Tag Archives: ECB

Fed Shirts vs Skins

By Andrew Busch | Published: April 4, 2011

There appears to be a jump ball for the direction of the Federal Reserve and monetary policy as FOMC voting and non-voting members spoke last week. It will continue this week as we have several speakers including Chairman Ben Bernanke ready to take a shot and score points for their view. An intriguing game of Dove shirts (Dudley) vs Hawk skins (Fisher) is playing out.

It’s interesting to see the recent commentary has shifted from caution and keeping the full QE2 to what instruments should the Fed use when it decides to reverse its easy money policy. While no one … …READ MORE

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The illusion of an impervious Euro

By Andrew Busch | Published: March 7, 2011

Let’s take a quick spin around the global currency markets to see what the major topics.

First, the price of oil continues to soar as the events in Libya have taken 1 million barrels per day out of the global supply. Brent crude is trading above $188 and Europe is feeling the pain as petrol prices go up. Libyan produced oil went to Italy and now Italy is getting refugees instead from MENA (Middle East North Africa) countries.

Next, the European Union members have been meeting to decide the future of the EFSF (bailout fund) and the future of the … …READ MORE

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AM Market Modus Operandi

By Andrew Busch | Published: February 28, 2011

The market narrative for currencies is now centered on the growing chasm between the Federal Reserve easy policy and the rest of the world’s tightening policy or soon to be tightening policy. Emerging markets have been at the forefront of raising interest rates to combat inflation generated via food or commodities. The change to the markets is the introduction of energy inflation via the spike in oil and the language coming from the ECB about heading off the tertiary effect to consumer’s perceptions to inflation. In turn, this has led to European interest rate spreads to US widening and supporting … …READ MORE

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Top Themes and Trades for FX

By Andrew Busch | Published: February 25, 2011

1. Like the winner of most American Idols, this week’s downward revision to US GDP was both surprising and disappointing. The market was expecting an increase from 3.2% to 3.3% and it was revised down to 2.8%. For the year, it was only 2.8% as the economy struggles to produce a rate fast enough to create jobs and then become self-sustaining. The jobs picture will be on full display next week as we get ISM data, ADP data, weekly jobless claims, NFP and unemployment. The GDP data this week should lead some economists and strategists to revise down their expectations … …READ MORE

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"Risk-Off" danger zone for the year begins

By Andrew Busch | Published: February 22, 2011

The global financial markets are beginning to show signs of distress and volatility after an exceptional strong rally in US equities and global risk. The market narrative is shifting from a positive discussion on earnings and a US recovery to a negative conversation over global inflation, fiscal imbalances and political turmoil. This shift should mean uncertainty will rise and investor sentiment will pullback in reaction to this unstable environment.

One of my major concerns at the beginning of the year was food inflation and the potential for domestic instability. The dramatic rise in the price of corn, wheat and rice … …READ MORE

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3 Things you need to know now

By Andrew Busch | Published: January 24, 2011

1. State of the union or SOTU. Most of the content has been leaked already in the NYT and Washington Post so it won’t be new news by the time the President speaks tomorrow night. However, the President is likely to push for new spending on infrastructure, education and technology. The Republicans are going to oppose any new spending and the House Budget committee meets today to lay out their framework for limiting federal government growth. One of the rumors that keep surfacing is a new push from Obama for a Homeland Reinvestment Act II.

Allegedly, this new act would … …READ MORE

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Fantastic FX Four

By Andrew Busch | Published: January 10, 2011

1. The ECB meets next week. The markets continue to abuse the Euro against most major currencies as concerns over European banks remain strong. As an indication of the uncertainty, the Swiss central bank has excluded Irish government debt from a list of assets considered eligible as collateral for its repo deals. Also, the ECB has stated they are concerned over the Irish government’s ability to force losses on the collateral it accepts for loans to commercial banks. These stories along with others (Belgium) have spooked the European sovereign debt markets and have forced spreads to German bonds and CDS … …READ MORE

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ECB Wizard of Oz

By Andrew Busch | Published: December 20, 2010

Today, the European Central Bank published a legal opinion on their website which expressed concerns over the proposed bank restructuring powers for Ireland’s finance minister. The ECB is concerned they would have to take losses from a restructuring directed by Fin Min Brian Lenihan.

“The ECB has serious concerns that the draft law is insufficiently legally certain on a number of critical issues for the Eurosystem,” according to Reuters. “The issues include “the scope of collateral rights of central banks given as security against ELA (emergency liquidity assistance),” as well the rights of the ECB and possibly other central banks … …READ MORE

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My Call for the Fall Changing

By Andrew Busch | Published: December 2, 2010

My call for the fall has been that the markets built unreasonable Risk-On expectations in the lead up to the November 2nd midterm US elections and the November 3rd FOMC QE2 and the Congressional lame duck session for extending the Bush tax cuts. I looked for a US dollar rally, a US equity drop and a steepening of the US yield curve. All have occurred to varying degrees.

However, I also stated that I would be wrong if either President Obama made solid steps to come to the middle and compromise on the Bush tax cuts or if the US … …READ MORE

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What to Watch for the Week…and Beyond

By Andrew Busch | Published: October 18, 2010

Overnight, the US dollar has had a rally on what I’d call the “We-can-print-money-too!” theory of central bank easing. We had ECB head Claude Trichet refute Bundesbank head Axel Weber’s assertion that the ECB should stop buying bonds. Also, we had two groups (E&Y, CEBR) state that the UK economy will be flat in Q1 2011 and that former policy maker David Blanchflower said, “We (UK) are desperately in danger of a double dip and the last thing you do in a recession is make things worse. The BOE unfortunately looks like the only ‘plan B’ the government has, but … …READ MORE

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