Dollar Softer Amid Consolidation

The US dollar is trading with a softer bias in what largely appears to be a consolidation. The euro held support near $1.34, sterling near $1.56 and Aussie near $0.9800. The news stream is light and corrective forces are seen in equities, which are mostly higher, and bond markets, which are mostly lower. Emerging market currencies are also generally firmer

Why France will be forced out of the eurozone

“Faced with a choice between permanent slump and rising debt burdens (as economic contraction and deflation leads to inexorable increases in debt), countries will elect to quit the currency union. At least that route will allow them to print money, recapitalise their banks and escape deflation. Once Spain or Italy opts for this, an unravelling of the eurozone will be unstoppable.”

Aznar: Spain will show fiscal discipline but we may need the ECB to avoid a “disaster”

While Spanish Prime Minister-elect Mariano Rajoy was preparing for continued austerity in Spain, his Popular Party colleague, Former Spanish Prime Minister Jose Maria Aznar, was talking to Bloomberg Television about the outlook for his country’s economy and the mandate of the European Central Bank. He spoke to Bloomberg’s Emma Ross-Thomas in Madrid, saying the ECB may be needed to avoid a “disaster”

Credit Writedowns Weekly Report, Vol 1 Issue 1: European and US Sovereign Debt

With the fundraiser week winding down, I am going to start making a few changes now. One thing we probably need is a synopsis of the past week’s posts in order to tie the week’s events together thematically. I will make this synopsis using the most read and tweeted posts plus the ones I think are most relevant to what’s actually happening in global markets and the economy.

This week there is a ton of stuff here. So, here we go with the weekly report volume 1, issue

News Links: BofA Clash With Fannie Mae Escalates Over Loan Buyback Stance

BofA Clash With Fannie Mae Escalates Over Loan Buyback Stance – Bloomberg Bank of America Corp. (BAC) told Fannie Mae it refuses to cooperate with the U.S. mortgage firm’s new stance on loan buybacks, setting the lender up for a potential surge in claims and penalties. EU’s Barnier: Tougher rules must precede euro bonds |

Dollar Bid as European Woes Dominate

News that the US super committee failed to reach an agreement has done little to eclipse the negative impulses coming from Europe. Rajoy won no honeymoon in Spain despite achieving an outright majority in parliament. Spain’s 10-year bond yield is up around 15 bp today, the worst performer in the euro zone. Moody’s warned that rising debt costs and weaker GDP is negative for France and maintained its negative outlook for Irish banking system, despite its improved capital position

Spain: The nationalist left makes a strong comeback after 15 years

The left-wing nationalists will return with force to the House of Representatives after 15 years of years of absence through the Amaiur coalition according to data from the first ballot count

How Would You React To The News Your Local Central Bank Just Went Bust?

Alarm signals have been going off over the last week, not only due to the surge in the yields on Spanish and Italian debt but also due to evidence that the infection (contagion) is now spreading to what was previously considered to be the core (France, Austria) with the evident danger that more countries will lose their triple A rating. This has put the spotlight on the ECB as an institution, but the bank is reluctant to adopt the role of ultimate guarantor. This is not principally due to the so called “inflation fear” – demand driven inflation is extremely unlikely in the Euro Area in the near term – but rather due to a fear of accumulating sizeable losses in the event that large quantities of bonds are purchased and then countries like Italy and Spain have to restructure their debt. Naturally some argue that a central bank can simply accept losses, since the bank doesn’t necessarily need recapitalisation and could be allowed to carry on regardless of the red ink on the bottom line. I am not very convinced by this argument. I think my fears are shared by the Bundesbank, and my intuition is that they are not at all keen to run the experiment just to see what actually happened

Spain: Fifth Government in Periphery Falls

New governments in Greece and Italy have brought no real relief to the financial markets. There are forces in motion that are not about which personality or interest group is implementing the various austerity programs.

Spain is unlikely to prove to be an exception. The dynamics are essentially the same. The economies are deteriorating faster that the austerity is being implemented, resulting in the overshooting of deficit targets, which in turn necessitates more austerity

News Links: Need to Create? Get a Constraint

Need to Create? Get a Constraint | Wired Science | Wired.com One of the many paradoxes of human creativity is that it seems to benefit from constraints. Although we imagine the imagination as requiring total freedom, the reality of the creative process is that it’s often entangled with strict conventions and formal requirements. Daring Fireball:

News Links: Spain becomes eurozone’s weaker link

Spain Set to Vote for Rajoy Cuts as Crisis Claims Fifth Leader – Bloomberg Spaniards may hand the biggest majority in three decades to opposition People’s Party leader Mariano Rajoy as polls suggest Europe’s debt crisis will push a fifth government from power. Rajoy will win as many as 198 of the 350 seats in

ECB backs a weekly limit of 20bln euro for SMP purchases ahead of Spanish elections

EuroStoxx 600 is off its lows but still down 0.4%, Asia shares mostly lower; dollar pares back gains. ECB backs a weekly limit of €20bln for SMP purchases; Malaysia reports robust Q3 growth. Looking at the four key drivers of dollar strength; This weekend (Sunday) sees Spanish elections