Forecasting misconceptions and the likelihood of European financial repression
Market participants, including economists and strategists are prone to confusing what they believe should be the case with what will be the case.
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Nervous Calm over Currency Market
A good reception to a Spanish bill auction and a some what better than expected German ZEW investor survey helped stabilize the risk sentiment which had been battered yesterday. The major foreign currencies are mostly firmer on the day,…
Three Key Developments
Three events took place last week that will shape the general investment climate in the weeks and months ahead.
Risk Off Monday
The US dollar is firm against all the major and emerging market currencies. Equity markets are lower, giving back all of Friday's gains and more. The euro has dropped 1% and the next level of support is seen near $1.3200.
Draghi Turns On Spigots, but Still a Drag
The ECB delivered the much expected 25 bp rate cut, though the decision was not unanimous. There was some immediate disappointment by some players positioned for the outside chance of a 50 bp move. The ECB addressed the liquidity and…
Worrisome Signs
Opinion polls and surveys are finding an increasing number of people expect one or more countries to leave the euro zone. Investors are anxious. What is to be done? What makes this so difficult is that there are so many moving parts and…
Key Disagreements at Late Stage Weighs on Euro
Germany and France are pushing for treaty changes. Under normal conditions treaty changes are a long drawn out process, subject to horse trading and vulnerable to domestic political considerations and the outcome is far from guaranteed.…
Two Developments Push Euro Lower in Europe
Asia extended the euro's recovery, but developments in Europe have seen it surrender the earlier gains and move back toward the lows seen in North America yesterday near $1.3360. The relatively light participation in the ECB's 84-day…
Liquidity is the Word
Tomorrow the central banks will auction dollars for the first time under the lower rates. There was some talk that the lower take down at this week's regular refi operation (about 13 bln less euros than were maturing from last week's…
Euro Recovers After S&P Slam
The euro sold off amid the rumors of the S&P decision to put on credit watch 15 euro zone countries. Spared was Greece, in a world of its own, and Cyprus, which was already on credit watch. It sold off further in Asia, but Europe has…