Fed Posts on Forex Blog
Forex Preview August 3 - August 8
Aug 3, 2008
The core theme of the week will be rate decisions from 4 central banks and attached commentary.
Australia and US bank rates are declared on Tuesday.
On Thursday, banks in Great Britain and the Eurozone announce rate decisions.
All 4 banks are expected to remain on hold. The real market movement will come from associated statements
- The Reserve Bank of Australia (RBA) is apt to remain confident in economic growth and focus on inflationary concerns.
- the US FOMC is likely to focus on a struggling economy with inflation a secondary concern that can be dealt with later
- The Bank of England will presumably highlight a faltering economy, indicating rate cuts may be needed sooner rather than later. If their is one bank that surprises with rate movement this week, the BOE will be it with a rate cut.
- The ECB can be a wild card. Inflation remains double their mandate target. Yet, signs of a Eurozone slowdown are spreading like wildfire. With oil pulling back, their is reason to believe Trichet is going to stress a wait and see approach. However, hawkish comments on inflationary concerns remain a possibility.
Aside from the central bank action, markets are also likely to move on unemployment reports out of New Zealand on Wednesday, and Switzerland, Canada on Friday. The New Zealand report is the only significant data coming out on Wednesday, and as such may gain unusual attention.
Three other events to watch for are:
- the US PCE on Monday (I think their is potential for upside surprise).
- Eurozone Retail Sales and US ISM Services ahead of the FOMC rate decision on Tuesday
Sunday August 3
9:30pm Australia House Price Index (expect -1.3% QoQ, 8% YoY)
11pm New Zealand Commodity Price Index
Monday August 4
5am Eurozone PPI (expect 0.8% MoM, 7.9% YoY)
8:30am United States Personal Consumption Expenditure (expect 0.4% MoM, 2.2% YoY)
Tuesday August 5
12:30am Reserve Bank of Australia Rate Decision (expect hold at 7.25%)
4:30am Great Britain Industrial Production (expect 01% MoM, -1.2% YoY)
5am Eurozone Retail Sales (expect -0.6% MoM, -1.3% YoY)
10am ISM Services (expect 51.0 from 48.2, signaling growth)
2:15pm United States Fed Rate Decision (expect hold at 2%)
7pm Great Britain Consumer Confidence
Wednesday August 6
10:35am United States Crude Inventories
6:45pm New Zealand Employment Report (expect 0.2% QoQ, -0.6% YoY)
6:45pm New Zealand Unemployment Rate (expect 3.8%)
Thursday August 7
2am German Trade Balance (expect €15.5 billion)
2:45am French Trade Balance (expect €-4.6 billion)
7am Great Britain Rate Decision (expect hold at 5%)
7:45am European Central Bank Rate Decision
8:30am ECB President Trichet Press Conference
10am US Pending Home Sales (expect -1.3%)
Friday August 8
1:45am Switzerland Unemployment Rate (expect 2.3%)
4am Italy GDP (expect 0.0% QoQ, 0.3% YoY)
7am Canada Unemployment Rate (expect 6.2%)
Bank of England, ECB, European Central Bank, BOE, jobs report, RBA, upcoming reports, Fed, FOMC
US Battles the Credit Crunch
Jul 28, 2008
The dual track of limiting naked short selling and increased government powers to help Fannie and Freddie seems to have worked for at least the short term. Since that fateful Tuesday, both stocks have rebounded nicely.
And now the US wants to keep that momentum going. Today, movement was made in 3 key areas.
1) SEC Expanding Curbs on Shorts
In a Wall Street Journal article today, they indicated that curbs to shorts may in fact expand. Other industries such home builders, insurance, and other financials may now be included.
The temporary limits covering 19 financials was set to expire at 11:59pm est Tuesday July 29.
The SEC held calls with a major fund association over the weekend to discuss the issue. Of great concern to funds was the ability for computer traded programs to adjust their software for the new rules. That would seem like a technical problem for the industry rather than a major hang up for the SEC.
