Category Archive: 4.) Marc to Market

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Discount Rate Follow-Up: And Then There were Nine

2015-11-25

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2015-11-25

On Monday, the Federal Reserve met to discuss the discount rate.   There has been a steady increase in the number of regional Federal Reserve presidents requesting an increase in the discount rate.  The minutes of the October 26 meeting were reported yesterday. The meeting was held before the FOMC met on October 27-28.  At that meeting, … Continue...

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Euro Bears Aren’t Hibernating

2015-11-25

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2015-11-25

The divergence of monetary policy is discounted, they argued. Ahead of next week's big events, which include the IMF's SDR decision, the ECB meeting, OPEC meeting, and the US jobs data, the euro, against which speculators have amassed a large sh...

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Dollar Recoups January Loss Against the Swiss Franc

2015-11-24

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2015-11-24

The US dollar recorded its high for the year against the Swiss franc on January 14 near CHF1.0240.  It closed that day a little below CHF1.0190.  The next day the Swiss National Bank surprised the world by lifting its cap against the euro.  The ...

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Why Portuguese Politics Matter

2015-11-24

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2015-11-24

A NATO country has shot down a Russian plane.  The refugee influx is threatening to unravel the Schengen Treaty of free movement.    Germany's Merkel celebrated her tenth anniversary as Chancellor this past weekend, but she faces one of the most serious challenges of her tenure.    Portugal accounts for less than 2% of the eurozone GDP.  …

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Dollar Softens, Consolidation Phase Continues

2015-11-24

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2015-11-24

The US dollar is trading choppily but with a distinct softer bias.  The economic news has been limited, and the apparent downing of a Russian plane by Turkey caused a flurry of activity, with Turkish assets coming under initial pressure which has abated somewhat.   The euro briefly dipped below $1.06 yesterday for new seven-month lows, …

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Great Graphic: Canadian Dollar and the Two-Year Rate Differential

2015-11-23

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2015-11-23

The Canadian dollar is more than a petro currency.    It is also subject to the same forces of divergence that have lifted the US dollar more broadly.  Since the beginning of the year, the US two-year yield has risen 26 bp while Canada's two-year yield has fallen almost 39 bp. This Great Graphic, created on …

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Parsing Gradually

2015-11-23

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2015-11-23

With the vast majority of economists and primary dealers expecting the Federal Reserve to lift rates next month, the subject of discussion has shifted toward the pace of the hikes and the peak or terminal rate.   The Federal Reserve has used various word cues to help guide market expectations.  There was, for example, going to … Continue reading...

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Emerging Markets: Preview of the Week Ahead

2015-11-23

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2015-11-23

(from my colleagues Dr. Win Thin and Ilan Solot)EM starts the week on an uncertain footing. Commodity prices were off sharply until comments by Saudi Arabia lifted them, reversing the trend in commodity-sensitive assets. The dollar is also back ...

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Dollar-Boc Slumps with Commodities, Greenback Remains Bid

2015-11-23

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2015-11-23

The dollar-bloc currencies and the Norwegian krone were the strongest major currencies last week but are leading the downside today.  The slump in commodity prices is taking a toll.  WTI is off by nearly 3%.  Copper is off about half as much, an...

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Anticipating December in November: When Cause Follows Effect

2015-11-23

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2015-11-23

Surveys show that around 90% of primary dealers and economists expect the Fed to raise interest rates in the middle of December. Over the past month, the two-year US note yield has risen by nearly 37 bp to 91 bp.   The implied yield of the Dece...

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Could the Fed Hike the Discount Rate on Monday?

2015-11-22

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2015-11-22

(Correction: The analysis first presented here was based on voting at the August discount rate meeting, not the September meeting.  Here is the link to the Fed statement following the August and September.   At the September meeting, eight of the 12 Federal Reserve banks advocated a hike in the discount rate.  Note that despite … Continue...

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Weekly Speculative Positions: Observations

2015-11-22

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2015-11-22

1.  The continued build of short currency futures positions characterizes the changes in the speculative positioning.  All the currency futures we track saw an increase in gross short positions. This is what drove the large net short positions.  One thing this means is that late shorts are in weak hands, and as we have seen …

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Chop City, but Dollar Express Still on Track, Even if Slowly

2015-11-22

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2015-11-22

The US dollar tended to broadly consolidate its recent gains over the past week.  Data and officials mostly confirmed what most investors had already anticipated.  The Federal Reserve is most likely to hike rates in the middle of December. The ECB will most likely ease policy further just shy of two weeks before the Fed meets. … Continue reading...

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Emerging Markets: What has Changed

2015-11-20

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2015-11-20

 (from my colleagues Dr, Win Thin and Ilan Solot) 1) Mexico's FX commission tweaked its intervention program slightly  2) The political tide in Brazil has turned slightly better for the government  3) The PBOC announced a rate cut for its Standi...

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Euro Short Covering Bounce Fizzles and Draghi Pushes it Lower

2015-11-20

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2015-11-20

The US dollar is rebounding today after yesterday's correction.   Those losses seemed to have been a function of some profit-taking after the seeming confirmation in the FOMC minutes that the Fed was set, barring a significant surprise, to raise rates next month.  The dollar bulls were already beginning to buy the dip before Draghi …

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US Corporate Earnings, Overseas Sales and the Dollar

2015-11-19

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2015-11-19

How much of a headwind is international exposure causing US-based companies?  Factset did a study earlier this month, drawing on a combination of companies that had already reported Q3 earnings and used estimated results for those who had not reported.   It sheds light on the much-discussed earnings recession.  The blended earnings (as of November 5) …

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Great Graphic: In the US to be in the Top 1% Depends on Where You Live

2015-11-19

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2015-11-19

It shows how much money one needs to earn to be in the top 1% of the state's income earners. There is great variance. Connecticut has the highest threshold of $678k. Arkansas has the lowest threshold at $228k. That is a third of Connecticut.

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Dollar Corrects Lower

2015-11-19

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2015-11-19

The US dollar is trading heavily today.  The losses are not particularly steep against either the majors or the emerging market currencies.  A common narrative is attributing the dollar's pullback to "dovish minutes," but this is not a fair asse...

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Democratizing the Fed or Politicizing Monetary Policy?

2015-11-19

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2015-11-19

The British historian Lord Acton famously said that "power corrupts and absolute power corrupts absolutely." The American response is a system of checks and balances. The Federal Reserve represents a concentration of power...

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A Less Terrible Political Moment for Brazil

2015-11-18

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2015-11-18

(from my colleagues Dr. Win Thin and Ilan Solot) Brazil’s government scored an important set of political victories yesterday, many of which impact the fiscal accounts. It’s too soon to say that the tide has decidedly changed, but there are some positive signs

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