July 1, 2008
Here is the “In the Financial Papers Radio Broadcast” (Length: 5:04 minutes). The player should load automatically. Please let me know if you like it. Contact Kathy
In the Financial Papers:
Podcast Covers:
RBA Statement a Tad Dovish as Bank Focuses on Growth Risks
Tankan confidence falls less than expected
German June Unemployment Falls to Lowest in 16 Years
Crude Oil Rises Above $142 on Concern Israeli Attack Would Cut Iran Supply
Global IPOs Decline to Five-Year Low as Economy Slows, Loan Losses Climb
U.K. House Prices Drop Most Since 1992; Manufacturing Unexpectedly Shrinks
Debt Laden Casinos Squeezed by Slowdown
China Hopes for Stability in US dollar and Credit ahead of g8 meeting.
Fukuda’s Low Key Style Furstrates Japanese A11
ECB Expected to raise rates as prices climb
Global Shares are Damped by Economic Storms
Central Bankers Warn of Tipping Point
Dollar Shows Surprising Stability
Banks are freezing lines of credit
US Autos face worst sales in a decade
BIS Calls for World Interest Rate Rise
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Posted in Trichet, consumer spending, Wall Street Journal, Forex Podcast, Reserve Bank of Australia, ecb rate hike, Fed rate hike, chinese yuan, Interest rates, Bank of England, Australian Dollar, British Pound, US Dollar, Bloomberg, FX Radio, Bank of Japan, Bernanke, Forex
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June 30, 2008
It is the end of the quarter and the end to the first half of the year which has been a brutal one for many fund managers. The Dow Jones Industrial Average is down 14% since the beginning of the year and 7% since the beginning of the quarter.
As for the US dollar, since January it has weakened against every major currency except for the Canadian dollar. Its performance since April on the other hand has been mixed. The dollar is virtually unchanged against the Euro, down more than 5% against the Australian dollar and up more than 5% against the Japanese Yen.
The worst performing currency this quarter has been the Japanese Yen, which has fallen against every major G-10 currency.
Today, end of quarter profit taking has helped the US dollar recover the majority of its earlier losses. At the open of the European Trading session, the US dollar fell to fresh 25 year low against the Australian dollar. The market is clearly expecting some hawkish comments from the Reserve Bank of Australia even though rates will remain unchanged.
It is going to be a very active week for the currency market. The ECB interest rate decision and the non-farm payrolls report collide to create the perfect storm for the US dollar. What ECB President Trichet says about future rate hikes should be more important than the non-farm payrolls report, unless of course job losses are more than 100k.
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Posted in dollar record low, euro, US Dollar
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June 30, 2008
Here is the “In the Financial Papers Radio Broadcast” (Length: 7:02 minutes). The player should load automatically. Please let me know if you like it. Contact Kathy
In the Financial Papers:
Podcast Covers:
China’s Export Machine Threatened by Rising Costs
Business Scrambe to Offset Rising Costs of Transportation
Jobs Report will Provide Clues on Growth and Inflation
Fed’s Priority is Likely to be Oil Price Shock
Oil Rises to Record Above $143 on Concern Iran Supplies May Be Disrupted
Stock, Bond Slumps Signal Worse Than ‘94 on Inflation
Yuan’s Path Seems Up Eventually
Dollar May Well Survive the Perfect Storm
Central Banks Focus on Rising Prices
Australian Wages Stable Amid Tight Market
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Posted in Trichet, Interest rates, Bernanke, Forex Podcast, Inflation, forex blog, Fed rate hike, gas prices, Dow, FX Radio, Federal Reserve, ECB, Japanese Yen, Oil, Crude Oil Prices, Radio, Bloomberg, euro, Uncategorized
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June 26, 2008
Two significant milestones have been reached in the financial markets today, one in stocks and one in currencies.
On an intraday and possibly even on a closing basis, the Dow Jones Industrial Average has broken the Bear Stearns low. It was in the middle of March that the Bear Stearns debacle became public, sending the Dow to a low of 11,731. That level was broken within the first minute of trading today.
In the currency market, EURJPY hit a record high of 169.46.
