Marc To Market's blog

A dispassionate discussion of developments in Cyprus and a few broader implications.

A weekly overview of the technical condition of a number of currencies against the US dollar. It is meant to compliment and supplement fundamental analysis. We retain a mostly favorable outlook for the US dollar, though skeptical of the scope for additional significant gains against the Japanese yen.

Here is an overview of wage developments in Germany and Japan. They have not been widely understood. See why these developments are important.

The reversal begun yesterday in the FX market is continuing today. Although we are skeptical of the factors being cited as causes of the price action, we suggest it should be respected and will look for opportunities next week to get back with what we suspect is the underlying trend.

Here is a quick overview of what is going on. Besides reviewing the key developments, we explain why the EU Summit, which is not attracting much attention, is in fact important.

A straight forward explanation of two elements of the options market and what it is suggesting about market positioning and psychology. Sometimes the options market acts as a parallel market to express views. Sometimes it acts as an insurance market. Written with the non-specialist in mind.

A 2-minute read on developments in the global capital markets. Equity markets are heavy, bonds little changed as is the dollar. Sterling is the big winner on short covering and bottom picking.

The UK government appears to be contemplating changing the BOE's mandate so it can be freer tolerate greater near-term price pressures. The Tory-led government is commented to fiscal consolidation--austerity--the same kind of policies many want to see the US adopt, and needs greater monetary stimulus to avoid a deeper contraction in the UK economy.

German state employees got a wage increase that is above current and expected inflation. This has domestic and boarder implications. Although few are talking about it, I think it is an important development. It may help lighten the pressure on the peripheral countries from bearing the sole burden of the adjustment process.

A few observations about growth and policy backdrop that is shaping the investment climate. It is a large overview that may be helpful to start the week.

A interesting non-partisan analysis of Draghi (which means dragon) and Grillo (which means cricket) to discuss what is happening in Italy and the euro area more generally.  

The US dollar rose to new multi-month highs against several of the major currencies, including the euro, Swiss franc, British pound and the Japanese yen.  The BOJ, BOE and ECB meet last week and none changed policy.  The Swiss National Bank meets on March 14 and is also unlikely to change policy.  The Federal Reserve meets the following week and is widely expected to stay its course.  It is not monetary policy then providing the new trading incentives. 

Nor can the dollar's gains be attributed to political uncertainty in Europe stemming from the inconclusive Italian elections, as was the case previously.   The immediate shock has worn off and Italian stocks and bonds have recovered the lion's share of those initial losses. 

Many see a rising US stock market and a weaker euro and conclude the correlation has broken down. Well, it did break down, but it has risen more recently. Correlation is a statistical relationship not something than can easily be eyeballed.

Here a three views that are outside the consensus.

Here is my take on the drivers of the foreign exchange market today and some implications.