European Central Bank

Why Currency Traders Are So Confused

"The FX market is confusing this year. More easing by the BoJ, the RBNZ, the Riksbank, the ECB and the Norges Bank, led to stronger currencies, despite delivering more than markets had expected in all cases. The market seems to be taking recent monetary policy easing as evidence that central banks are reaching their limits, as their forward guidance has sent mixed signals."

Central Bankers' Embarrassment Of Stitches

Had central bankers simply taken to heart that well known idiom that cautions "a stitch in time saves nine" early on, they would not now be so frantically stitching such a gaping gash in the world economy. One thing is for certain. All of this quantitative pleasing has done little to lift the spirits of the world’s worker bees.

World’s Second Largest Reinsurer Buys Gold, Hoards Cash To Counter Negative Interest Rates

German reinsurer Munich Re is boosting its gold and cash reserves in the face of the punishing negative interest rates from the European Central Bank, it said on Wednesday. Munich Re has held gold in its coffers for some time and recently added a cash sum in in the two-digit million euros, Chief Executive Nikolaus von Bomhard told a news conference.  "We are just trying it out, but you can see how serious the situation is," von Bomhard said.

Fed Mouthpiece Parses Timid Janet's Latest Pronouncement

"Federal Reserve officials reduced estimates of how much they expect to raise short-term interest rates in 2016 and beyond, nodding to lingering risks to the economic outlook posed by soft global economic growth and financial-market volatility."

The Narrative 'Fix' Is In - "Bold" Is The New "Buy"

Risk assets are up because "investors reassessed" the ECB announcement. Really? That's what happened? Real world investors stayed up till the wee hours last night and en masse concluded that they had just gotten it completely wrong yesterday? How about this for an alternative explanation: the allocation heads at one or two European mega-insurance firms were informed that they would be supporting risk assets this morning, the Narrative machine got into gear, and real world investors do what they always do, they play the Common Knowledge Game.

Central Bank Rally Fizzles: Equity Futures Lower As Attention Turns To "Hawkish Fed" Risk

While Asia was up on China's bad data, and Europe was higher again this morning to catch up for the Friday afternoon US surge, US equity futures may have finally topped off and are now looking at this week's critical data, namely the BOJ's decision tomorrow (where Kuroda is expected to do nothing), and the Fed's decision on Wednesday where a far more "hawkish announcement" than currently priced in by the market, as Goldman warned last night, is likely, in what would put an end to the momentum and "weak balance sheet" rally.

Goldman Warns Its Clients They Are Overlooking "The Largest Macro Market Risk"

"While investors focus on oil and the ECB, they overlook the largest current macro market risk – and opportunity – which centers on the Fed. Although our economists expect rates will remain unchanged, a credible argument can be made for the FOMC to proceed with the “flight path” it had previously outlined.... The market’s eventual acceptance of the Fed tightening path will spur some parts of the momentum trade to resume and others to unwind."

Can Draghi's "Kitchen Sink" Beat Recessionary Earnings?

Despite ongoing Central Bank interventions which boost asset prices and acts as a huge wealth transfer tax from the middle class to the rich, corporate earnings are a direct reflection of what is happening in the actual economy. Wall Street has always extrapolated earnings growth indefinitely into the future without taking into account the effects of the normal economic and business cycles. This was the same in 2000 and 2007. Unfortunately, the economy neither forgets nor forgives.

Forget 'Free Lunches' - The Populace Gets Nothing For Something

When an economy’s demographics are young, and growth is strong, the price of lunches looks minimal. The miracle of getting something for nothing seems possible. But as the economy ages, and growth peters out, debt levels become unsustainable. Eventually, the bill comes due. The lunches must be paid for. Instead of something for nothing, the populace now gets nothing for something.

Now We Know Why the ECB Panicked

The ECB panicked. Not only did QE fail to ignite inflation, the second order indications, modeled or real, suggest the real economy is in much, much worse shape than thought just a few months ago. The timing is not coincidental, as again there was a palpable global change starting around mid-year last year, cemented by the events of August and now January.

Frontrunning: March 11

  • Shares bounce, euro fades after savage ECB reaction (Reuters)
  • Trump's Islam comments draw attacks as Republicans discover civility (Reuters)
  • Oil Prices Rise on Hopes Glut Will Ease (WSJ)
  • IEA Says Oil Price May Have Bottomed as High-Cost Producers Cut (BBG)
  • Why Euro-Area Inflation Will Be Low for Years, According to Draghi (BBG)
  • Calmer markets, positive data prime Fed to push ahead with rate rises (Reuters)