This page has been archived and commenting is disabled.
Summarizing Last Night's Crazy European Action
There has been some ridiculous moves in overnight FX: as the chart below shows, those trading the CHF have had to consume several times the RDA of Dramamine to stay on this particular ride.
The whopping move was due to comments out of the SNB that the bank is "preparing for an exit." The bank softened its intervention language, noting that "deflationary" risks have largely disappeared (see note from Goldman below on full SNB implications). Ironically, this was the least of the night's highlights. As pointed out last night, the EURUSD was initially dropping on comments that the ECB will continue devaluing the EUR by buying bonds (and potentially commercial paper) until the situation stabilizes. But then Tim Geithner's idiocy v2 kicked in as all of a sudden everyone in Europe started touting the ridiculous straw-man that are Stress Tests: France's minister of economics noted that the "sooner banks publish results the better." And as we saw domestically a year ago, there is nothing more honest than the administration imposed stress tests (especially accompanied by a complete suspension of accounting rules). Hilariously, the vice chairman of one of the most insolvent companies in the world, the infamous STD, or Banco Santander, said he was convinced the stress tests will show the "extraordinary strength of Spain's banks." You just can't make this up. Then Germany also touted what a great thing stress tests would be. Somehow all this doctored propaganda managed to raise the EURUSD by over 150 pips, bringing the pair to almost 1.24. Lastly, Spain's horrendous auction, where the 30 Year closed at 5.908% compared to 4.758% previously, even with the ECB directly involved, was supposed to be seen as good news. All in all, EURUSD should be testing 1.22 support. Instead it is back to 1.24 resistance. Well played, Tim Geithner.
Some more on ever-deteriorating Spanish bond auctions from Reuters:
Spain's Treasury drew strong demand for its 10- and 30-year bond issues on Thursday, selling 3.5 billion euros ($4.3 billion), at the top of its target range, but paid a hefty premium compared with previous issues of the same paper.
The Spain/Germany 10-year bond yield spread narrowed to 222 basis points following the auction result, from about 236 basis points beforehand.
The 10-year average yield was 4.864 percent compared with 4.045 percent at the previous auction on May 20, while the 30-year yield jumped to 5.908 percent from 4.758 percent on March 18.
"Spain passes another market test with 10- and 30-year bond auction," 4Cast said in an investors note.
"Spain got its bonds away (even if the 30 years was underwhelming), and while that's not going to see off all the doomsayers it does at least buy some more time," analysts at the London-based research house wrote.
The auction helped ease market tensions over Spain's ability to meet this year's remaining bond redemption of 16.2 billion euros by the end of July.
Spain's 10-year bond spread against Germany has swelled to record highs since the euro zone was created amid media reports that the government may need European Union aid and its banks may be facing a liquidity freeze in international markets.
And here is the take of Goldman's Dirk Schumacher on the SNB announcement:
No change in stance for now - but SNB starts preparing for exit
Bottom line. The 3-month Libor target (0.25%) and the 2012 inflation forecast (2.2%) was left unchanged. At the same time the SNB softened its language on FX interventions and thinks that the deflationary risks have "largely disappeared". If it weren't for the Euro-zone debt crisis the SNB would start the exit from its super-accommodative policy soon. We still think that a rate hike in September would be too soon, but are less certain after today's meeting. Our central forecast is for a first hike in December.
Inflation forecast. The 2010 inflation forecast was revised up from 0.7% to 0.9% and the 2011 figure from 0.9% to 1.0%. The forecast for 2012 was left unchanged with inflation clearly breaching the SNB's target in the second half of 2012 (see chart). The SNB now also published a forecast for Q1:2013 showing inflation at 3.07%. We would have thought that the appreciation of the CHF would lead to some downward revision of the forecast. These forecasts are all based on the assumption of a stable Libor target clearly indicating that the current stance, if left unchanged, would be inconsistent with price stability as defined by the SNB.
FX interventions. The SNB says that the deflationary risk has "largely disappeared" on the back of the improving economic situation (growth for this year was revised up from 1.5% to 2.0%; GS: 2.0%). The debt crisis, however, implies higher risks and the SNB will take "all measures necessary" to prevent a materialisation of the risk to price stability stemming from an appreciation of the CHF. Put differently, the SNB will still intervene if FX moves are too dramatic but the hurdle for interventions seems to be higher now. The SNB also acknowledges the increased financial risk on its balance sheet resulting from FX interventions.
Excess liquidity. FX interventions have led to excess liquidity in the banking system which will need to be mopped up at some point. President Hildebrand said in its speech accompanying today's decision that the monetary base has reached a record high in May. Coupled with already quite lively lending growth this shows the inflationary risk from interventions if left unchecked. SNB board member Danthine presented in his speech the framework the SNB will use for absorbing the excess liquidity: issuance of SNB bills and reverse repos as a fine-tuning instrument.