The parabolic move in these two assets are driven partially by the 3 factors; the rise in oil, the technical break of a previous low and news that Goldman Sachs put Citigroup stock on its sell list and downgraded several other brokers. This drove Citigroup stock to a 10 year low.
The market was already bearish dollars following the FOMC rate decision. Today’s breakdown in US stocks and mixed economic data has sent the US dollar even lower. GDP and existing home sales were stronger than expected, but jobless claims and the help wanted index deteriorated, pointing to a weak non-farm payrolls report next Thursday.
Meanwhile is interesting that EURJPY which is often times considered a carry trade currency is not necessarily moving in lockstep with the Dow. It did give back some of its gains but given the move lower in USD/JPY, it is clear that the rise in EUR/JPY is driven by the move in the euro. The relationship between the Dow and carry trades has broken down as the monetary policies of central banks around the world diverge.
Expect this trend to continue in the coming week.
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Posted in EURJPY Record High, forex blog, Kathy Lien, Bear Stearns, Dow, US Dollar
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June 26, 2008
Here is the “In the Financial Papers Radio Broadcast” (Length: 4:41 minutes). The player should load automatically. Please let me know if you like it. Contact Kathy
In the Financial Papers:
Podcast Covers:
Fed Sounds Inflation Alarm, Takes `Baby Step’ Toward Raising Interest Rate
Volvo to Cut 8% of Global Staff
JC Penny Slashes Opening Plans
Trichet denies Speculators Cause Oil Rise > major issue still supply and demand
Bernanke Keeps His Options Open
Nobody’s Snapping up GE Plastic
LSE to Open Doors to Pan European Trading
EU Steepening Trades
ECB Noyer: Trichet didn’t say that a July hike was the start of the cycle
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Posted in Forex Podcast, Wall Street Journal, weak dollar earnings, Fed rate hike, Kathy Lien, Bank of England, Bernanke, British Pound, Federal Reserve, Crude Oil Prices, FOMC, FX Radio, ECB
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June 25, 2008
The Federal Reserve is getting ready to raise interest rates but a rate hike is not imminent. For the first time since August, the central bank has left rates unchanged at 2 percent. Although the FOMC statement is hawkish, the US dollar has failed to react because currency traders were looking for more. They wanted reassurance that a rate hike was around the corner, but what they got was the minimum that dollar bulls were looking for. It wasn’t enough to send the dollar higher or to take it dramatically lower.
The central bank hopes that slower growth will ease inflationary pressures, but if that does not happen by the August 5th FOMC meeting, they will have to raise rates. Between now and then, there are 2 non-farm payroll reports and multiple inflation reports due for release, giving us a much better sense of how bad the US economy is faring and whether consumers and businesses can handle an interest rate hike.
As much as Fed officials will hate to admit it, oil is currently determining Fed policy. If they want to take inflation into their own hands, what they need to do is to raise interest rates, which will strengthen the dollar and weaken oil prices.
The biggest change in the statement is the line that says that “Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased.” In other words the risks to growth and inflation are no longer balanced – the scales are tilting in favor inflation.
The decision is leave rates unchanged was also not unanimous – one member, Richard Fisher voted in favor of a rate hike.
This officially draws a close to the Fed’s easing cycle and puts the central bank one step closer to raising rates. Given the tone of today’s FOMC statement, I expect the Fed to raise interest rates in September.
Having brought interest rates from 5.25 percent all the way down to 2.00 percent, the Federal Reserve does not have room to cut interest rates in the current inflation environment. It would take at least two consecutive months of negative retail sales growth and back to back job losses in excess of 100k before the Fed would lower interest rates again.
If the ECB raises rates in July and the Fed does not reassure the markets that a rate hike is coming as well, the US dollar could continue to give back its gains. However in the longer term, the US dollar has bottomed out alongside US interest rates and it will only a matter of time before it begins to trend higher once again.
Comparing the FOMC Statements
June 25, 2008
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 2 percent.
Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters.
The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh. Voting against was Richard W. Fisher, who preferred an increase in the target for the federal funds rate at this meeting.
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Posted in Fed rate hike, Fed Rate Cut Expectations, Fed Rate Cut, Federal Reserve
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