In a world where fundamentals don't matter, everyone's attention will be on Janet Yellen who speaks at 1:15pm today in Harvard, hoping to glean some more hints about the Fed's intentionas and next steps, including a possible rate hike in June or July. And with a long holiday in both the US and UK (US bond market closes at 2pm today), it is no surprise overnight trading volumes have been dreadful, helping keep global equities poised for the highest close in three weeks; this won't change unless Yellen says something that would disrupt the calm that’s settled over financial markets.
Currency Headwinds continue to make billions in losses for big public companies. Make use of your stock account and utilize currency ETF and ETN options.
It has been more of the same overnight, as global stocks piggybacked on the strong US close and rose despite the lack of good (or bad) macro news, propelled higher by the two usual suspects: a higher USDJPY and a even higher oil, if mostly early on in the trading session.
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With everyone from ivory tower academics to sin-street hookers proclaiming the need for and benefits of a "war on cash" to save the world from criminals and tax-evaders (oh yeah and to stop NIRP-driven savers from hording cash and crushing central planners' dreams), it is perhaps shocking that Bundesbank board member Carl-Ludwig Thiele warned at an event this week that the attempt to abolish and criminalize cash is out of line with freedom. He said that citizens should continue to decide how and in what form they want to use their money.
At the latest G20 meeting, China’s central bank vowed to promote the use of SDRs in the Chinese economy, just four months after the IMF decided to include the RMB as part of the currency basket un-derlying SDRs. Adding the RMB marks only the 5th time the Fund changed the composition of the basket since formally moving away from a gold based system in 1974. However, as history shows, the SDR has been unable to maintain value as gold has. Adding the RMB to the basket will hardly change that.
Sterling fell 20% on BREXIT concerns and the euro fell 11% against gold. Canadian dollar fell 10%, Aussie dollar fell 9% & Swiss franc fell 12% against gold
The campaign for Britain to leave the European Union has taken a 2 percentage point lead, according to an ICM poll, to 43%, up 2 percentage points from a similar poll a week ago and the highest proportion in favour of a British exit since ICM started its referendum tracker in May 2015. Bearish bets on GBP have soared to record highs as a split within the governing Tory party and the atrocities in Brussels have sent bookies odds to their highest yet.
Following two days of rangebound moves, where Monday's modest market rebound was undone by the Tuesday just as modest decline (despite the early surge higher on the latest "bullish for stocks" European terrorism), overnight equity action continued to be more of the same, and as of this moment S&P 500 futures were unchanged, while European stocks were modestly higher. But while equities remain surprisingly uneventful despite loud warnings by both JPM and Goldman now that another bout of volatility and equity downside is coming, in FX there has been a substantial change, one which has seen the US dollar rise for a fourth day, the longest winning streak in a month, driven by the latest round of hawkish Fed jawboning courtesy of the Chicago Fed's Charlie Evens yesterday, which in turn has pushed down prices of oil, gold and copper.
In the aftermath of the Fed's surprising dovish announcement, overnight there has been a rather sudden repricing of risk, which has seen European stocks and US equity futures stumble to roughly where they were when the Fed unveiled its dovish surprise, while the dollar collapse has continued, sparking deflationary fears resulting in treasury yields plunging even as gold soars, all hinting at another Fed policy error. So was that it for the Fed's latest intervention "halflife"? We don't know, but we expect much confusion today over whether even the Fed has now run out of dovish ammunition.
The British Pound has a Brexit Referendum on Thursday the 23rd of June which is putting downward pressure on the currency.
Amid the biggest weekly drop in GBPUSD (cable) in 7 years, a surge in UK credit risk, and a spike in cable volatility, Brexit risk has never been higher, but, as Citi notes, is only 30% priced in at current levels (while polls are more 50-50) even as The British Pound is plumbing 30-year lows versus the U.S. Dollar.
Propped up by the Chinese central bank and by a generous Chinese finance ministry, with further hopes a backsliding European economy will mean even more easing by Draghi, the risk on mood is back: "People are willing to take risk again,” Karl Goody, a private wealth manager at Shaw and Partners Ltd. in Sydney told Bloomberg. “People are looking at the selloff this year and saying: enough is enough, there’s been enough pain now."
When people lose everything and they have nothing to lose, they “lose it.”
In a statement, the People’s Bank of China thanked the IMF for the recommendation and said it was “an acknowledgment of the progress in China’s recent economic development, reform and opening up”.