2) FOMC to Improve Inflation Transparency
As of today, Committee officials use core inflation to set a sustainable price target for the next 3 years.
In a speech in Washington today, outgoing Fed Governor Mishkin outlined how that might be improved. He suggested 3 key changes.
a) Set a mandate rate like that used in England and Europe
b) Switch to 5 year forecasts
c) Use headline inflation rather than core inflation.
This speech is notable as Governor Mishkin is sometimes thought of as an inflation dove. The wide divergence between headline and core inflation in recent months makes the third point unlikely for the near term. However, a mandate rate (which he has long supported) and 5 year outlooks are plausible.
I am not convinced mandate targets are really useful. The Bank of England, the Royal Bank of Australia, and the ECB seem to be cornered by their rates. In each case, the bank is willing to exceed their mandate in the short term while they wait for their respective economies to slow enough to justify further rate action.
Had the Fed been similarly handcuffed, it is unlikely they would have cut rates as substantially or as fast as they did in the last year. (Though watching Jim Cramer's head explode on national TV would have been great entertainment).
3) Paulson Pushes Covered Bonds
In what could be a major strike against the credit crunch, US Treasurer Hank Paulson announced best practices for covered bonds.
What are covered bonds and why would they help?
Glad you asked.
Like the mortgage backed securities that got the US into this mess, they are mortgage pools backed by cash flow.
I can hear the groans an snores already, but stay with me.
Unlike the CDOs of recent years - the originating institution MUST keep the security on their own balance sheet. That is, they can not sell them off to others. Perhaps the biggest problem with the recent run in mortgage securities is that they were sold off to other institutions. Forcing them to stay with origination should enforce higher lending standards.
More specifically, covered bonds would have the following limits:
- balance stays on asset sheet of lender
- covered bonds can not exceed 4% of lender liabilities
- loans must have documented income
- mortgages over 60 days delinquent must come out of the pool
- investors in the pool must be updated monthly
Today, Europe's mortgage market largely functions under this model to the tune of $3 trillion. In contrast, their are virtually no covered bonds in the US.
Credit Crunch, housing, Fed, SEC, USD
Bernanke, Paulson, Cox Take Center Stage
Jul 14, 2008
The US Dollar is likely to see unusually high volume starting at 10am est tomorrow.
At that time, Fed Chairman Ben Bernanke will have the floor to himself when he gives his semi-annual monetary policy report. The discussion will likely center on today's revision to mortgage lending rules and when Mr. Bernanke believes the credit crises will abate.
In an unusual move, Treasurer Henry Paulson and SEC Chairman Christopher Cox will join Mr. Bernanke at at a second hearing. No doubt, the topic of discussion will center around steps taken to prevent the collapse of Fannie Mae and Freddie Mac. This hearing will take place after Mr. Bernanke's monetary policy report.
Senator Chris Dodd, head of the Senate Committee on Banking, Housing, and Urban Affairs has indicated that he is receptive to the proposals put forth by Hank Paulson over the weekend. Senator Dodd stated that "Fannie and Freddie are in sound shape, but fear produces its own results". He further implied that he hopes to add amendments enacting Mr. Paulson's recommendations to last week's housing bill. The bill would then likely pass in time for President Bush to sign by Friday of this week.
US Dollar trades may also see some movement when reports on retail sales, PPI, and the Empire Manufacturing Index are released.
Retail sales are expected to rise 0.5% (1% excluding auto).
Lehman Brothers, the entity responsible for kicking up the Fanny and Freddy storm last week, is looking for 1.3% MoM and 8.5% YoY on the PPI.
The Empire manufacturing index is expected to come in at -5.
The German ZEW Survey will be released at 5am tomorrow, and may surprise to the downside. Industrial production has fallen off dramatically in France and Germany and trade balances shrunk last week.
