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

Dollar Heading Lower after Constructive Outcome of EU Summit

Dollar is heading lower after the EU summit saw 25 of the 27 nations endorse the new fiscal compact. EuroStoxx 600 is nearly 1% higher as a result, banks up nearly 1.3%; MSCI Asia Pacific index up 0.7%. Japanese data showed a surge in December production; Germany’s Dec. job boost offset by retail sales

Seven Observations about Commitment of Traders in FX

The Commodity Futures Trading Commission requires futures traders to identify whether they have an underlying business interest (commercials) or if they don’t (non-commercials). Here are seven take-aways from the most recent report that covered the week through January 17th

Chart of the Day: Developed economies’ debt levels by sector

This is a great chart below via the Wall Street Journal. It shows the total debt to GDP ratios for the largest developed economies in the world broken down into four sectors: households, non-financial corporations, financial institutions and government

What has the Fed done to avoid the US becoming the next Japan?

Imagine being on the FOMC and in the mainstream paradigm. In 2008 you moved quickly to make sure the US would not become the next Japan. What do you have to show for it, 3 years later

Dollar Finishing Year Mixed, Second Annual Gain Against Euro

The main price action to note is that the euro fell through the JPY100 level for the first time since mid-2001. For the most part, the dollar is confined to yesterday’s ranges against the major currencies. The day’s economic highlights include: HSBC’s Chinese PMI, Hungary’scontroversial law that further erodes the central bank’s independence, South Korea’s CPI and the new PBoC currency fix of

Japan and China: Small Beer

Understanding the financial agreement within the context of that rivalry is more important than what it means for the future of the dollar as the world’s more important reserve currency, invoicing currency and vehicle currency. Nor will the agreement impact the outlook for either the yuan or the yen

Bond vigilantes and the currency relief valve

The last post by Randall Wray below is an interesting one because it points out how the world has changed since the end of the gold standard and why the sovereign debt crisis is centered in the euro zone.

While I have an Austrian bias overall, for me, MMT is the best way to think about nonconvertible floating exchange rate systems as distinct from fixed exchange rate, currency board, pegged and convertible systems. The difference is policy space and what I would call the bond vigilante relief valve

Is Finland Really A Closet Member Of The Eurozone Periphery?

The country’s debt dynamics are far from unsustainable at this point, but given the weakening in the country’s export performance and the steady unwinding of the housing boom we can now anticipate I would expect growth to be weaker than either the EU or the IMF are currently anticipating, and pressure on the country to increase fiscal spending to maintain expectations to rise, with the implication that pressure on the Finnish spread over 10 year German bunds will continue, as the country risks drifting off from being part of the core towards the growing periphery, at least in the eyes of investors

Pending EU Summit May Curb Response to ECB

The dollar is trading slightly firmer ahead of today’s ECB rate decision and tomorrow’s summit. We expect the ECB to cut by 25bps, with a possibility of a 50bps cut; look to fade knee-jerk reaction. Australia’s employment much weaker than expected; Singapore imposes news taxes on homes

Full Text: FRB Statement on Coordinated Central Bank Action on Currency Swaps

“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 the supply of credit to households and businesses and so help foster economic activity. “

Chart of the day: Definitive guide to the European debt web

The BBC has a terrific chart tool that gives you a good feel for exactly how much the sovereign debtors in each of the European countries owes and to which other countries. The great thing about this chart is that it also shows you the debt flows outside of the European periphery i.e. for France and Germany, as well as for Japan, the US and Britain in both directions