The ECB Has Spoken, But Euro Falls Anyway - European Central Bank President Jean-Claude Trichet indicated that he would maintain the status quo of having the ECB buy distressed sovereign bond. The Euro sold off because he failed to indicate that the central bank would boost bond purchases. Speaking at his monthly news conference in Frankfurt, Trichet said the central bank would continue to sterilize bond purchases under the program. The market was looking for a numerical number and the ECB failed to give it to them. Up to that point, the Euro had its best rally of the last couple of weeks on hopes that the ECB would signal its determination to contain the crisis from spreading to other countries, such as Portugal and Spain. Yesterday the Euro received a boost after a U.S. official told Reuters Washington would support boosting an EU rescue facility via IMF funds, although a Treasury Department spokesman later said an "extra commitment is not something we're discussing right now". In Asia, the USD was little changed versus the Yen but the AUD was down versus the USD. In Australia, data showed retail sales unexpectedly declined and imports slumped to the least since February. In Canada, the CAD extended its gains for a second straight day as the risk trade continues. The key employment reports for Canada and the U.S. are tomorrow. This will be the last major data release to consider before the Bank of Canada's next interest rate decision on Dec. 7. The market has already discounted that the central bank will leave interest rates unchanged at 1%.
Thursday, December 2, 2010
Wednesday, December 1, 2010
Coming to America
One of the triggering mechanisms will be at the end of this month when two million idled workers, now collecting unemployment, will be dropped from the rolls. At the end of December, another two million workers will join the ranks of those who have exhausted their unemployment benefits and a total of 4 million Americans will be without unemployment checks and face destitution.
This will slowly put pressure on municipalities, which will then put pressure on individual states, with California and Illinois likely to be the first two states to default on their debts and declare bankruptcy. Read how this whole mess will play out here.The USD as a safe haven, you must be kidding.
Morning Currency Wrap for Wednesday December 1, 2010
Is The Euro Correction Over or Dead Cat Bounce? - Time will tell, but the Euro would have to press passed yesterday's high of around 1.3150 for it to be sustainable. Why the rally off the lows - according to Bloomberg - The euro rose against the dollar and yen amid speculation European Central Bank policy makers meeting tomorrow may signal their willingness to act to prevent the spread of the region’s debt crisis. No kidding, does the ECB even have a choice? If they don't act the whole system will implode. The ECB will have to start printing money, strike that I mean they will have to start their own version of QE and buy every sovereign bond in sight. Remember last year when the Fed and ECB were talking about exit strategies, well that's all it was, just talk - QE will have to go on and on until the whole global monetary system is fixed. Back to the markets, the market awaits tomorrow's ECB policy meeting, which some expect the central bank to keep its three-month liquidity operations unlimited to help banks struggling for cash. This Euro bounce is just another opportunity to get short. Take a look at the gold price, is it telling you that the problems are fixed? No, what it is telling you is that it expects the ECB to engage in QE and this will further undermine the perception of the Euro as a hard currency alternative. News in China that purchasing managers' indexes registered their strongest readings in seven months and the story was similar in India, where the HSBC Markit PMI climbed to a six-month high help the market to change its focus from sovereign debt crisis to global growth. This was followed up with improved manufacturing in Germany, France, Italy, and the UK. This good news lit a fire on the risk on trade as better manufacturing means higher oil prices and firmer commodity prices. The bad news is that increased manufacturing in China and India leads to higher inflation - China raised interest rates in October for the first time in nearly three years and India has already raised interest rates six times this year. The good news spurred stocks higher and the USD lower. In the U.S. this morning, news that U.S. private employers added more jobs than expected in November caused the USD to slightly extend gains versus the Yen and trimmed losses against the Euro. ADP Employment Change data indicated that private payrolls expanded by 93,000 in November, more than the 58,000 that was expected, and October was upwardly revised to 82,000. In Canada, the CAD was firmer against the USD as good news in the U.S. is good news for Canada. Canada's data calendar is bare until Friday when the November jobs report is published.
Subscribe to:
Posts (Atom)