Credit Crunch, Bernanke, Fed, USD
Fed, US to Bail Out Fanny and Freddy
Jul 13, 2008
On Sunday, US Treasurer Hank Paulson and the Fed announced 4 steps to secure the future of Fannie Mae and Freddie Mac.
1. The 2 entities can now borrow from the NY federal reserve. This is the same emergency lending facility granted to investment banks earlier this year.
2. The Federal Reserve will play a greater role in any future changes to their regulations
3. The US will expand the lines of credit (currently $2.5 billion) provided by the federal government
4. The US government will be able to buy equity of the 2 giants.
Steps 3 and 4 still need congressional approval. In an election year, they seem likely to pass. Chances are further improved by the perception that Senator Chuck Schumer (D - NY) may have had a role in the collapse of IndyMac.
One has to wonder why step 1 (access to the Fed discount window) was not done earlier this year when the privilege was extended to investment banks.
Shoring up the giants is mission critical for the US. Between the 2, they hold $5 trillion in mortgage debt. Just 2 years ago, they were underwriting roughly 30% of all mortgages. Today, that number number has grown to 70%.
With all the attention drawn to Fanny and Freddy, one has to ponder the fate of Lehman Brothers.
Credit Crunch, Hank Paulson, Fed
Euro Trade Narrows, Ex Fed Surprises
Jul 9, 2008
The German trade surplus narrowed unexpectedly to €14.4 billion. This was against a forecast of €18 billion. The French trade balance fell to -€4.5 billion vs an expected €4 billion expected.
Meanwhile, in a bit of unexpected news, ex Fed Laurence Meyer has spoken about the emergency lending facility to investment banks. Mr Meyer, who achieved a PHD in economics at MIT as did the Fed's Bernanake and ECB's vice president Papademos, suggested the emergency lending facility will be extended into 2009. This suggests housing foreclosures, and thus the credit crunch, will extend into 2009.
trade balance, Fed
Forex Outlook July 6 - July 11
Jul 6, 2008
Welcome to another fun filled week of forex trading.
This is the week of trade reports! Germany, France, UK, and Japan report Wednesday. Canada and the US report on Friday.
Beyond those reports, the week is largely dominated by speaking opportunities. Fed officials have 3 major speaking engagements, and the Bank of England Rate decision comes on Thursday.
G8 Summit July 7 - 9
Sun July 6
9:30pm German Wholesale Price Index (expect 1.0% MoM, 9.0% YoY)
Mon July 7
4:30am UK Industrial Production (expect -0.1% MoM, -0.7% YoY)
11am US SF Fed President Janet Yellen Speaks on Economic Outlook. She is considered an inflation dove.
Tue July 8
8:30am US Fed Chairman Ben Bernanke Speaks on Mortgage Lending
10am US Pending Home Sales for May (expect -2.5% MoM)
2:30 pm US Richmond Fed President Jeffrey Lacker speaks on Economic Outlook. He is considered an inflation hawk. This was demonstrated when he dissented with the FOMC in 4 straight meetings in 2006 by voting for rate increases.
7pm UK Consumer Confidence
Wed July 9
2am German Trade Balance for May (expect €18 billion, -€0.7 billion from previous)
2:45am French Trade Balance for May (expect -€4 billion, -€0.3 billion from previous)
4:30am UK Trade Balance (expect -£4 billion)
5am Eurozone Q1 GDP Finalized (expect 0.8%, same as preliminary)
10:30am US Crude Inventories
7:50pm Japan Trade Balance for May (expect ¥487 billion )
10:30pm Australian Unemployment
Thu Jul 10
7am UK Bank of England Rate Decision (expect hold at 5%)
10am US Fed Chief Bernanke and Treasurer Henry Paulson testify before Congress
Fri July 11
7am Canada Employment (expect +10k)
8:30am Canada International Trade (excludes services) (expect 5 billion)
8:30am US Trade Balance (expect -$61 billion)
Bank of England, trade balance, Hank Paulson, upcoming reports, Fed
The Calm Before the USD Storm?
