Category: Markets
Currencies Look Past Moody’s Downgrade
The US dollar is broadly mixed against the majors and EMs after the market appears to have shrugged off Moody’s downgrades of European sovereigns. Central banks ability to surprise the market remains intact, even in these trying times. It was the Bank of Japan’s turn today. On the data front, the main focus today is twofold: euro zone industrial production and US retail sales. US retail sales should be supportive of risk appetite this morning with the advanced figure for January seen improving to 0.8% following the disappointing 0.1% in December
The BOJ Surprises, Weakens Yen
Central banks’ ability to surprise the market remains even in these trying times. It was the Bank of Japan’s turn today. It surprised the market in two ways. First, it expanded its asset purchase plan by JPY10 trillion ($128 bln). Second, it set an inflation goal of 1%
Moody’s Monday Mass Downgrade
We stress again that the loss of AAA is not the end of the world, and one could make the case that AA is indeed the new AAA. However, the Moody’s news comes a time when markets are nervous about Greece, and so some limited fallout to the euro and EM FX appears likely near-term. The fallout for GBP may be longer-lasting, since it was expected by most to retain its AAA rating
Ten Observations To Start the Week
Ten thoughts on the economy and markets that include events in Greece, the US, Sweden, the EU and China
Dollar Higher on Greek Stumbling Blocks
Concerns over the Greek deal have seen the dollar move higher against most of the majors and EMs
EuroStoxx 600 is off its lows but down 0.4%, bank shares down 1.7%; S&P 500 futures down 0.6%
Safe have securities are rallying with 2-year bund yields down 2bps; Swiss Jan. CPI contracted by -0.4% m/m
Majors Trading Flat ahead of the ECB
The dollar is paring back some of its recent losses, with currencies mostly range bound, ahead of the ECB. The EuroStoxx 600 is currently up 0.25%, with bank shares up 0.8%; S&P 500 futures are essentially flat. Euro zone sovereign 10-year yields are mixed; Portuguese 10-year down 17bps, Spanish 10-year up 7bps
Dollar Mostly Softer as Greek Deal Inches Closer
The dollar is extending its recent losses on hopes that Greece is inching closer to a deal that would ensure the next bailout payment, though the major currencies remain in relatively tight ranges
Chart of the day: 2012 sovereign risk compression
Great data from Bespoke. Looks like Portugal is the odd man out as the only government in which its CDS spreads have widened this year
Has the Euro Broken Out?
Given market positioning and the anticipated long-term repo operation at the end of the month, it is tempting to see this move above $1.3250 as a breakout. Is it a breakout
Intervention Risks Rise In Latin America
FX intervention is certainly in the air this week for Latin America. Brazil stands out as the most aggressive, of course, as the central bank intervened in the forward market Friday and in the spot market Monday
Tuesday’s Surprises from Australia and Japan
The dollar is mixed against the majors and EMs but largely remains confined to recent ranges. The EuroStoxx 600 slid for a second straight day, currently down 0.5%; MSCI Asia index holds recent highs. Demand in Greek bill sale eased slightly and refinancing costs moved higher; Portugal’s 10-year up 22bp
An Update on Italian Sovereign Outperformance
Ahead of the next LTRO at the end of the month, Spanish and Italian bonds may begin consolidating after the large moves seen over the past month. The scope for Italian out performance in the month ahead appears somewhat more limited than over the past month. Indeed, the 5.5% yield level on the Italy’s 10-year generic bond may prove a bit sticky. It also corresponds to trend line on the weekly charts, drawn off the yield low of 3.7% in mid-Oct 2010. Spain’s 10-year yield decline is slowing as it slips through the 5% threshold