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Trichet Hawkishness to Exacerbate Peripheral Woes

March 03, 2011
ECB President Trichet is signaling a rate hike and the market debate seems to be between April and May. While the monetary setting may be too easy for Germany, the peripheral countries, where the debt crisis has been concentrated, monetary conditions (currency plus rates) are too tight. Germany 2-year yields are up 20 bp, but periphery yields are …
Trichet Hawkishness to Exacerbate Peripheral Woes Trichet Hawkishness to Exacerbate Peripheral Woes Reviewed by Marc Chandler on March 03, 2011 Rating: 5
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Trichet Sends Euro and Interest Rates Sharply Higher

March 03, 2011
Trichet has stayed true to form and issued relative hawkish signals. Two key points--"strong vigilance" is needed and no reiteration of the mantra that "interest rates are appropriate". He explicitly said that this could mean a rate hike as early as next month, but the ECB does not pre-commit.
The staff forecast for inflation w…
Trichet Sends Euro and Interest Rates Sharply Higher Trichet Sends Euro and Interest Rates Sharply Higher Reviewed by Marc Chandler on March 03, 2011 Rating: 5
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ECB and Europe Front and Center, Ahead US Jobs Tomorrow

March 03, 2011
The ECB meeting and more importantly the press conference that follows is the main event of the session. The market generally expects Trichet to continue to sing from the hawkish hymn book. Although many observers have been critical of the July 2008 rate hike decision, Trichet has referred to it, almost as a badge of honor, demonstrating beyond re…
ECB and Europe Front and Center, Ahead US Jobs Tomorrow ECB and Europe Front and Center, Ahead US Jobs Tomorrow Reviewed by Marc Chandler on March 03, 2011 Rating: 5
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CNBC: Gold: New Reserve Currency CNBC: Gold: New Reserve Currency Reviewed by magonomics on March 02, 2011 Rating: 5
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FX Forces: Rate Expectations and Petrodollar Recycling

March 02, 2011
There are two main drivers of the US dollar presently: divergent interest rate expectations and the recycling of petrodollars. Developments over the past 24 hours reinforce those drivers. The higher euro zone manufacturing PMI readings yesterday have been followed by news of a larger than expected jump in Jan producer prices. The 1.5% m/m increase…
FX Forces: Rate Expectations and Petrodollar Recycling FX Forces: Rate Expectations and Petrodollar Recycling Reviewed by Marc Chandler on March 02, 2011 Rating: 5
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Fight Over Budget, Opposition Balks at Financing, but Not US

March 01, 2011
The government submits a budget. Their majority in one house allows it to be passed there. The opposition is trying to obstruct it and it is raising concern about the world's largest public debt. This is not the US but Japan.
Earlier today the lower house of parliament approved the record JPY92.4 trillion budget for the new fiscal year that be…
Fight Over Budget, Opposition Balks at Financing, but Not US Fight Over Budget, Opposition Balks at Financing, but Not US Reviewed by Marc Chandler on March 01, 2011 Rating: 5
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Policy Divergence Theme Driven Home

March 01, 2011
The combination of the strength of the European data and Federal Reserve Chairman Bernanke's semiannual testimony before the Senate, which is unlikely to signal an early end to QEII, is reinforcing ideas that Europe is likely to raise rates before the US. This continues to weigh on the dollar. Talk of recycling of petrodollars as oil producers…
Policy Divergence Theme Driven Home Policy Divergence Theme Driven Home Reviewed by Marc Chandler on March 01, 2011 Rating: 5
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