Cut Likely Next Week

October 26, 2011
Minutes from the recent RBA meeting kept the door ajar to a rate cut next week, and today's CPI figures, especially the fact that the preferred trimmed mean measure rose 0.3%, half as much as the consensus expected and bringing the year-over-year rate to 2.3% from 2.6%. Pushes the door wide open. Barring some major shock in the coming days, th…
Australia: Rate Cut Likely Next Week Australia: Rate Cut Likely Next Week Reviewed by Marc Chandler on October 26, 2011 Rating: 5
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Berlusconi Cuts Deal: Et Tu Brute

October 26, 2011
Controversial Italian Prime Minister Berlusconi appears to have finally capitulated to international and domestic pressure. Press reports indicate that he has agreed to step down by January. This in turn will bring forward elections, probably to March 2012, a year earlier than Berlusconi had previously insisted.
Italy would join a number of other c…
Berlusconi Cuts Deal: Et Tu Brute Berlusconi Cuts Deal: Et Tu Brute Reviewed by Marc Chandler on October 26, 2011 Rating: 5
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D-Day for Europe? And What's Up with the Yen?

October 26, 2011
The euro has remained firm even as the US S&P tumbled yesterday, Asia stocks slip and expectations for the outcome for today's summit continue to ratchet lower. It does continue to stall out in the $1.3950-60 area. The $1.3840-50 area still marks the first level of support, though the $1.3890 area held in both Asia and Europe.
At most, an …
D-Day for Europe? And What's Up with the Yen? D-Day for Europe? And What's Up with the Yen? Reviewed by Marc Chandler on October 26, 2011 Rating: 5
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CNBC: Waiting on a European Debt Solution CNBC: Waiting on a European Debt Solution Reviewed by magonomics on October 25, 2011 Rating: 5
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Three Political Events that Should be on Your Radar

October 25, 2011
Tomorrow's EU Summit is the markets main focus. The key issue is whether European officials can finally provide closure to the two year old debt crisis and deliver the "comprehensive" and "decisive" package they have repeatedly promised. We are skeptical as governance structures and diverse interests of the stakeholders len…
Three Political Events that Should be on Your Radar Three Political Events that Should be on Your Radar Reviewed by Marc Chandler on October 25, 2011 Rating: 5
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