Posts tagged 'Euro'

The face behind the euro

We know who he is, we just don’t get what he’s doing. He does so like confounding expectations on his island of stability.

This time with inflation at 1 per cent there was a belief that Draghi would make some sort of compromise gesture while keeping rates on hold, even if it amounted to SMP tokenism. But, nope, he disappointed… despite the ECB’s own 2016 inflation forecast coming in well below 2 per cent. Doing nothing in the face of that isn’t exactly reassuring — it’s a lot easier to fight deflation risks than the real thing. Read more

The ECB cuts…

Update – It’s not just the rate cut, as Mario Draghi opens the presser at pixel time:

Earlier – Bold move or way too late? You decide: Read more

This is your euro on AQR

Consider this from Morgan Stanley’s FX team:

 Read more

Hold on, the periphery looks relatively calm?

A telling chart from Citi’s Steven Englander:

 Read more

One very large divergence please (with a dollar chaser)

According to Nomura, since 1980, there are only two periods of economic divergence — between the US and Europe and the UK — comparable to what we are observing currently.

 Read more

Caption this — lat there be euros edition

Olli Rehn (left) and Valdis Dombrovskis, the Latvian prime minster, (right) regrettably seem to have got lost in a Powerpoint presentation. Read more

Nowotny on Draghi and negative rates: “purple monkey dishwasher”

From Reuters:

LONDON, May 3 (Reuters) 13.04 – The euro pared gains while German Bund futures edged up on Friday after European Central Bank policymaker Ewald Nowotny said the central bank was open-minded about taking deposit rates into negative territory.

Nowotny said he was “astonished” by the market’s reaction to his comments earlier in the day, when he said negative deposit rates were not relevant in the near term.

 Read more

Intransigence in the face of Cyprus

The single currency, and financial markets generally, have been stubbornly stable in the face of the Cypriot mess (ongoing, obvs) and it’s not really clear why.

 Read more

Japanese investors, the AUD and everyone else

Japanese investors are a powerful bunch in world markets. For a microcosm of this, just look at Australia; Japan plays a big role here in debt and in turn, in currency; and it’s a market that has been very attractive to foreigners of late, keeping the currency stubbornly high regardless of price changes in the country’s key exported commodities. BUT, as with everything yen at the moment, there is a serious shift going on. Read more

Currency handbags at dawn [updated]

The currency war meme rumbles on as the G7 does its very best to avoid a coherent message amid arguments about whether drawing a distinction between “domestic objectives” that weaken a currency and just plain weakening it actually matters. Ho hum. Read more

What chance a direct shot from the ECB?

Little or none seems to be the answer…

I wrote on Monday about the ECB’s options for expanding its balance sheet but skimmed over the idea of direct FX intervention on the presumption it just wasn’t going to happen and the ECB would push via less obvious channels. As I was (justifiably) rebuked, the aim here is to make quick amends. Read more

Draghi’s pro-LSAPs?

Mario Draghi talked, everyone was a little confused, a little wary… so the euro fell. He OMT’ed the FX market. Clever.

But what if talking isn’t enough? As Capital Economics argue, the power of talk is diminished when others are taking action: Read more

The Draghi Rorschach test

“Oh, Hollande…” said Mario Draghi as the rest of us wondered if he had or hadn’t entered the supposed currency wars. Or if, in fact, the question was redundant.

The euro’s dive on Thursday was impressive and clearly the result of ECB president Draghi’s comments after the ECB’s rate setting meeting. But whether it was justified or not is very much contested. Read more

Ware the currency wars

You gotta roll with fashion:

 Read more

An actual consequence of France’s downgrade?

Not many people seem bothered by France’s overnight downgrade by Moody’s. The euro shrugged and French bond yields crept upwards at a snail’s pace.

