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Imported Deflation and a New Currency War?

March 31, 2014
The lowest euro area CPI print in four years has not spurred investors to reconsider the outlook for this week's ECB meeting.   Most recognize the ECB is likely to shrug off today's preliminary report. 

It is not clean, in the sense of the base effect of lower oil prices and the distortions caused by Easter (last year Good Friday was on Ma…
Imported Deflation and a New Currency War? Imported Deflation and a New Currency War? Reviewed by Marc Chandler on March 31, 2014 Rating: 5
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Emerging Markets: The Week Ahead

March 31, 2014
(from my colleague Dr. Win Thin)

Korea reports March CPI Tuesday and is expected to rise 1.4% y/y vs. 1.0% in February.  It will also report March trade Tuesday, with exports expected to rise 4.2% y/y and imports to rise 3.5%.  The economy remains sluggish even as inflation remains below the target range, but the BOK seems content to keep rates ste…
Emerging Markets: The Week Ahead Emerging Markets: The Week Ahead Reviewed by Marc Chandler on March 31, 2014 Rating: 5
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Great Graphic: Breakdown of EMU February and March CPI

March 31, 2014
This Great Graphic was created by Eurostat.  It shows the breakdown in today's preliminary March CPI reading.  The 0.5% represents a new 4-year low.  
Although the March pace is less than half of the ECB's forecast, expectations are decidedly against action at this week's ECB meeting.     Moreover, German Finance Ministry's jarring…
Great Graphic: Breakdown of EMU February and March CPI Great Graphic: Breakdown of EMU February and March CPI Reviewed by Marc Chandler on March 31, 2014 Rating: 5
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Soft CPI Sends Euro to Low and then High

March 31, 2014
The euro zone CPI fell to 0.5% in March.   The consensus had expected a 0.6% print after 0.7% in February.  Initially, the euro sold-off, hitting $1.3725 before snapping quickly back to new session highs near $1.3795.  News wires surveys found only a small minority (according to Bloomberg 3 of 57) expected an ECB rate cut and the data does not app…
Soft CPI Sends Euro to Low and then High Soft CPI Sends Euro to Low and then High Reviewed by Marc Chandler on March 31, 2014 Rating: 5
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ECB and US Jobs Dominate the Markets Next Week

March 30, 2014
The ECB meeting and the US jobs data are the two key events in the coming days. At the March meeting, the ECB failed to take fresh action. That broke the equilibrium that had kept the euro in a five cent trading range ($1.33-$1.38). Only now, amid dovish comments from ECB officials and a more hawkish Fed, accompanied by a thus far sustained ris…
ECB and US Jobs Dominate the Markets Next Week ECB and US Jobs Dominate the Markets Next Week Reviewed by Marc Chandler on March 30, 2014 Rating: 5
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Cool Video: Europe's Shifting Borders over the past 1000 Years

March 30, 2014
This Cool Video was posted on Owen Zidar's blog and appears to have been originally posted by Nick Mironenko.  In about 3.5 minutes it shows the changes in the European borders over the past millennium.  
As one country or another tried to increase its sphere of influence, wars were often fought. The increase in one country's sphere of infl…
Cool Video: Europe's Shifting Borders over the past 1000 Years Cool Video: Europe's Shifting Borders over the past 1000 Years Reviewed by Marc Chandler on March 30, 2014 Rating: 5
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Recycled: Re-Orientation--Russia Looks East

March 30, 2014
(Initially posted in January 2010, this essay is suggestive of a realpolitik world that some are only sensing now that Russia has annexed Crimea).  
In 1869 the U.S. completed the transcontinental railroad. With shipping interest in the Atlantic and Pacific Oceans, the partners of Brown Brothers, one of the key investment banks of the period, u…
Recycled: Re-Orientation--Russia Looks East Recycled: Re-Orientation--Russia Looks East Reviewed by Marc Chandler on March 30, 2014 Rating: 5
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Cool Video: A Cause for Pause: The Air You Breathe

March 29, 2014
This Cool Video, from the PBS It's Okay to be Smart Series, makes a provocative observation.  The air is finite and remarkably limited, so that the air we breathe has already been breathed by others.  Using basic mathematics, it arrives at the a startling conclusion:  It is highly probable that we have breathed some of the same air particles …
Cool Video: A Cause for Pause: The Air You Breathe Cool Video: A Cause for Pause: The Air You Breathe Reviewed by Marc Chandler on March 29, 2014 Rating: 5
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Currency Positioning and Technical Outlook: Greenback Mixed for Start of Q2 Currency Positioning and Technical Outlook: Greenback Mixed for Start of Q2 Reviewed by Marc Chandler on March 29, 2014 Rating: 5
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Great Graphic: Rate Differentials Getting Traction

March 28, 2014
This Great Graphic is the bane of our euro bearishness, at least until last week's FOMC meeting.   This Bloomberg chart shows the US premium over Germany on 2-year money (white line) and the inverted euro (yellow line).

We have often found the spread helpful thinking about the euro's movement.   You can see how well the differential tracked…
Great Graphic: Rate Differentials Getting Traction Great Graphic: Rate Differentials Getting Traction Reviewed by Marc Chandler on March 28, 2014 Rating: 5
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Threat of Deflation sends Euro to Three Week Lows

March 28, 2014
The main impulse, today, is the heightened deflationary risk in the euro area, sparked by Spanish and German state inflation figures.  The euro area's flash CPI will be reported Monday ahead of next Thursday's ECB meeting.   Since Draghi's comments that recognized that the euro's strength, while not a target of policy directly, was…
Threat of Deflation sends Euro to Three Week Lows Threat of Deflation sends Euro to Three Week Lows Reviewed by Marc Chandler on March 28, 2014 Rating: 5
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Great Graphic: The Herculean Task To Stabilize Debt/GDP Ratios

March 28, 2014
This Great Graphic, tweeted by Niall O'Connor, that Pictet's Wealth Management group created.   It shows the level of the primary surplus the euro zone countries need to stabilize their public debt (red bar), and the estimated position in 2014 (gray bar).  
Of the eleven countries included here, seven have primary budget surpluses.   Unappr…
Great Graphic: The Herculean Task To Stabilize Debt/GDP Ratios Great Graphic: The Herculean Task To Stabilize Debt/GDP Ratios Reviewed by Marc Chandler on March 28, 2014 Rating: 5
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Emerging Markets: What has Changed

March 27, 2014
(from my colleague Dr. Win Thin)

1) Brazilian central bank did not fully roll over swaps coming due in the first round for the first time since September 2013
2) S&P downgraded Brazil by one notch to BBB-
3) The IMF agreed to a standby program for Ukraine that will be between $14-18 bln
4) SARB gave guidance that was more hawkish than expected
…
Emerging Markets: What has Changed Emerging Markets: What has Changed Reviewed by Marc Chandler on March 27, 2014 Rating: 5
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Great Graphic: Periodic Table of Elements by Discovery Nation

March 27, 2014
This Great Graphic was tweeted by SciencePorn.  It shows the familiar periodic table of elements, but identifies the country that discovered them.  It is interesting, even though the broader significance may be limited. 

I was surprised that Sweden was the  third most active discoverer.  Perhaps it is due more to my lack of a sufficient appreciat…
Great Graphic: Periodic Table of Elements by Discovery Nation Great Graphic: Periodic Table of Elements by Discovery Nation Reviewed by Marc Chandler on March 27, 2014 Rating: 5
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