Jun 24, 2008
Bring back Fed Speak.
The Fed will have to craft tomorrow's statement very carefully. Perhaps some good ole' Greenspan ambiguity would be best.
A spat of negative news today confirmed the US economy is facing difficult times. The Case-Shiller index showed a whopping 15.3% annual decline in home prices. The OFHEO report, which tracks mortgages backed by Freddie Mac and Fannie Mae, showed an annual drop of 4.6%. The Richmond Fed Survey dropped to a low of 4.5 And consumer confidence fell far more than expected, to a reading of 50.4 (vs expected 56.5).
Yet the dollar didn't fall of the face of the earth.
Instead, it remained within a fairly narrow range against the Euro, Pound, and Yen. Evidently, traders feel the Fed is turning hawkish.
Aside from a month of hawkish commentary, what fundamentals can rationalize a strong statement out of the Fed?
1. Uptick in Q1 GDP
I can't stress this one enough. Q1 GDP is expected to be revised up to 1.2% later this week. From an initial reading of 0.6% (later revised 0.9%), that is fantastic.
2. The ARM Conversion Wave
Years ago, the Economist put out a great article discussing the housing bubble pre-burst. In it, they included a graph detailing the ARM conversion wave. The wave had a considerable upswing in Spring 2007 (start of credit crisis), another bump Spring 2008, and a final massive bump in 2010. That suggests that housing will see at least a temporary reprieve for the next 18 months.
3. FDI Outflows are Dropping, Inflows are Picking Up
The OECD today reported that foreign outflows have dropped sharply among member nations. Outflows are now expected to come in at $1.14 trillion, down 37% from the $1.82 trillion in 2007. Indeed, lower than the $1.21 trillion in 2006.
And last week, the TIC showed a sharp increase of inflows of $115 billion vs expected $63.3 billion.
4. Durable Goods Orders
The last 2 reports have beat expectations. The latest report will come out almost 2 hours before the Fed statement. Another surprise (especially excluding autos) is a sure sign of US resiliency.
5. Politicians are Dragging Us Down
It is not a great stretch to suggest political speeches are helping to drag down consumer sentiment.
The Fed is charged with remaining out of politics. As such, they should be expected to ignore the constant down talking of the US economy that is coming out of the politicos.
6. The Greenspan Tarnishment
Former Fed Chairman has taken a lot of heat for leaving rates too low for too long. Bernanke must be conscious of this perception. He must show this Fed will not repeat the mistakes of the past.
Expect the Fed to leave rates unchanged with commentary highly suggestive of rate hikes in the near future.
GDP, housing, Bernanke, durable goods, Fed, FOMC, USD
Forex Events June 22 - June 25
Jun 22, 2008
This week will be dominated by US data. The key mover may be comments from the Fed rate decision at 2:15pm est Wednesday.
Events Monday and Friday are clearly Euro positive, Greenback negative. Watch for the Euro to test the 1.5800 resistance on Monday. If it finally breaks the range, we could see an end to the sideways trading of the last few months as the ECB is definitely going to hike rates July 3rd.
New Zealand and Japan, 2 key parts of the carry trade, report significant data late Wednesday evening. Surprises on either side could be an omen for future carry trade volatility.