But one place the downgrade might have a real and lasting impact is within the Swiss National Bank. They have a predilection for core eurozone bonds and the downgrade might just prompt them to ditch what holdings they have and/or stop loading up on French debt.
 Read more

A year in a life…

Dear euro, this has been your 2012 so far. Do try and get through the rest safely:

 Read more

About those new ‘Europa’ euro notes…

At Thursday’s ECB press conference, Mario Draghi unveiled plans to introduce a new series of euro bank notes. And there was a little video to accompany the news… Read more

In Greece, Antonis Sisyphus took another painful step forward

Pushing a fresh austerity package (the price of financing the next stage of the country’s bailout) through parliament on Wednesday night cost the Greek government and Antonis Samaras, the centre-right prime minister, dearly. And while there is no guarantee a repeat performance can be staged, there is every probability the boulder will slip and one will be demanded. Read more

Euro area bank lending: Halloween edition

Click through the pic for the full document (it’s not the most fun read):

Now, we don’t want to get carried away here. The report – covering lending in the third quarter and expectations for the fourth – wasn’t pretty, but it’s worth pointing out that there are glints of cautious funding optimism to be found, both within the report and without, particularly where corporates are concerned. Read more

What inflation?

From the ECB’s September update on monetary developments in the euro-area released on Thursday:

That’s euroland M3 – the broad money supply measure — coming in below expectations and dropping again to 2.7. Really brings to mind Draghi’s warning to the Bundestag that “In our assessment, the greater risk to price stability is currently falling prices in some euro area countries”, doesn’t it? Read more

A brief respite for the euro?

Commerzbank is arguing that we should all forget about the eurozone crisis for a bit where euro-dollar is concerned (with our emphasis):

At the same time a further improvement of the Spanish and Italian yield premiums no longer supports EUR-USD (see chart 1). Why? From the market’s point of view the crisis has eased sufficiently for German CDS to ease below 30bp for the first time since April 2010. That means the crisis is no longer sufficiently virulent to affect EUR-USD to the same extent as it did over the past 12 months.

 Read more

Half time at the summit

And we have some very small bits of progress. And, naturally, plenty of kinks. Here’s a handy run down from JP Morgan’s Alex White: Read more

Of China, the yuan, inequality and the euro

There may be a new China to consider but its signs are not very easy to discern. The yuan is on a roll against the dollar, hitting multiple new highs since July but somewhat confusingly, estimates suggest that in the 12 months through September, some $225bn flowed out of China — that kind of outflow doesn’t square with the yuan’s recent strength. Read more

Panama hat time

You know what they say. When one door closes, another one opens.

And for the euro, that door seems to be opening in err… Panama. Read more

A tinhat-full of dollars

This is just a lovely chart from the FX team at HSBC (click in to see — tis just too big for an excerpt to handle):

What it, and its fellow soon to be introduced below, do is call further into question the US dollar’s status as a haven currency; one which will benefit in periods of risk aversion. They do so by looking at the performance of G10 currencies against the S&P500. It’s a timely query considering the approaching fiscal cliff… and, well, lots of other stuff. Read more

OMT is so 2013

That call might not come this side of New Year.

The market has been waiting for Spain to request its very own Enhanced Conditions Credit Line for quite a while now. It’s the road to OMT. And for a (very) little while just last week while it appeared we were only a weekend away.

But it’s now looking increasingly like we are not gonna get to see any OMT buying at all in 2012. Sad. Read more

A new era for FX

Today carry’s hold on FX has waned as global rates gravitate towards zero, forcing the FX market to react instead to the far more ambiguous implication of QE. By contrast, other asset classes, notably equity markets, provide a cleaner mechanistic link between a given view and a price.

The conclusion is that even if we knew the outcome of future events with certainty, the FX market is not the best place to reflect those views. We have fallen to the bottom of the food chain. Read more

Cofer catch-up time

The glacial pace of FX reserve change continues, as documented by the IMF ’s “Composition of Official Foreign Exchange Reserves” data which was released on Friday.

Summary: the dollar is still reluctantly loved, the euro is ‘confused’ by the Swiss and everyone is as deep into the ‘others’ as they can be… which isn’t far. Read more

Coy Chinese elephant reveals ever slimming ankle

We’ve written about the idea that global FX reserve growth might be creeping back up very recently. However, the evidence remains circumstantial; we saw the reserve manager enter the house after fighting with his neighbour but we didn’t actually see the killing blow.

Citi’s Steven Englander, for example, argues that the same uptick in risk that has brought the dollar index down 5 per cent since July will have been accompanied by an increase in reserve accumulation. Risk-on with a weakening dollar equals reserve growth. Read more

The SNB’s increasingly tangled web [updated with rebuttals aplenty]

Update2.1:

Ok, in combination with Alice Ross and James Mackintosh we did a very back of the envelope calculation comparing the S&P’s figure with that suggested by the SNB’s methodology (they did not give a figure). Read more