Category Archive: 4.) Marc to Market

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Two Decisions from Europe

2016-05-03

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2016-05-03

It might not be on investors' calendars, but European officials will take steps toward addressing two issues tomorrow.  First, the EC will make a preliminary recommendation of visa-free travel in the Schengen area for Turkish passport holders.  S...

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Dollar Continues to Push Lower

2016-05-03

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2016-05-03

The US dollar’s downtrend is extending.  The euro traded above $1.16 for the first time since last August. With Japanese markets closed for the second half of the Golden Week holidays, perhaps participants felt less hampered by the risk of intervention and pushed the dollar to almost JPY105.50.  Despite an unexpectedly large fall in the …

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Great Graphic:US Rents and Core Inflation

2016-05-02

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2016-05-02

Shelter inflation in the U.S. is at 3.2% per year, but only 1% in Europe. It is 33% of the US CPI basket, but only 6.4% of the euro zone. This leads to massive distortions in CPI inflation, and to wrong bets of investors and FX traders.

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China: Services Companies Benefit on Lower Tax with VAT introduction

2016-05-02

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2016-05-02

Yesterday, China announced one of the most important tax reforms of the past twenty years.  It is replacing a business tax on gross revenue for non-manufacturing companies with a VAT.   Manufacturing companies have been subject to a VAT approach subject

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FX Daily, May 02: New Month, Same Heavy Dollar

2016-05-02

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2016-05-02

In quiet turnover, with China, Hong Kong, Singapore and London markets closed, the US dollar is trading with a heavier bias against all the major currencies.  Lower commodity prices, including oil and copper, appears to be taking a toll on some emerging market currencies, including the South African rand. Japanese markets were closed last Friday …

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Another Strong Jobs Report may Not be Sufficient to Reignite Dollar Rally

2016-05-01

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2016-05-01

The die is cast.  The Federal Reserve is on an extended pause after the rate hike last December. The market remains convinced that the risk of a June hike are negligible (~ less than 12% chance).   The ECB has yet to implement the TLTRO and cor...

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Weekly Speculative Postions: Euro and Yen Exposure Trimmed ahead of FOMC and BOJ

2016-04-30

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2016-04-30

Speculators in the futures market made mostly small position adjustments in the sessions leading up to the FOMC and BOJ meetings.   During the Commitment of Traders reporting week ending April 26, the largest adjustment of speculative position in the currency futures was the 12.5 k build of gross long Australian dollar contracts. The accumulation …

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Will the Dollar Bloom like May Flowers after April Showers?

2016-04-30

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2016-04-30

April was a cruel month for the US dollar.  It fell against all the major currencies; even those whose central banks have negative yields.  The greenback also fell against nearly all the emerging market currencies, but the Philippine peso and the Polish zloty. Through the first four months of the year, the dollar is lower …

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Do You Believe Six Impossible Things before Breakfast?

2016-04-29

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2016-04-29

The White Queen in Alice in Wonderland (Through the Looking Glass) confesses that when she was younger, she could believe six impossible things before breakfast.  She encourages Alice to do the same.    It appears many in the market are taking ...

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FX Daily, April 29: Dollar Losses Extended Ahead of the Weekend

2016-04-29

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2016-04-29

There are two main forces in the foreign exchange market that are rippling through the capital markets.  The first is the continued weaker dollar tone.  The combination of what appears to be a stagnating US economy (0.5% annualized pace in Q1) and a market that does not believe the Federal Reserve will hike rates in … Continue reading...

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Podcast Discussing Dollar, Fed, BOJ on Futures Radio Show

2016-04-28

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2016-04-28

I had the privilege of being interviewed by Anthony Crudele, who is trader at the CME, for the Futures Radio Show.   There was much to discuss.  The FOMC met yesterday.  The market, judging from the Fed funds futures see little chance of a Ju...

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FX Daily April 28: What is the Next Shoe to Drop?

2016-04-28

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2016-04-28

One can appreciate the frustration in Tokyo. The Bank of Japan surprised the world by adopting negative rates in January and the yen rallied. Today it disappointed many by not easing, and the yen rallied. The BOJ next meetings in mid-June and like this week, the outcome of its meeting will be announced the day … Continue reading »

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Central Banks Roil Markets

2016-04-28

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2016-04-28

The Bank of Japan defied expectations and its economic assessment to  leave policy unchanged.  The inaction spurred a 3% rally in the yen and an even larger slump in stocks.  The financial sector took its the hardest and dropped almost 6%.  The...

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FOMC Statement Demonstrates Firm Grasp of the Obvious

2016-04-27

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2016-04-27

The FOMC delivered a statement largely as expected.  It upgraded its assessment of the global economy by dropping the reference to risks.  It downgraded its assessment of the domestic economy by acknowledging that growth has slowed.   Otherwi...

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What is the BOJ Going to Do?

2016-04-27

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2016-04-27

Under Kuroda's leadership the BOJ has surprised the market a number of times, most recently with the move to negative rates at the end of January.   It is not that such a move, which has been tried by several European central banks, was without...

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FX Daily April 27: Two Issues Loom Large Today: Soft Australia CPI and FOMC

2016-04-27

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2016-04-27

The foreign exchange market is largely quiet as the market awaits fresh trading incentives and the FOMC statement later in the North American session.  The main exception to the consolidative tone is the Australian dollar, which is posting its largest loss (~1.7%) in a couple of months. The short-term market was caught the wrong-footed when …

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Schaeuble Channels Meghan Trainor: No

2016-04-26

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2016-04-26

Debt relief is noGerman stimulus is noECB  easing is noYou need to let it go 

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Great Graphic: Measuring Cost of Extend and Pretend

2016-04-26

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2016-04-26

There is a debate.  On one hand is Summers, who argues that modern economies have entered an era of secular stagnation.  Full utilization of the factors of production and particularly capital and labor is not possible without stimulating aggregate demand in a way that facilitates bubbles.  The broad strokes of the argument can be found …

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Greenback Mostly Softer, Sterling Shines

2016-04-26

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2016-04-26

The gains the US dollar registered in the second half are being pared, but it is sterling’s strength that stands out.  It is difficult to attribute it to Obama’s push against Brexit, but there does appear to have been a change in sentiment. Sterling is the best-performing currency not only today but for the past …

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FX Daily April 25: Global Tensions Lessened, but Bound to Increase Ahead of June FOMC Meeting

2016-04-25

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2016-04-25

We expect the FOMC statement this week to recognize the improvement in the global conditions that have been an increasing worry for officials over Q1.  At the same, time the soft patch of the US economy is undeniable. We suspect the Fed will look past the weakness of the US economy. The strength of the … Continue reading...

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