All times eastern standard time
Monday June 23
4am German IFO - Current and Expectations
4am Euro-zone PMI Services (expect 50.4)
4am Euro-zone PMI Manufacturing (expect 50.2)
Tuesday June 24
4am Swiss UBS Consumption Indicator
9am Case Shiller Home Price Index (expect 168.8)
10am US Consumer Confidence (expect 56.7, a 16 year low)
7:50pm Japan Trade balance (exclude services)
Wednesday June 25
8:30am US Durable Good Orders (expect -0.9% excluding transport)
10am US New Home sales (expect 530k, a flat reading)
2:15pm Fed Rate Decision (expect hold at 2%)
6:45pm New Zealand Current Account (expect -7.5%)
Thursday June 26
7:30am US fed Vice Chairman Speaks at ECB
8:30am US Q1 GDP finalized (expect 1.2% from initial 0.6%, thats big folks. Note, upgraded from 0.6% to 0.9% previously)
10am US Existing Home Sales
6:45pm New Zealand Q1 GDP (expect 2.1%)
6:45pm New Zealand May Trade Balance (expect +150million)
7:30pm Japan CPI
7:50pm Japan Retail Trade (Domestic)
Friday June 27
2:50am France GDP (expect 2.2%)
4am Euro-zone Current Account
4:30am Great Britain Q1 GDP (expect 2.5%)
10:00am US university of Michigan Consumer Confidence (expect 56.8)
European Central Bank, CPI, Carry Trade, trade balance, housing, upcoming reports, consumer confidence, durable goods, Fed, IFO
Forex Events June 15 - June 20
Jun 15, 2008
Below is a summary of the major forex news of the week.
Cash believes the biggest events may have already occurred - a) the G8 did not intervene in the forex marketplace as some had speculated and b) flooding in the US Midwest has reduced corn and soybean crops significantly (see Bloomberg).
All times listed in eastern standard time
Monday June 16
5am
Eurozone CPI MoM (expect +0.6%)
Eurozone CPI YoY (expect +3.6%)
Eurozone Core CPI YoY (expect +1.8%)
8:30am
US Empire(NY) Manufacturing (expect -1.50
10am
Fed Chairman Bernanke Speaks before Senate
Lehman Brothers Reports Q2 Earnings (Cash expects negative news reminding everyone of last years credit crunch)
1pm
US Fed Lacker Speaks
9:30pm
Bank of Australia Minutes for June
Tuesday June 17
4:30am
UK CPI MoM (expect +0.4%)
UK CPI YoY (expect +3.2%)
UK Core CPI YoY (expect +1.5%)
5:00am
German ZEW Survey
Eurozone Trade Balance for April (expect -1.5 billion)
8:30am
US Housing Starts (expect 980k)
US Building Permits (expect 960k)
Wednesday June 18
4:30am
Bank of England Minutes for June
11am
Morgan Stanley Q2 Earnings
Thursday June 19
4:30am
UK Retail sales YoY (expect 4.1%)
UK Retail Sales MoM (expect -0.1%)
7am
Canadian CPI YoY (expect 1.9%)
Canadian CPI MoM (expect a sizzling 0.6%)
Canadian Core CPI YoY (expect 1.4%)
Canadian Core CPI MoM (expect 0.3%)
10am
US Philly Fed (expect a rise to -11.4)
Bank of England, BOE, CPI, RBA, Reserve Bank of Australia, minutes, upcoming reports, Fed
US Economic Calendar June 9 - June 13
Jun 8, 2008
Monday June 9
Pending Home Sales (expect 82.6, down 0.4)
NY Fed Governor Timothy Geithner Speaks About Economy (8:15am est)
Fed Chairman Ben Bernanke and Vice Chairman Donald Kohn Speak About Inflation (3:15pm)
Tuesday June 10
Manpower Employment Outlook for Q3
Imports (expect $209.1 billion, +$2.4 billion)
Exports (expect $149.7 billion, +$1.2 billion)
Trade Balance (expect -$59.4 billion, +1.2 billion)
Dallas Fed President Richard Fisher Speaks
Wednesday June 11
Quarterly Services for Q1
Beige Book for June 24-25 FOMC meeting
Fed Vice Chairman Donald Kohn speaks
Fed Governor Randolph Kroszner speaks
Thursday June 12
Retails Sales (expect -0.3%)
Retail Sales excluding Auto (expect +0.2%)
Friday June 13
CPI (expect +0.2%)
Core Index (expect +0.1% to 2.2%)
University of Michigan Preliminary Consumer Sentiment (expect 55)
CPI, trade balance, housing, upcoming reports, consumer confidence, Fed
US Non Farm Payroll Preview
Jun 5, 2008
Markets are expecting a loss of 60k jobs in tomorrow's Non Farm Payroll (NFP) report.
