Some interesting currency moves today

[Wd40]

You are right. All markets have surged, including crude oil

Apparently, even though she dropped the "patient" word, she said something else which enthused the markets.

http://www.bloomberg.com/news/articles/ ... t-to-surge

[Wd40]

Meanwhile look at the dollar, it has fallen against all currencies.Look at the Euro. A sharp short covering rally and its at 1.09, what a move!

[JR8]

The Dow/S+P closed +1.2>1.3% so I take it they're 'comfortable' with the Fed statement. That's what Yellen would have wanted, no surprises. It's like turning a '180' in a super-tanker - 'M/V Global Economy'? - through a bay of rocky atolls... sloooowly An unenviable job, not least the er.... indirect responsibility to much of the developed world to keep the ship safely on it's intended course.
http://www.digitallook.com/news/market- ... 63117.html

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'The FOMC added that median forecast for the level of the central bank's main policy rate at year-end is now 0.625%, in comparison to the 1.125% projected in December.
"The Fed offset the potentially hawkish signal this new guidance might send with much more dovish expectations about the future path of interest rates," said Berenberg' s senior economist Christian Schulz.
"The change suggests that the Fed will step on the monetary brake early, but initially more gently than it previously expected."
Following the FOMC's decision, the dollar plunged 2.85% against the euro, shedding 1.9% and 1.2% against the pound and the yen respectively, while gold futures rose 1.83% to $1,169.20.'

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So the EU get some respite from the threat of Euro-parity vs US$ for a while. Though I expect this pause will end with the next instalment of the Grecian drama


@WD40. Ouch re: short-covering on the Euro, bet some ar$es got singed last night!

[Wd40]

So the EU get some respite from the threat of Euro-parity vs US$ for a while. Though I expect this pause will end with the next instalment of the Grecian drama

Yes, I agree, its a good time to make use of this short bounce and pare exposure to risky currencies. The dollar rally will come back eventually, now the expectation is September rate hike.

[JR8]

Yes, I agree, its a good time to make use of this short bounce and pare exposure to risky currencies. The dollar rally will come back eventually, now the expectation is September rate hike.

My gut-feel is that both the STI and S$ will be rallying on the news.

[But haven't time to look right now, time for me to focus on and digest events in my own markets! ]

[Barnsley]

Meanwhile look at the dollar, it has fallen against all currencies.Look at the Euro. A sharp short covering rally and its at 1.09, what a move!

You need to start getting some rest fella!!

Or do you have an alert set on your phone to wake you whenever there is a currency move of over a certain amount!!!

Up at 4am and posting about Euro rallys .......... Not good for ones health!

[Wd40]

No, I have this habit of checking my phone, to see what's up with the markets sometimes when I wake up in the night. Coincidentally, yesterday I woke up at 3am and the sharp rally in Dow got me interested and I stayed awake until 4:30 just reading/watching Bloomberg:)



Doesn't happen always, though. Yesterday was a key event, equivalent to a world cup match for a football fan

[Primrose Hill]

Yellen pushed back the rate rise possibility to Sept. If inflation stays low the way it is now and crude staying within the $50-$60 range I really can't see how, the Fed will raise rates. The huge budget deficit is still to be reckon with. With crude being low and its inability to export crude other than as refined products, is shale gas that profitable?
And what about the world's economy? EU is going to pots with Greece being a big factor. All the interest payments will be due soon for Italy, Portugal etc. The ECB is already printing money, EURO is low. UK is deflationing. Despite Osborne's speech yesterday about UK being the comeback country, we are still drowning in debt. Lower unemployment? Yes but look at the types of jobs that are created. Look at RBS retreating etc. No good news.

[Barnsley]

Yellen pushed back the rate rise possibility to Sept. If inflation stays low the way it is now and crude staying within the $50-$60 range I really can't see how, the Fed will raise rates. The huge budget deficit is still to be reckon with. With crude being low and its inability to export crude other than as refined products, is shale gas that profitable?
And what about the world's economy? EU is going to pots with Greece being a big factor. All the interest payments will be due soon for Italy, Portugal etc. The ECB is already printing money, EURO is low. UK is deflationing. Despite Osborne's speech yesterday about UK being the comeback country, we are still drowning in debt. Lower unemployment? Yes but look at the types of jobs that are created. Look at RBS retreating etc. No good news.

Until debts start getting written off , nothing will change.

Everyone is stuck in the low interest rate , borrow borrow borrow ..... I think everyone knows that nobody is going to pay anything like the debt back they owe , just that nobody wants to admit it.

[Primrose Hill]

I read somewhere today that consumer debt in UK are at a far worse position compared to pre-crisis.
Moneyweek yesterday asked its readers to dump 3 toxic investments - US stocks, bonds/gilts and London properties.
Too much doom and gloom? or are theres some truths to it?

