Fed Dovish
15/10/09 08:11
FED Dovish
The US dollar was hit by surprisingly dovish FOMC minutes as several policymakers spoke in favour of increasing the MBS purchase limit beyond the current ceiling of $1.25 trn. Only a few weeks ago, there was some speculation that the program would be cut short prematurely, even before that limit was reached. Mixed views about inflation were also expressed, but the majority of the FOMC felt it would be subdued ahead. The minutes clearly indicate the FOMC is a long way from tightening and balance sheet reduction does not appear to be a policy priority either.
Strong Q3 earnings reports from the US financial sector and better than expected retail sales also kept the dollar under pressure. September US retail sales fell 1.5% m/m - a better outcome than the 2.1% m/m drop expected by consensus. Retail sales ex-autos rose 0.5% m/m in September, also beating the consensus expectation of a 0.2% m/m rise. Read More...
The US dollar was hit by surprisingly dovish FOMC minutes as several policymakers spoke in favour of increasing the MBS purchase limit beyond the current ceiling of $1.25 trn. Only a few weeks ago, there was some speculation that the program would be cut short prematurely, even before that limit was reached. Mixed views about inflation were also expressed, but the majority of the FOMC felt it would be subdued ahead. The minutes clearly indicate the FOMC is a long way from tightening and balance sheet reduction does not appear to be a policy priority either.
Strong Q3 earnings reports from the US financial sector and better than expected retail sales also kept the dollar under pressure. September US retail sales fell 1.5% m/m - a better outcome than the 2.1% m/m drop expected by consensus. Retail sales ex-autos rose 0.5% m/m in September, also beating the consensus expectation of a 0.2% m/m rise. Read More...
Bernanke Did Not Surprise Investors
21/07/09 20:44
Chris Lori Professional
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Auckland, NZ
Aug 14-16
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Aug 2-4
Fed Chairman Bernanke's testimony did not surprise investors as he said that while the Fed has the ability to tighten monetary policy from the current state, it is in no rush to do so. 10y Treasury yields dropped below 3.50% and the 2s10s curve flattened down to 257bp on the back of his comments that inflation pressures are limited.
2y yields dropped as well as Bernanke said the Fed would keep rates low for quite some time. Earlier in June, 2y yields had jumped as investors thought the Fed might tighten earlier than expected on the back of the better non-farm payrolls data. For a study on the impact of interest rate spreads in fx, review the course titled "Inside the Banks" at www.protradersclub.com But even as Bernanke sounded cautiously optimistic on parts of the economic outlook, he also cautioned on the labour market, which helped temper expectations on the timing of Fed rate hikes. Read More...
Auckland, NZ
Aug 14-16
Great Bonuses!
Chris will be appearing at the Las Vegas Money Show
Aug 2-4
Fed Chairman Bernanke's testimony did not surprise investors as he said that while the Fed has the ability to tighten monetary policy from the current state, it is in no rush to do so. 10y Treasury yields dropped below 3.50% and the 2s10s curve flattened down to 257bp on the back of his comments that inflation pressures are limited.
2y yields dropped as well as Bernanke said the Fed would keep rates low for quite some time. Earlier in June, 2y yields had jumped as investors thought the Fed might tighten earlier than expected on the back of the better non-farm payrolls data. For a study on the impact of interest rate spreads in fx, review the course titled "Inside the Banks" at www.protradersclub.com But even as Bernanke sounded cautiously optimistic on parts of the economic outlook, he also cautioned on the labour market, which helped temper expectations on the timing of Fed rate hikes. Read More...
Not a lot of market moving items of late
25/03/09 21:35
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Interestingly, and troublingly the 10-year TIP bond spread rose further to 1.36% - its highest level since early February. A further modest rise would see it at its highest level since September last year.