The DailyFX has a nice preview of the report. In general, they take a fairly negative view and hint that a 100k drop is not out of the question. Specifically, they highlight that each of the previous 3 recessions has seen jobs drop for 10 months or more. Further, previous recessions have seen monthly job losses spike above 300k. They reveal 10 indicators they are using to predict a number above expectations.
While I agree with their overall thesis, I do think they are jumping the gun.
1. Fed Comments - The Fed has made a number of comments indicating the economy may avoid a severe slowdown. It started last week with comments from Dallas Fed President Fisher and Fed Governor Mishkin's resignation. It continued this week with back-to-back days of comments from Chairman Ben Bernanke.
And today, in comments that may have flown a little under the radar with the RNBZ and ECB statements over the last 24 hours, Richmond Fed President Lacker reiterated that the US may avoid a severe slowdown and that inflation is becoming the main concern.
2. Macro reports this week - The ISM Non manufacturing, ADP, and Initial Jobless Claims all improved. Individually, each of those measures may be unreliable, but taken as a trio they can not be easily dismissed.
I believe economists may be missing a crucial factor in this slowdown - illegal immigration. Job losses are highest in construction and manufacturing. Those are 2 industries that have extensively tapped into the illegal immigrant labor pool. As jobs dry up, they will likely return to their native countries and never show up on job loss reports.
3. Foreclosures are becoming confined to 6 states. The six can broken into 2 groups - those with over development and risky loans (California, Florida, Arizona, and Nevada) and those suffering from job losses (Michigan and Ohio). Beyond those states, housing markets have begun to stabilize. While those states are big enough to remain a concern for the overall health of the US economy, it is important to realize that 44 other states are getting better.
I recommend you read the DailyFX NFP preview
This has been an eventful week in the forex markets - comments from central banks and jobs reports have seen sharp moves in the GBPUSD (200 point swing Monday), the EURUSD (2 big point swings this week - one uip, one down), and the Kiwi (down big against many currencies yesterday).
If you've ever felt you could be better at trading forex around economic news releases, this Elliot Wave Report is a must-read.
jobs report, housing, Fed, USD
Signs of USD Rebound Over the Next Few Months Continue to Mount
Jun 5, 2008
Fed comments, improvements in services, ADP Jobs, and more Asian Oil subsidies may signal a fundamental rally in the greenback.
For the second day in a row, Fed head Ben Bernake took a hawkish stance on inflation. He indicated that long term indicators of inflation were of "significant concern" This is the 3rd time in a week (President Fisher last week) that a Fed member has made comments focusing on inflation. With Mishkin on the outs in August, the chance of a US rate hike this fall looks positive.
In addition, the US economy continues to skirt inflation. The service sector accounts for around 80% of American jobs. Well, today the ISM non-manufacturing reported a reading of 51.7, 0.7 higher than forecast. It represented a minor dip from the April reading of 52. A number above 50 represents growth.
Also, ADP numbers for private employment showed 40k new jobs, 70k over expectations. However, that ADP number needs to be taken with a grain of salt. The number has been wrong by an average of 104k since November. Q1 productivity also beat expectations slightly, with a 2.6% reading vs a forecast 2.5%. By comparison, 2007 Q1 productivity was up 1.8%.
Meanwhile, numbers in the UK and Europe continue to sour. Eurozone retail sales fell -0.6 vs an expected gain of 0.2%. And services seemed to contract for both the UK and the Europeans. The UK slipped into contraction with a PMI service reading of 49.8 vs a forecast of 50.5. The Eurozone PMI service number came in at 50.6 vs an expected flat reading of 51.1.
