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EURUSD Surges By 200 Pips (To China's Delight) On Trichet Comments That Inflation Cracks Starting To Appear
Those looking for vol in stocks really should shut down their E-Trade account and get some forex terminal. As we have been stating for well over 6 months now, with the Fed artificially ramping stocks, and making stock vol extinct, daytraders continue to be forced to find other avenues to day trade volatility. And the FX is just that market. The EURUSD has just done its daily 200 pip song and dance, putting yet another several hundred Japanese housewives using 50x leverage underwater by 10 times their capital amount. But at least China is happy. Oh and yes, with $4 trillion in FX turnover per day in 2010, this kind of mindblowing volatility is sure to end well.
The "reason" for the move, inasmuch as there is one, can be attributed to a littany of Trichet comments, but most notably to him noticing what nobody else in the Fed dares to even utter a peep on, namely that there is "evidence of short term pressure on inflation", even if he explains it by blaming energy prices. Luckily, nobody has to heat their homes, or spend any money on energy and other derivatives.
- ECB's Trichet says evidence of short term pressure on inflation, and upward pressure mainly due to energy prices
- ECB's Trichet says bond purchase programme is ongoing
- ECB's Trichet says interest rates are appropriate
- ECB's Trichet says inflation expectations remain firmly anchored
- ECB's Trichet says expect price stability over medium term
- ECB's Trichet says governing council will continue to monitor all developments very closely
- ECB's Trichet says our non-standard measures are temporary in nature
- ECB's Trichet says recovery is expected to be dampened by balance sheet adjustment
- ECB's Trichet says downside risks to growth from renewed tensions in some segments of financial markets
- ECB's Trichet says risks to economic outlook are still slightly tilted to downside, uncertainties remain elevated
- ECB's Trichet says monetary policy stance and liquidity provision and allotment modes will be adjusted as appropriate
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Gold going up as well.
.
Well hello there.....!
What's Trichet going to do about this inflation? Raise interest rates and torpedo the entire Eurozone periphery? Clearly this is what the markets are expecting, based on the surge in EUR/USD. I don't think they've thought it all the way through.
Bumping up mortgage costs in Ireland, Greece etc. is not going to do a lot of good for their growth prospects, and of course, their slim chance of paying back the 'Bailout' loans is predicated on extremely optimistic growth forecasts.
The Ben Bernank is "100% certain" this is all some kind of mistake.
Is trading Forex any different than betting on pro wrestling?
Yes. The wrestling crowds are more urbane.
As in all betting activities, the average player relies on wishful thinking and self deception to pick the (alleged) winners. It doesn't help that the game (the system or the actual contest) is rigged against the average gambler.
Tyler,
I am actually terrified that I might open an FX account. And if you think my rantings here are strange now...why, I might lose my membership.
FX trades, as far as I can tell, and during this time of perpetual central bank intervention, ARE ENTIRELY RANDOM!
Intervention daily...everything in this special Olympics world is being hand-held and given a boost over the bar whenever its needed. For now anyway, until Bernank 'contains inflation'.
Think twice. Some kind of crazies there aint no coming back to the really real world. There aint no coming back.
Now, once the dollar is devalued enough, well then China will certainly import more goods from the U.S>? Perhaps some Cadmium painted Shrek III collectors glasses from the good 'ol US of A?
Well what is the USA still producing that the world wants? All the crap is already produced in China plus no sane person outside US would buy an US car.
Forex, now thats a bubble. No wonder premiums on physical gold and silver are heading up. I beleive paper and physical are now just starting to diverge. Paper silver to $1.00, physical at a $40 premium. Nice.
More Biflation News Today (so far):
Crude Goods Index of PPI rose 4% (!) last month. Crude Energy Index up 7.7%.
What was down? Anything that consumers have to purchase: From BLS: Passenger cars -0.4%, athletic and sporting good -2.5% and shoes. No wonder retailers are screaming about margins!
Here is the crux of the biflationary dilemma that none of the MSM and Fed economists can figure out: the recent surge in global food prices, are causing some concern in the U.S. that inflation could rise suddenly. Fast-growing emerging economies like China's are already grappling with higher prices. But the spillover into final consumer prices in the U.S. has been very limited so far. Moreover, measures of underlying inflation, which have proven to be better gauges of where prices are going, have remained very subdued. -Dow Jones News
Ya, that about summarizes it! Because you only need a moderate amount of BOTH inflation and deflation together to crush corporate margins and consumer buying power:
Today's confirmatory news:
-Employment: Down (Jobless claims above expected and way above highering levels)
-PPI: UP
Only Gold will protect your buying power, savings and wealth
Nope. Sorry. Gold is not civilization's alpha asset.
Oil is. That's where value resides.
Everyone ready for the Bernank 'contain inflation/remove liquidity in 15 minutes' button to be fat fingered?
Yup, that's right Monsieur Trichet, inflation is caused by rising prices, not by printing money or pressing the zero key on a keyboard like there's no tomorrow.
DavidC
How do Oil Shocks create recessions?
In Many ways, the most fundamental linkage between Oil shocks and economic recession is that Oil shocks always cause huge spikes in inflation and those spikes in inflation are accompanied by huge spikes in interest rates that eventually snuff off growth
Every Central Banker knows, even misleads Central Bankers as Alan Greenspan or Ben Bernanke will tell you that your borrowing rate is a mirror image of your inflation rate.
What drove that huge increase in interest rates?
What droves that huge in interest rates is the same thing that droves that huge increase in inflation. Almost all increase has been drove by only one component of the CPI Index, the “Energy Component”.
Jeff Rubin
is it really the comments...or just technical move...what about last weeks "charts that matter analysis"....which said the E-wave was coming
Why anyone pays attention to these press conferences I'll never know . Trichet is never going to state anything controversial or potentially damaging to confidence in the euro or the eurozone , regardless of whether it's reality or not . Appearance is everything .
I was reading about this in the period between Christmas and New Year when notayesmanseconomics pointed this out.
So he was ahead of the game expecting a response from Mr.Trichet and also feels that the UK could do with a rate rise....
http://t.co/enzESfJ