[Wd40]

Nice interview by JPM analyst with an Indian news channel:

http://www.moneycontrol.com/news/fii-vi ... 33607.html

Latha: You were telling us that Fed doesn’t like to talk directly about the dollars’ problems but that’s what they are intending and so how does that colour your views towards other asset classes?

A: I think what is going to happen is that over the next few months, hopefully the dollar stops rising and infact it begins to fall and if it does that then that’s good for global commodities and I also think that if the dollar falls – that will improve the US economic conditions and make it more likely that Federal Reserve will raise rates in June. It used to be that all you needed to watch was wages and it was picked up in United States then you knew the Fed is going to tighten but now if the dollar falls then that’s when the Federal Reserve will begin to tighten. So we will watch that and as the Federal Reserve tightens – that will be somewhat challenging for emerging markets although I do not think it will be a problem for commodities.

Latha: How are your choices of assets changing at this point in time after the Fed statement?

A: As a long-term investor I still think that interest rates will go up that still makes me short fixed income, it makes me long equities both in the United States and around the world. However, emerging market equities and particularly European equities look like somewhat better valued than US equities right now. Therefore, I will be focused on Europe and emerging markets.

[Strong Eagle]

Looks like the EU and Germany are bound and determined to push Greece out of the Euro... it's really in Greece's best interests to return to the Drachma, make debts payable via the Drachma, then devalue it.

Really, the only option the EU has is to negotiate how much of a haircut they are going to take. If Greece leaves the Euro, then only Greece will decide the new exchange rate and the haircut lenders are going to take.

I predict that the EU will ultimately crumble and write off Greek debt in an amount equal to what they estimate that Greece would devalue the Drachma in order to cut debt.

Ultimately, though, a reduction in debt still doesn't solve Greece's other competitive problems... a devalued Drachma makes Greece cheap and labor more competitive. The EU is going to have to sweeten the pot.

So, although the EU will crumble and write off debt, the handwriting is still on the wall... Greece will leave unless there is a way (so far undiscovered) to make Greek labor, tourist destinations, more competitive without leaving the Euro.

[Barnsley]

Looks like the EU and Germany are bound and determined to push Greece out of the Euro... it's really in Greece's best interests to return to the Drachma, make debts payable via the Drachma, then devalue it.

Really, the only option the EU has is to negotiate how much of a haircut they are going to take. If Greece leaves the Euro, then only Greece will decide the new exchange rate and the haircut lenders are going to take.

I predict that the EU will ultimately crumble and write off Greek debt in an amount equal to what they estimate that Greece would devalue the Drachma in order to cut debt.

Ultimately, though, a reduction in debt still doesn't solve Greece's other competitive problems... a devalued Drachma makes Greece cheap and labor more competitive. The EU is going to have to sweeten the pot.

So, although the EU will crumble and write off debt, the handwriting is still on the wall... Greece will leave unless there is a way (so far undiscovered) to make Greek labor, tourist destinations, more competitive without leaving the Euro.

Step right up all the other countries forced to pay back a la Spain/Portugal/Ireland if there is any form out reduction in the amount Greece has to pay.

Maybe the lenders will be more responsible , they are gonna get an almighty haircut.

I don't see anything other than a lose-lose for the EU no matter which road they go down.

[JR8]

@Eagle.
I don't see it myself. The EU is an expansionist ideology. Letting Greece leave would require them to accept that expansion has already gone beyond it's potential limits. That would make the hopes and preparations of many of the candidate new-entrants waiting in the wings all for nought. The project would be over.

So the EU has a dilemma. They won't let leave Greece leave, as they have demonstrated, and instead are trying to turn Athenians into Berliners, which of course can never happen. Ideology vs pragmatism; oh what a sorry mess. Can you imagine the USA ejecting a state, or allowing one to cede?

If Greece force an exit the EU will crush them, despite which a queue will rapidly form at the exit door. Spain, Portugal, Italy. Who next? Greece was welcomed into the Euro, with a half-way decent looking public face, but a socking great festering boil on the backside.

p.s. I wish there were a straight forward solution, because as it is the EU is arguably structurally-f*****.

[Barnsley]

@Eagle.
I don't see it myself. The EU is an expansionist ideology. Letting Greece leave would require them to accept that expansion has already gone beyond it's potential limits. That would make the hopes and preparations of many of the candidate new-entrants waiting in the wings all for nought. The project would be over.

So the EU has a dilemma. They won't let leave Greece leave, as they have demonstrated, and instead are trying to turn Athenians into Berliners, which of course can never happen. Ideology vs pragmatism; oh what a sorry mess. Can you imagine the USA ejecting a state, or allowing one to cede?

If Greece force an exit the EU will crush them, despite which a queue will rapidly form at the exit door. Spain, Portugal, Italy. Who next? Greece was welcomed into the Euro, with a half-way decent looking public face, but a socking great festering boil on the backside.

p.s. I wish there were a straight forward solution, because as it is the EU is arguably structurally-f*****.

Agreed on there really not being a happy ending to this story....