As expected by many traders, Asian countries have begun cutting subsidies. Indeed, Malaysia announced a whopping 40% raise in gas prices, and 67% rise in diesel prices! Malaysian consumers of gas will now pay $3.30 a gallon of gas (vs $2.32) and $3.04 for a gallon of diesel (vs $1.22). Malaysia - a net exporter of oil - becomes the 5th major Asian country to cut subsidies. Indonesia (raised prices 28.7% in late May), Taiwan (ended all price controls effective June 1), India (raised prices 11% this week), and Sri Lanka (raised prices 25%) have already acted on the skyrocketing cost of oil. It should also be noted that Egypt, the most populous Arab country, raised prices 40%.
As an aside, Chuck thinks many governments and traders underestimated the impact of Cyclone Nargis and the China earthquake. The two mega-disasters created a sudden need for diesel fuel to power generators. Economic historians will eventually recognize that disasters and ambitious speculation was the reason oil reached $135. July futures fell to $122.30 today.
The EURUSD traded in a 50 point range over 1.5425. The greenback is up 4% vs the Euro since the all time high of $1.6019 in late April.
Greenback, jobs report, Bernanke, oil, Fed
Fed Dove Mishkin Leaving in August
May 28, 2008
In a surprising move, Frederic "Ric" Mishkin turned in his resignation letter today. His last meeting will be August 5th, and he will formally finish service on August 31.
The resignation may be an important cue of future FOMC decisions. Mr. Mishkin was seen by many as a key ally to Chairman Bernanke, and a proponent of formal inflation targets. Mr. Mishkin took office Sept 2006, with his term set to expire in January 2014. That he leaves after serving only 2 years may be highly indicative of a change to the Fed's stance on inflation targets.
Mr. Mishkin's departure leaves the Fed with 3 empty slots on the 7 member board. President Bush has nominated 2 candidates to fill the open slots, but the Senate banking Committee, led by Chris Dodd (D - Conn) has not taken any action. The 4 remaining members will be:
Ben Bernanke (Chairman)
Donald Kohn (Vice Chairman)
Kevin Warsh
Randall Kroszner
Mr. Kroszner's term has expired, but he is allowed to remain until a new governor is sworn in.
All members of the Fed have been appointed by President Bush, so the Dems may be trying to hold out until next year with the hope of getting some of their "own" appointed. This can be evidenced by the Senate's reluctance to move on Larry Klane's nomination. He was nominated Nov 27, 2007 with little progress since. His experience as president of Capital One's financial services division likely would have been invaluable when markets got rocked from Decemeber - March. Incidentally, it was Chris Dodd who held up the late fix for the AMT, which slowed IRS refund checks for some 13 million Americans this spring. Chuck is not a big fan of Sen Chris Dodd.
Futures markets are now pricing in a 30% chance of a rate hike in September, vs 21% last week.
dove, Fed
A Bundle of US Data This Week May Move Dollar Trades
May 27, 2008
The US will see a number of potentially trade driving reports in this holiday shortened week.
On Tuesday May 27
The S&P Case-Shiller Index at 9am est.
At 10am, New Home Sales and consumer confidence will be reported.
Wednesday May 28
Durable goods will be reported at 8:30am est, before equity markets open.
Thursday May 29
Revised Q1 GDP and weekly jobless claims are reported at 8:30am est.
Also, Fed Chief Ben Bernanke speaks at 2:30pm in Basel Switzerland. And Fed Vice Chairman Kohn talks at 7pm.
On Friday May 30
Consumer sentiment will be reported at 10am est
Other notable forex movers will be the German Unemployment numbers May 29 and Canada's Q1 GDP.
In light volume May 26, the EURUSD held above the $1.5750 support. Given the upbeat comments from the Germans last week, and the negative mood from the US Fed, this week's data has the potential for sending the EURUSD above the $1.58 resistance - we shall see.
GDP, jobs report, housing, Bernanke, upcoming reports, consumer confidence, Fed
Fed Glum, But Hey, No More Rate Cuts
May 21, 2008
In a mixed bout of pessimism with silver linings, the Fed indicated that growth will be worse than originally forecast, but rates are unlikely to be cut again.
