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Our analysis of the forecasts of economic data for 2015 shows that the Swiss banks were too optimistic for most data. US growth, the oil price, inflation and interest rates were far lower in 2015 than they expected. The forecast errors for stock indices and unemployment, however, were  smaller. In December 2014, the Neue Zürcher Zeitung (NZZ) published the forecasts of the leading Swiss banks for the year 2015. UBS, Credit Suisse, Julius Bär, die ZKB, Raiffeisen, Pictet und J. Safra...

As you may have expected, last week the market moved more into wind-down mode as the week progressed and dosed to a near-sleep on Friday’s half-day with the S&P500’s volume down 53%. This is the usual script at this time of year, so that the market ignored the WTI crude oil price, which it had recently been closely correlated to, when it moved from last week’s close $34.73 per barrel to this week’s price of $38.10, an increase of 3.38%. The market still languishes in its ‘under...

One year ago (and just two months before the shocking announcement the Swiss Franc’s peg to the Euro would end, dramatically revaluing the currency, and leading to massive FX losses around the globe and for the Swiss National Bank) the Swiss held a referendum whether to demand that their central bank should convert 20% of its reserves into gold, up from 7% currently. After the early polls showed the Yes vote taking a surprising lead, the Diebold machines kicked in and the result was a...

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Many financial centers in Asia and Europe are on holiday today, and those that are open, are experiencing a minimum of activity.  Turnover may pick up briefly in the North American morning, but conditions will remain thin and only those who need to transact will.   The US reports weekly jobless claims and the Chicago PMI.   The holiday-shortened week may limit the changes in the weekly jobless claims though we note that the four-week moving average finished 2014 near 287k, and now it...

The US dollar will finish 2015 higher against both the euro and yen.  Sometimes those of us who follow the economic and financial news closely can get caught up with the short-term fluctuations.  As traders that is what we do.  . Investors, however, can take a longer look at developments.   Taking a step back, we note that this is the fourth consecutive year that the yen has fallen against the dollar.  The greenback closed 2011 near JPY77.  It will likely finish this year near JPY120....

The foreign exchange market is becalmed, leaving the US dollar narrowly mixed in uneventful and light turnover. The euro has been confined to less than a third of a cent range. Yesterday it briefly dipped below its 20-day moving average for the first time since the ECB met earlier this month. It remains in the upper half of the two-range ($1.08-$1.10) that has confined prices most of this month. There was only one close outside of this range (December 9) since that ECB meeting.   The...

The trajectories of the monetary policy at the Federal Reserve and the European Central Bank are diverging.  It is the keystone of our anticipation of further euro weakness in the year ahead.  In addition to this monetary divergence, there is a geopolitical divergence that will be of growing significance.  At the heart of the geopolitical divergence lies asymmetrical threat perceptions.  Simply, if crudely put, the US perceives a greater threat from Russia's actions than many in...

I had the privilege of talking with Scarlet Fu and Joe Weisenthal on Bloomberg TV. They gave me an opportunity to discuss my big picture view of the dollar and the Obama dollar rally. While the Reagan dollar rally was driven by the policy mix, and the Clinton dollar rally was driven by the tech bubble, the Obama dollar rally is being driven by monetary policy divergence. Divergence itself has a bit of a history. The first phase was about what other countries were doing, namely easing...

The US dollar is narrowly mixed. The euro and yen remain within yesterday's ranges, while sterling continues to trade heavily. The stabilization of oil prices has not lifted the Canadian dollar, while the other Antipodean currencies turn higher. Emerging market currencies are mostly lower, though the South African rand is slightly firmer. The Russian ruble's decline has been extended into the fourth sessions and brings its loss this month to 8.5%, the worst performing emerging market...