Overall, the statement and the updated inflation forecast are slightly more hawkish than we had expected. Once the funding situation for the Euro-zone periphery stabilises the SNB will switch gears. We continue to think that a rate hike in September is too early, not least because we expect the CHF to appreciate further. But we are less certain now than we were before today's meeting.
The only winner out of all this... gold, which is once again pushing for an all time record.
»
- 5636 reads
- Printer-friendly version
- Send to friend
- advertisements -
so another good day ahead for the markets
this is just sickening me
I have shorted the market since september
there is no way it should be above 850 spx i would say
or even zero really
DIE YOU F*CKER
Have faith, Yabs. These boys need a big cushion for when it all falls on it's arse again....
No it shouldn't be above 850.. however..
It's way too early to say it's a good day in the market. The futures starting out positive doesn't mean a damn thing anymore with HFT/TBTF banks/and Timmy leading the way.
Hang in there.
every loss you took on those shorts made them stronger. they can squeeze any of us anytime. thats why they printed the QE money, to manipulate markets against the ordinary folks who dare to short. only winning move is not to play, default and go cash.
Be nimble, not stubborn. We are currently under the control of economic priests that worship at the alter of a false god.
Forex has been less and less reality-based, and more resembling the borked equities markets, ever since the 'flash crash' and then the first Greek downgrade and SNB interventions in mid-May that rescued EUR by several hundred points over a day or so. It most definitely changed following that time.
The EUR rally of the past two days has ignored a complete flood of bad news, including downgrading of Greek debt to junk status and Spain's obvious bailout preparations. There was one (1) good report today: Britain's retail report. So they're still shopping - awesome for EUR! And as you've noticed, Spain's 'successful' bond auction and the stress test rhetoric. In other words, this rally is also of fumes and fantasy. It'll stop just as it started: when the Big Wheels want it to.
I fully expect more rally from the New York session. China sold a bit but only enough to cool things down, not enough to make any dent in the price...New York is perfectly set up now for a ramp to 1.245.
Then 'risk appetite' can be declared back 'on' all over the world, Bloomberg can shake its pompoms for another day on 'signs of global recovery', and the setup for the next Big Short will be almost complete.
I have wanted to sell, wanted to sell, couldn't - they have not allowed selling for days, except for an hour here or there that just takes the edge off. I have watched the red candles start, only to be shoved back to the same consolidation place over and over again. Mostly, between these huge green buy candles, the EUR market sits completely still for hours in 15- and 20-pip ranges. I hope I am quick enough to get in a sell position when the next big fall comes...from 1.26 or so? Deutsche probably knows more about when that will be, and PBOC. Thank God I'm such a small trader that we can't lose much, although we can't gain much either with our small, short trades. I can't help wondering how much longer this market is going to be accessible, or even tradable, by small retails like me.
The forex is seriously almost as broken now as equities markets. Hyperinflation can't be far behind, I think.
It's the other way round
all trades are currency trades now
though I agree that there doesn't seem to be much sanity to FX... that leaks into credit & equities
.
What is even more hilarious is the fact that news agencies are applauding the Spanish bond sales as good news. Spain can't afford the interest they were paying, how are they gonna afford even more? These news agencies are being paid off if you ask me.
Who helped on the bid to cover ratio....UNOFFICIALLY! ECB knows how important the the fantasy is to the markets....Its drama of epic proportions.
This place is a bit like the compound of some religious gold worship apocalyps cult. The world is going to end any day now. Tool up.
It's a strange world. Reminds me of a few days ago where Best Buy basically says no one in the U.S bought a flat screenTV or computer....no one in the great bankrupt state of NY got a job and homebuilder sentiment is a swirly in the bowl, yet we ramp.
These a$$ clowns are gonna game the FX markets until the end of time, they're pulling off , until they don't. The keep going until they make that fatal misatake.
Don't forget OpEx. It's all the game.
Sure. It is the game for taking money from the 'little people'. But please don't think that all the currency games overnight were for the benefit of moving OpEx.
USD/CHF went from 1.133 to 1.113 in 2 hours last night. Just another healthy market.
Is the new game 'tank the dollar'? Bernanke may finally be feeling some relief.
so farking ridiculous
all of it
Geithner et al belong in prison
Pretty red candle this morning. Not quite long enough though.
someday soon all will be seen for the hologram it is in the hands of the magicians. the smoke will dissipate and the mirrors will have been set at the wrong angles. the illusion will end.
but at that time watch and see that the magicians have left some less guilty saps holding the wand while they pull off the great disappearing act.
A-H CNBC (i.e. PPT) set-up of shorts...?
