Today, 6 central banks acted to reduce funding tensions in the global financial markets. The EUR rallied 200 points, S&P is up 35 and US 10yr yields are up 10bps at 2.07%. Here’s the Federal Reserve statement:
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on … …READ MORE
Tag Archives: Federal Reserve
Finally, Global Action!
Global Macro Monday: Equities, Greece and Central Bank Bonanza
Equities
We start this week with global equities playing catch up to the drop on Friday in the US. We have now seen $2 trillion in value wiped out due to the drop in stock prices since the peak on May 5th. The S&P is down 5 weeks in a row. The reasons stem from a global drop in economic activity stemming from Japanese supply chain disruptions and US gasoline prices crimping consumer spending.
The data over the last month has remained weak and this culminated on Wednesday with the massive drop in ADP that foreshadowed the disappointing NFP and … …READ MORE
Waiting for Superman Bernanke
The focus of the week will be on earnings and the Fed with the currency markets taking a back seat. So far, the earnings have been robust with 79% of those reporting beating the analysts’ expectations. Today, we had Ford out and they beat. As far as the Fed is concerned, we all have our questions we want answered. Aside from my jokes, Ben Bernanke will be forced to answer the inflation questions over energy and food. In conjunction with inflation, he will also be asked about what levers the Fed will pull first and the sequence. Since the Fed … …READ MORE
US dollar Devaluation Has Begun
Wednesday’s Bullets:
• The Bank of Thailand (central bank) raised its benchmark overnight repo rate 25 basis points to 2.75% for the third time this year.
• The Riksbank (central bank Sweden) raised its benchmark overnight repo rate 25 basis points to 1.75% for the sixth time since July.
• The Bank of Korea (central bank) said it will “consistently” push to raise its key interest rate in future to curb growing inflation expectations.
• An advisor to the People’s Bank of China (central bank) said China could move to raise benchmark interest rates further, arguing that real interest rates … …READ MORE
Fed Shirts vs Skins
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
Fed Talk=$ Rally?
On March 25th, Philadelphia Fed President Plosser surprised the markets by laying out a strategy for withdrawing the massive monetary stimulus pumped in over the last 4 years and stated that an improving economy means policy makers should consider how to exit. He stated that the Fed should sell assets from its balance sheet and raise interest rates at the same time.
On March 26th, St. Louis Fed President Bullard stated that the FOMC should review QE2 to see if it could be completed early as the economy may not need it as it has rebounded. He went on to … …READ MORE
Posted in Front Page Also tagged Bullard, Evans, interest rates, Plosser, Rosengren, US dollar 1 Comment
AM Market Modus Operandi
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
Top Themes and Trades for FX
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
Lending and the Recovery
Yesterday, the Federal Reserve released their Senior Loan Officers Survey for Q1. BMO’s Jennifer Lee had these insights:
- stronger demand for C&I loans by large and medium-sized firms jumped in Q1. The “net percentage of domestic respondents reporting stronger demand for C&I loans” rose to 28.1, which is the first positive reading since 2010Q3 and the largest reading since 2005Q3. This must stem from companies needing loans to bulk up on M&E purchases that they can fully write off this year.
- fortunately, the banks continue to ease their lending standards, although the speed hasn’t picked up. The “net … …READ MORE
3 Things you need to know now
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
