The Fed's GDP forecasts are still too optimisitc even after the Q2 GDP revisions. And the core PCE deflator is closer to zero than it is to the Fed's target. Tapering still a done deal ?
Quick, dispassionate overview of the fx market.
- Lew warns Congress to strike debt ceiling deal (FT)
- Central-Bank Moves Blur the View (WSJ)
- Brazil, Indonesia launch measures to shore up their currencies (FT)
- More mainstream media reminded about Fukushima - Radioactive ground water under Fukushima nears sea (AP)
- Fukushima inspectors 'careless', Japan agency says, as nuclear crisis grows (Reuters)
- New York Banker Arrested on Rape Charges in East Hampton (NYT)
- This time they mean business, for real: CFTC Moves to Rein In High-Speed Traders (WSJ)
- Britain operates secret monitoring station in Middle East (Reuters)
- Moody’s considers downgrading top US banks (FT)
- China's Bo calls wife mad after she testifies against him (Reuters)
- JPMorgan Sub-New Normal Growth Seen Vexing Next Fed Chief (BBG)
- SEC calls for cooling-off period for more staff (Reuters)
Anticipation of Fed tapering is being cited for both dollar gains and dollar losses. What gives?
Short-term, dollar risks still appear on the downside, but this appears largely corrective in nature. Medium-term, a higher dollar still appears to be the most likely scenario.
Discussion of recent and prospective price action in the foreign exchange market.
Is there such a thing as a ‘safe’ fiat currency? The term itself is as intellectually disingenuous as terms like ‘fair tax’ or ‘government innovation’. But as we’ve been exploring recently why modern central banking is completely dysfunctional, it does beg the question – is any currency ‘safe’? Let’s look at the numbers for some data-driven analysis. But which is the safest major currency?
A brief discussion of the technical condition of the major currencies going to what is a week packed with fundamental developments.
Dispassionate review of some of next weeks important developments.
Bernanke's comments washed out some late dollar longs and they may be reluctant to re-establish ahead of the Chairman's testimony before Congress at the end of next week. The underlying bullish case for the dollar remains intact.
- Portuguese bond yields soar amid political turmoil (FT)
- Portugal Resignation Rocks European Markets (WSJ)
- Portugal, Greece risk reawakening euro zone beast (Reuters)
- Egypt’s military chiefs hold crisis meeting as Mursi snubs ultimatum (Al Arabiya)
- Egypt Crisis Deepens as Mursi Refuses to Step Down (BBG)
- Hidden microphone found in London embassy: Ecuador (AFP)
- Health Law Penalties Delayed (WSJ)
- Rise in mortgage rates cut into homebuyer demand last week (Reuters)
- Bolivia angered by search of president's plane, no sign of Snowden (Reuters)
- Olympus ex-chairman gets suspended sentence (FT)
Near-term outlook for the major currencies discussed and a brief analysis of the short-coming of fair-value "discounting" models in understanding recent price action.
Tryingto make sense of the price action in the foreign exchange market. The dollar was heavier than we anticipated and there is no compelling sign of a turnaround, but the key is the FOMC meeting.
Here is my weekly outlook for the major foreign currencies. Yes they are not backed by silver or gold, it is still the largest of the major captial markets at an estimated turn-over of some $4 trillion a day. Yes, officials may try to guide the market directly and indirectly, but success is often elusive.
It’s always a bit amusing to meet an investor making money in the markets right now who actually thinks it’s because he’s smarter than everyone else. Everyone knows the Fed’s quantitative easing program calls for them to buy $85 billion worth of bonds and mortgage backed securities each and every month. And the connection to market performance is clear. But, as is clear with USDJPY, Nikkei, and European sovereigns, the end of this exuberance is beginning to happen. All of this indicates that the leveraged investing herd seems to be squaring positions, going to cash, and paying back some of the USD-denominated debt they’ve borrowed. So far it’s all been an orderly move lower. And herein lies the trouble. Few investors are spooked right now because there is so much calm in the markets. But that calm can quickly turn into anxiety, which can quicly turn into all-out panic. It’s taken years (since 2008) to print so much money. This means that a market panic will unwind years’ worth of liquidity in a matter of weeks. It’s a financial tsunami that no investor should underestimate.