Not a lot of market moving items of late, but some as a matter of interest
PBOC Governor Zhou yesterday called for a new international currency to replace the role of the US dollar as reserve currency. Zhou argued that the crisis "calls for creative reform of the existing international monetary system towards an international reserve currency with a stable value, rule-based issuance and manageable supply, so as to achieve the objective of safeguarding global economic and financial stability." Presumably Zhou wishes there was some other abundant reserve asset that China could buy other than the US dollar. The problem with Zhou's suggestion however is that major countries would not find it appealing to issue in another currency due to exchange rate risk as government expenses and tax revenue are denominated in the local currency. Accordingly, the supply of assets in such a new reserve currency would remain thin. The market has correctly interpreted Zhou's comments as a reflection that China desires to buy less Treasuries and whether China likes it or not the only way to do that is to intervene less in the FX markets. Accordingly, the market is now pricing in some CNY appreciation over the next 12 months. It is a futile proposition and has warranted attention only because of the source. One only has to look at the complexities arising in Eurozone to realize it is a proposterous suggestion. This news that makes the papers today will be used to wrap fish and chips tomorrow.
Read More...
Interestingly, and troublingly the 10-year TIP bond spread rose further to 1.36% - its highest level since early February. A further modest rise would see it at its highest level since September last year.
Not a lot of market moving items of late, but some as a matter of interest
PBOC Governor Zhou yesterday called for a new international currency to replace the role of the US dollar as reserve currency. Zhou argued that the crisis "calls for creative reform of the existing international monetary system towards an international reserve currency with a stable value, rule-based issuance and manageable supply, so as to achieve the objective of safeguarding global economic and financial stability." Presumably Zhou wishes there was some other abundant reserve asset that China could buy other than the US dollar. The problem with Zhou's suggestion however is that major countries would not find it appealing to issue in another currency due to exchange rate risk as government expenses and tax revenue are denominated in the local currency. Accordingly, the supply of assets in such a new reserve currency would remain thin. The market has correctly interpreted Zhou's comments as a reflection that China desires to buy less Treasuries and whether China likes it or not the only way to do that is to intervene less in the FX markets. Accordingly, the market is now pricing in some CNY appreciation over the next 12 months. It is a futile proposition and has warranted attention only because of the source. One only has to look at the complexities arising in Eurozone to realize it is a proposterous suggestion. This news that makes the papers today will be used to wrap fish and chips tomorrow.
Read More...
Bernanke Deflects the “N” Straw
24/02/09 23:01
US Markets rallied as Fed Chairman Bernanke's noted
that he did not believe nationalization of banks was
in the current picture. The S&P500 rose by 4%,
while the Nasdaq roes by 3.9%. In the FX world this
translated to EURUSD rallying to a high of 1.2860,
from a low of 1.2700, while USDJPY traded up to a
high of 96.93 from a low of 95.05. This news poked
risk aversion after six days decline. Any excuse will
do.
In his comments to Congress, Bernanke said that full nationalisation does not make sense, he said that "I do not see any reason to destroy the franchise value or to create the huge legal uncertainties of trying to formally nationalise a bank when it just is not necessary".
Otherwise, his prepared remarks before the Senate Banking Committee did not offer much new information about the outlook for the economy and policy. In reading between the lines, the FED knows the outlook is dismal, but only share on a need to know basis.
Read More...
In his comments to Congress, Bernanke said that full nationalisation does not make sense, he said that "I do not see any reason to destroy the franchise value or to create the huge legal uncertainties of trying to formally nationalise a bank when it just is not necessary".
Otherwise, his prepared remarks before the Senate Banking Committee did not offer much new information about the outlook for the economy and policy. In reading between the lines, the FED knows the outlook is dismal, but only share on a need to know basis.
Read More...
Data Watch: ECB and Non-Farm Payrolls this week
29/06/08 20:24
We had a series of dollar negative events last week
on which the dollar suffered. Firstly, the highly
anticipated FOMC statement showed lack of urgency in
a rate hike from Fed, contrary to what Bernanke led
markets to believe some weeks earlier. Markets pared
bets on near term hikes with odds of an Aug, as
implied by interest rate futures, down from 40% to
25%. Read
More...