UK Bonus Tax Will Cost US Banks $2 Billion This story was broken on CNBC during Fast Money (5-6p ET) with the FT reporter given sig. airtime, just in time to get small time shorts to make after hours bets the market would open down...a sure thing as futures dropped until well after 8p ET. A sure thing short! Not.for what it is worth I get all kinds of stuff happening at spy 113.41
we must remember the global cabal is only maintaining power on the "strength" of the markets. Therefore they can't let it crash. since we all know no human are actually involved in trading anymore. it isn't that hard for crazy shit to happen.
The best way to think of it is: what will the dictators do to be willing to hold onto power? Leaders don't leave power unless they have to. since the entire system is a corrupt PONZI scheme you think they are going to walk away from the money machine. These people will destroy the system before they admit defeat. see what has happened throughout history.
Look how far communism had to go before they gave up. Now they just have another version with a differrent elite often made up of the same cast of chartacters.
Let me tell you they will have the army shooting people in the streets before they walk away and give up the ponzi scheme.
As I have been saying the proof that the global cabal wasn't going to change was when Obama (Mr. change) appointed Summers, Geithner, and then reappointed Bernanke. the Coup aint going to leave. Geithner perhaps being the most "evil, crook" of them all. Bernanke is a kind of Petter Sellers in being there. I don't think he is evil but just not very bright. Summers. These three are the flawed ideology cabal that has been running things into the ground for 30 years. You maintian control by having policy markers enforce your crooked ideology.
The Chinese were smart enough to change before they destroyed their country. This allowed them to remain in power. I do not believe the current cabal is smart enough for that. They will destroy everything in the quest to remain in power.
Understand we have an ideological system just like a theocracy, communism, etc. Summers, Geithner, Bernake, are a representation of that flawed ideology. Our ideology is corporatism which just happens to be the ideology that benefits those at the top level. As always the ideology followed makes sure those at the top benefit the most.
Spanish auction what a joke. Same game as over here. ECB loaning to banks who as a proxy to buy Spanish debt. Monetization bitchez!
Funny how virtually any market can be "jawboned" at will, since thousands of overleveraged hedge funds now employ Red Bull chugging 18-year old joystick junkies which constantly read the news feeds.....
LOL...what a casino.
stress tests = self fulfilling prophecy.
the conclusion is reached: all banks are healthy everywhere. and then the methodology is created to fulfill that prophecy.
it would be more constructive to use a magic 8 ball.
I disagree. In a magic eight ball, there are a few negative answers. Can't aford that.:>)
Great - keep up the good work and we'll see you at 30y 7.335% next time.
Because we all know that healing Spain is just a matter of weeks!
And, perhaps in a strange twist, that Spanish "futbal" team loses again and doesn't make it out of the first round, and the Spanish people will be good and pissed ready to take to the streets and get the rioting started already, hastening this all along nicely...
dcb
wise words indeed
thats when I twigged that Obama was a fraud when he appointed the same usual suspects who deregulated the system in the first place and now they are going to fix it with regulation
oh pleaaazzze.
I am not veven american, do not know much about american politics but this was clear to me
so why does the american electorate not see it?
he is the biggest fraud ever
The biggest prostitute for the banking cabal there has ever been
the only change is now we have a black guy sucking bankers c*cks
rather tha n a white guy and he takes it up the poop shoot as well
And as for Geitner how can anyone with one brian cell not see him for
the evil weasel he is?
GODDAMN IT, ZH IS THE ONLY BEACON OF SANITY IN AN INCREASINGLY INSANE WORLD. I'M GOING TO BUY 100 ZH T-SHIRTS AND GIVE THEM OUT TO ALL OF MY FRIENDS AND FAMILY.
USD/JPY tanking - tanking even as Eur @1.24. EUR/JPY also tanking - signs are there the drop is coming, the MM won't let us small fish profit from the drop, but the signs are there folks, maybe after opex.
Been watching that. Don't believe it'll last. But they're allowing it to look good - you know, 1.245 isn't that far away and a bit of drop-back is suitable first...so, you know, let the USDJPY take the EUR pairs back a bit...
No way they allow it, though...stress tests were just put at issue in Europe, so they have to be legitimised as market movers. Plus they've ignored every other negative report all week, so why would these two be any different? (UE and mfg) And these are the last two major reports this week...
I still say, 1.245 for EURUSD this session, and 114.5 EURJPY in the near future (this session and/or in Asia), possibly 91.5 or 91.6 for USDJPY. I think, no way they let the big ramp in London, ideal setup, go to waste over *jobs*. No way Bermonkey lets the DOW read red, over *jobs*...
We'll see. Your guess is as good as mine, and prolly better. 'Casino' is most DEFINITELY the right word, used above.
I agree, the Big Short is coming soon. I just don't see it happening today...
ETA: Spoke too soon! Man, is it getting interesting now...I should have tried predicting something earlier this week! Maybe I could have prevented some of this fake-ass rally. ;-)