The Fed now believes unemployment will be worse than expected, and that housing is unlikely to recover anytime soon. Overall, the Fed cut annual growth to 0.3% - 1.2% (from 1.3% - 2%).
At the same time, the Fed also joined team Trichet in warning of inflation. They indicated the April 25 bp cut was a "close call". Since September, the Fed has cut rates 325 bp to reach the current 2% level. Futures markets are pricing in a 90% chance the Fed keeps rates at 2% in June.
Tomorrow, will have 3 key US government reports by 10:30am est. Weekly jobless claims will be first at 8:30am, OFHEO home price data at 10am, and finally natural gas at 10:30am.
Read more at CNBC
rate cut, Trichet, rate hike, Fed
Forex News to Watch for May 21
May 20, 2008
Forex traders will have their eyes firmly glued to their screens for 3 key pieces of news tomorrow.
First up, the bank of England will release the minutes from their May 8th meeting. As with the Fed, the BOE will have a mighty balancing act - as they try to fight 3% inflation rates AND a slowdown. The minutes will almost certainly contain 1 vote for a 25 basis point cut. Any more vote than that will likely lead to a sell off of the Sterling.
Next will be the Canadian CPI numbers. Canada has seen a severe deterioration in their markets, and CPI is only barely expected to inch up to 1.4%. They cut rates by 50 points in April. A low CPI will all but guarantee another cut in June.
Finally, the US Fed will release minutes from their April 30th meeting at 2pm est. Futures markets indicate the Fed is likely to hold firm in June, and possibly raise rates to 2.5% by early next year. Any change on inflation sentiment - up or down - may have a dramatic effect. Given CPI numbers, the 3% annual inflation, and the hawkish comments out of Europe, I would not be surprised if we see some commentary indicating inflation is becoming a greater concern than a slow down.
Bank of England, BOE, CPI, minutes, Fed
Bernake: Foreclosure Issue Requires More Action
May 5, 2008
In a speech at the Columbia School of Business, the US Fed Chief urged more movement to combat the nation's foreclosure problem.
According to Mr. Bernanke, unemployment alone does not account for foreclosure rates in Florida, California, and Colorado. Instead,piggy back loans plus declining home values are working in conjunction to stop people from refinancing out of the problem.
Mr. Bernanke was heard to say "Doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest."
Read more at CNN
Bernanke, Fed
US Fed Cuts Rates 0.25%, Dollar Gains
Apr 29, 2008
On Wednesday, the US Fed cut the target rate 0.25%, bringing it to 2%. This is the 7th cut since August 2007, when the rate stood at 5.25%. In additon, the Fed signaled they are likely done cutting rates.
The Dollar gained overnight against the Yen and Euro. Many investors now believe the worse of the 'credit crunch' is over, a view supported by the 0.6% GDP growth for Q1 2008
Read more at CNN
interest rates, Fed
PIMCO Chief: End of FED Rate Cutting Near
Apr 10, 2008
PIMCO CEO Mohamed El-Erian suggested the Fed may stop cutting rates at around 2%. Appearing on CNBC's Squawk Box, El-Erian said "If the Fed can do what it wants to do it will stop at around 2 (percent) and the (yield) curve will stabilize and two-year (bond) rates will reflect it...But the big question is, can the Fed get what it wants? And what it wants is the financial contraction to stay in the financial sector."
El-Arian also indicated that he believes the dollar will continue to weaken against Asian currencies.
Read more at CNBC
Fed
Bernanke Warns of Contraction
Apr 2, 2008
US Fed Chief Ben Bernanke warned the economy 'could even contract slightly' on Wed April 2. During congressional testimony, the Chairman also stated that recent moves - interest rate cuts and liquidity measures such as opening the discount window to investment banks - appear to have 'helped stablize the situation'.
Bernanke's comments did not offer much clarity on the chances for further rate cuts.
Read more at the Financial Times
Bernanke, Fed
