Category Archive: 4.) Marc to Market

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Great Graphic: French Premium over Germany Continues to Grow

2017-02-02

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2017-02-02

French Premium Over Germany Since 2014
European premiums over Germany typically increase in a rising interest rate environment. France's premium is at the most in two years. France is still set to turn back the challenge from Le Pen.

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Thoughts about the Fed’s Balance Sheet

2017-02-02

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2017-02-02

hotair balloon
Several regional Fed presidents want to begin talking about shrinking Fed's balance sheet. Leadership does not appear to have great urgency, so don't expect anything in this week's statement. First step more hikes, then refrain from reinvesting payments and maturities, but slowly.

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FX Daily, 01 February: Markets Stabilize, Investors Await Signals from US data and FOMC, and POTUS

2017-02-01

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2017-02-01

(commentary will be sporadic for the next couple of weeks during a European business trip) The US dollar is consolidating yesterday's losses that were spurred speculation that the US was abandoning the more than 20-year old strong dollar policy. The meaning of that policy was clear to global investors even if it was often parodied.

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Trade is Trump’s Centerpiece

2017-02-01

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2017-02-01

Trans-Pacific Partnership
Investors are anxiously awaiting more details on the new US Administration's economic policies and priorities. Part of the challenge is that the cabinet represents a wide range of views and it is not clear where the informal power lies, or whose call is it. In terms of economic policy, trade is being given priority. It is seen as the key to the jobs and growth objectives.

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Pressure on Greece Mounts, New Crisis Looms

2017-02-01

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2017-02-01

greece
Greece needs to implement its commitments in the next few weeks or it faces a new crisis. The more the government implements its commitments, the less public support it draws. New elections in Greece cannot be ruled out.

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FX Daily, January 31: Markets Look for Solid Footing

2017-01-31

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2017-01-31

FX Performance, January 31 2017 Movers and Shakers
The immigration imbroglio in the United States is being cited in various accounts for the price action, including yesterday's drop in the S&P 500, where the intraday loss was the largest since before the election. The drama is also being blamed for the dollar's losses yesterday, which it is consolidating today.

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Trump and the Dollar

2017-01-31

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2017-01-31

Dollar Shoes
US official comments on the FX market appear to have increased in frequency. They are mostly warnings about a strong dollar, but not all comments are dollar-negative. Policy is the ultimate driver but comments pose headline risk.

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FX Daily, January 30: EUR/CHF falls further to 1.650

2017-01-30

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2017-01-30

FX Performance, January 30 2017 Movers and Shakers
The EUR/CHF collapsed once again to 1.0650. This rate broke the 1.0680 - 1.0700 that constituted the previous intervention area. Reasons can be found in the weak U.S. GDP weak, in Trump's foreign trade policy and in the strong Swiss trade balance.

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FX Weekly Preview: Yellen nor Kuroda nor Carney will Take the Spotlight from Trump

2017-01-30

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2017-01-30

eagle
Fed, BOJ, and BOE meet next week, each may adjust economic assessments in more favorable direction. Key challenge for many investors is the new US Administration. US employment, EMU inflation, Q4 GDP, and China's PMI are among the data highlights.

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Great Graphic: Mexico and China Unit Labor Costs

2017-01-29

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2017-01-29

Unit Labor Costs in China and Mexico 2007 - 2015
Mexico has been gaining competitiveness over China before last year's depreciation of the peso. The depreciation of the peso, and other US actions can contribute to the destabilization of Mexico. An economically prosperous and stable Mexico has long been understood to be in the US interest.

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The Grand Strategy: Fixed Spheres of Influence or Variable Shares?

2017-01-28

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2017-01-28

mate
The US has a direct investment strategy for historical reasons. It competes against export-oriented strategies. The FDI strategy does make low-skilled domestic labor compete with low-skilled foreign worker, but skilled workers abroad complement the skilled domestic worker.

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FX Daily, January 27: Week Ending on Mixed Note as Year of Rooster Begins

2017-01-27

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2017-01-27

FX Performance, January 27 2017 Movers and Shakers
The Lunar New Year celebration thinned participation in Asia, where several centers are closed. Although the MSCI Asia Pacific Index slipped slightly, it rose 1.5% on the week, the fourth weekly gain in the past five weeks. The Nikkei advanced 0.35%, the third rise in a row. The 1.75% gain for the week snaps a two-week decline.

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US GDP Misses, but Final Domestic Sales Accelerate

2017-01-27

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2017-01-27

GDP
Net exports was a large drag on growth. Inventories flattered growth. Underlying signal, final domestic demand, increased 2.5% after 2.1% in Q3.

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Are Interest Rates No Longer Driving the Dollar?

2017-01-27

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2017-01-27

US 10-year yield and US Dollar
Many are concerned that the dollar and interest rates have become decoupled. We are not convinced. Correlations, not to be eyeballed, are still robust.

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FX Daily, January 26: EUR/CHF collapses to 1.670

2017-01-26

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2017-01-26

FX Performance, January 26 2017 Movers & Shakers
The US dollar is mostly firmer against the major currencies but is confined to narrow ranges, and well-worn ranges at that, but the focus has shifted to the strong advance in equities. Yesterday, the Dow Jones Industrials finally rose through the psychologically-important 20k level, and the S&P 500 gapped higher to new record levels.

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Cool Video: Bloomberg’s Daybreak–Trump and Rates

2017-01-26

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2017-01-26

Chandler - Bloomberg TV
On what Trump's first working day as POTUS, I had the privilege to be on Bloomberg's Daybreak to talk about the wagers on US interest rates in the futures market. In the most recent CFTC reporting week, which ended on January 17, speculators in the 10-year note futures market reduced the record net short position. It is only the second week reduction since the end of November.

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FX Daily, January 25: Dollar is on the Defensive Despite Firmer Rates

2017-01-25

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2017-01-25

FX Performance, January 25 2017 Movers and Shakers
The US dollar is softer against nearly all the major currencies. Participants appear to be growing increasingly frustrated with emerging priorities of the new US Administration. They want to hear more details and discussion of the tax reform, deregulation, and infrastructure plans.

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Great Graphic: How a Strong Dollar Weighs on Net Exports

2017-01-25

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2017-01-25

Contributions of Exports and Imports to GDP Growth
Investors appreciate that a strong dollar can impact US growth through the net export component of GDP. The dollar's appreciation can push up the price of exports and lower the cost of imports. The St. Louis Fed took a look at how the strong dollar from 2014 to the beginning of 2016 impacted the net export function of GDP.

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FX Daily, January 24: UK Supreme Court Requires May to Submit Bill on Brexit to Parliament

2017-01-24

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2017-01-24

BritainFirst
As widely expected, the UK Supreme Court ruled that Parliament approval is needed to trigger Article 50 start the divorce proceedings with the EU. The Court decided by an 8-3 majority that a bill needs to be submitted to both chambers, but that the approval of the regional assemblies (e.g. Scotland, Northern Ireland) is not necessary.

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UK Supreme Court Decision: Anti-Climactic?

2017-01-24

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2017-01-24

May
Sterling retreats on court ruling but key supports hold and it recoups initial loss. The US dollar is recovering with the help of firming US yields. Investors are still anxious for details of new US government's tax, deregulation, and infrastructure investment plans.

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