Tag Archives: Featured

Bar a disastrous NFP print this coming Friday the US Federal Reserve will change the target range for the Federal Reserve (Fed) Bank’s Funds rate from the current level of zero – 25bp to 25 – 50bp on December 16th.  The Fed will effectively raise the overnight interbank rate of interest to around 30bp from an average of only 12bp in 2015. Ironically, that will be seven years, to the day, when the Fed first lowered rates to the current band. During the period of ZIRP madness, the Fed’s...

Anticipating a yawning divergence of monetary policy between the world's largest central banks, market participants continued to drive the dollar higher over the past week.  In fact, the greenback appreciated against all the major and emerging market currencies except the Malaysian ringgit and South Korean won.     Next week is one of the most eventful weeks of the year, and the speculative community has amassed a very large long dollar position.  It begs the question of whether the ECB...

With the ECB poised to take additional steps down the unorthodox monetary policy route, financial and economic forces are as potent as ever.  However,  there is a subtle shift taking place that few seem to recognize.  It is the re-emergence of non-economic/non-financial issues.  Since the Great Financial Crisis began, and especially since the emergence of the European debt problems, economics have been paramount in Europe.  Even political developments were understood in relation to the...

The US dollar remains firm, even if it has eased from its seven-month high against the euro and five-year high against the Swiss franc recorded yesterday.  The US October personal consumption expenditure was disappointing, and prompted some downward revision to Q4 GDP forecasts. The Atlanta Fed estimates that Q4 GDP is tracking 1.8% rather than 2.3%.   However, it is not seen deterring the Federal Reserve from hiking rates next month.  The decline in the weekly jobless claims, the rise...

Soggy Dollars First, there’s a word for someone who buys gold in the hope its price will rise. This word is not investor, but speculator. Second, statistical anomalies cannot be asserted as proof of manipulation. Also, the article is giving the reader the blueprint for a no-brainer way to profit by the mistakes of the manipulators. If it were that easy, then people would be doing it. Third, with gold there is nothing to trust. Gold just is.  Which is rather the whole point. If market...

This Great Graphic was composed on Bloomberg.  It shows two time series.  The yellow line shows the premium the US pays over Germany for two-year money.  The white line shows the premium the US pays over Japan for two-year money.   The premiums have risen sharply since mid-October and today are at new multi-year highs.  In the middle of October the US premium over Germany was near 80 bp. Today it was near 136 bp.  Although the German 2-year yield has fallen below -40 bp, it is the US...

On Monday, the Federal Reserve met to discuss the discount rate.   There has been a steady increase in the number of regional Federal Reserve presidents requesting an increase in the discount rate.  The minutes of the October 26 meeting were reported yesterday. The meeting was held before the FOMC met on October 27-28.  At that meeting, nine of the 12 regional presidents expressed a preference to lift the discount rate.  It is a preference because it is ultimately up to the Board of...

The divergence of monetary policy is discounted, they argued. Ahead of next week's big events, which include the IMF's SDR decision, the ECB meeting, OPEC meeting, and the US jobs data, the euro, against which speculators have amassed a large short position, just shy of a record,  were supposed to be content. The euro did gain almost a cent between Monday's low when it briefly dipped below $1.0600 and today's high, which stopped shy of $1.0690 in early Europe.  However, it was greeted...

The US dollar recorded its high for the year against the Swiss franc on January 14 near CHF1.0240.  It closed that day a little below CHF1.0190.  The next day the Swiss National Bank surprised the world by lifting its cap against the euro.  The dollar plunged to nearly CHF0.7400.   It has taken increased prospects of a Fed rate hike, negative 75 bp on sight deposits at the SNB, and the prospect of more, if the European Central Bank takes additional unorthodox monetary measures in early...

A NATO country has shot down a Russian plane.  The refugee influx is threatening to unravel the Schengen Treaty of free movement.    Germany's Merkel celebrated her tenth anniversary as Chancellor this past weekend, but she faces one of the most serious challenges of her tenure.    Portugal accounts for less than 2% of the eurozone GDP.  We argue, that like Greece, Portugal's importance is greater than the size of its economy.  Among the political challenges Europe faces, the Iberian...