Monthly Archives: March 2009
FX Daily Squawk
March has been a rough month for the US Dollar. The US Dollar has only gained against the Yen, out of all of the G10 currencies. However, the US Dollar remains resilient.
At the start of next week, corporations and fund managers will rebalance and reassess their hedges and portfolio exposure. This is very important because it also marks the end of the fiscal year for some companies, as well as some countries in general. The large swing in currencies has led up to this point.
There are some influences and key events that will affect the currency markets next week -
There is risk that Japan will release a series of unfortunate data, which may be weaker than the consensus. They noted today that their economy is deteriorating at a fast pace.
Out of Europe, the European Central Bank meetings will be of greater importance than the economic reports. The balance sheet of the European Central Bank has shrunk since January of this year and they may annouce some measures that will expand it again.
FX Daily Squawk
The US Dollar is prolonging its recovery against the Japanese Yen today, up nearly 5%. The British Pound has rallied, in response to the higher February inflation figures. The rally has advanced the Pound through the 100 day moving average against the US Dollar.
World equity markets are continuing their recovery. The MSCI Asia-Pacific Index is up roughly 2%. The Won has advanced about 10% for the month. European equities are unable to maintain early gains and the UK inflation figures have affected the FTSE, which is off around 0.70% near midday.
FX Daily Squawk
Mar 30
Posted by John Taxiarchos
There is much talk that the European Central Bank (ECB) has nothing left to give. Analysts argue that the ECB is “all-in”, as they say in Poker. I believe that to be false. I have listed a few more steps that the ECB could take before they are actually “all-in”.
1. Step-up their existing efforts -
A. Unlimited liquidity provisions should be extended
B. Reduction of “haircuts” for larger loans on the same collateral
C. the acceptance of collateral that is of lower quality
2. Initiate a new effort -
A. commercial paper purchasing
B. long-term corporate bond purchasing
C. long-term sovereign bond purchasing
The ECB is most likely not ready to initiate new efforts, but instead, may look at increasing the size of their existing programs, along with a small rate adjustment. It would also be a good idea for them to decrease the size gap between the deposit rate and the refinance rate, which is 100 bps apart. This would also help short-term rates, since the deposit rate typically acts as the floor rate for short-term rates.
Share this:
Posted in FX Daily Squawk
Leave a Comment
Tags: currency trading, dollar, ECB, economy, euro, European Central Bank, Fed, financial news, foreign exchange, forex, forex commentary, forex news, FX, US jobs report, world markets, world news, yen