Category Archive: 4.) Marc to Market

Oil: WWJD–What would JD Rockefeller have Done?

Many observers conclude OPEC is dead.  Oh, its demise has been claimed before, but after the oil cartel failed to provide a quota (output goal) in last week's statement, the claim has been given new life.  The problem is that OPEC's action under Saudi leadership may be perfectly rational for a cartel.  Suppose you were … Continue...

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Great Graphic: Divergence is Still the Euro Driver

This remains one of my favorite Great Graphics that illustrate the divergence theme that I think is the main driver of the euro-dollar exchange rate.  Composed on Bloomberg, it shows two time series.  The first (white line) shows the German two-y...

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Dollar Mixed, Equities Head South, Oil Stabilizing

The US dollar is firm against the dollar-bloc currencies, and sterling, but is heavier against the euro and yen.   The 13th consecutive year-over-year decline in China's imports helped keep the pressure on the commodity producers.  Despite New ...

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Emerging Market Preview: Week Ahead

Taiwan reports November CPI Tuesday, and is expected to rise 0.36% y/y vs. 0.31% in October.  The central bank does not have an explicit inflation target, but low price pressures should allow the easing cycle to continue at the December meeting.  Nov...

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Why China’s Reserves Fell $87.2 bln in November

Economists expected China's reserves to fall by around $33 bln in November.  Instead, they fell by a little more than $87 bln.   This is the third largest decline it has recorded, and a little below the $94 bln drop reported in |August. China's reserves peaked in June 2014 near $3.993 trillion.  At the end of … Continue...

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Dollar Continues to Recover

The exaggerated response to last week's ECB meeting continues to unwind.   Draghi's dovish comments and the strength of US employment data have helped keep the divergence meme front and center.   The euro traded quietly in Asia before breaking...

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After Gorging On News, Time To Digest

Last week lived up to the hype. It was indeed a momentous week. China joined the SDR, with a weight that puts it in third place behind the dollar and euro.  The ECB did ease policy. It delivered a 10 bp cut in the deposit rate (now -30 bp), extended its asset purchase program for six … Continue reading »

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Observations from the Speculative Positioning in the Futures Market

1.  Given the large moves in prices shortly after the CFTC reporting period ended on 1 December renders the latest Commitment of Traders report more dated than is usually the case. 2.  The Thanksgiving holiday that closed US markets reduced par...

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Once Unleashed, Corrective Forces Dominate

The market's disappointment with the ECB unleashed pent-up corrective forces in the foreign exchange market.   This leg up in the dollar began in mid-October.  Through the day before the ECB, the euro was the weakest of the major currencies, losing 7.5% against the dollar.  The yen and sterling shed a little less than half as …

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Emerging Markets: What has Changed

(from my colleague Ilan Solot) 1) The Chinese yuan will be in the SDR.  2) Brazil had one of the most important weeks of the year, and possibly of its history.  3) Russia enacted sanctions against Turkey, while Turkey got a deal from the EU.  4) Moody’s raised Russia’s credit-rating outlook to stable from negative.  … Continue reading...

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Jobs Data Keeps Fed on Track to Hike

After the ECB's disappointment yesterday market nerves were shattered, but the largely as expected US jobs data may help the focus return to the underlying fundamental fact.  The ECB just eased policy.  Not as much as the market expected, and t...

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From the ECB’s Failure to Communicate to US Jobs to Confirm Fed Signals

The only way to explain the largest swing in the euro in six years yesterday is to appreciate the disconnect between what was expected and what was delivered by the ECB.  Draghi's urgency and commitment to do "what it must" fanned expectations, a...

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ECB Fireworks

Market participants knew that volatility would rise today with the ECB meeting.  What they got was far worse than could have been anticipated.   It started with a report on the Financial Times a few minutes before the ECB's official announceme...

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Draghi’s Day to Deliver

The much anticipated ECB meeting is at hand.   Yesterday's disappointing eurozone CPI figures only fanned the anticipation. Today the service PMI was softer than expected at 54.2, down from 54.6.   What will Draghi do?  There are four moving...

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Is Grexit Back on the Table?

Defying the expectations a few months ago, Greece remained in the Economic and Monetary Union.  It recently succeeded in implementing sufficient reforms to earn another tranche of aid.   However, the entire exercise exhausted whatever trust the...

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The Wait is Nearly Over, and the Dollar Catches a Bid

The anticipation is nearly over.  The softer than expected preliminary EMU inflation figures encourages expectations for the more aggressive range of actions by the ECB tomorrow.  Draghi has claimed that movement toward the inflation target was to...

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Great Graphic: Canadian Growth and Rate Expectations

Canada reported its monthly GDP estimate for September, and at the same time, provided its first estimate of Q3 GDP.   The Great Graphic, created on Bloomberg, shows both time series. The monthly GDP is depicted by the yellow line and the quart...

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Dollar Trades Heavier, Key Events Awaited

The US dollar is trading with a heavier bias today amid some last minute position squaring ahead of the key events of the week, which are stacked in the second half.  The ECB meeting and US jobs data are the two most important events in a jam pa...

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Cool Video: CNBC Discussion about China and the SDR

I had the privilege of being on CNBC to discuss the significance of China being included in the IMF's Special Drawing Right. Here is the link to the discussion.  The decision was announced shortly after the interview on CNBC.  It was largely a foregone conclusion that China would join.  Besides the confirmation, the new news … Continue reading...

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Great Graphic: Decline of U.S. Participation Rate Explained

The decline in the labor force participation rate helps explain the substantial decline in the US unemployment rate over the past couple of years.  That decline has helped bring the Federal Reserve to the point that a December rate hike is thought to be extremely likely barring a significant disappointment at the end of the …

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