COMMERZBANK: Say Hello To Negative Rates In Europe And Keep Selling EUR/USD On Rallies

It seems that various ECB officials have been busily doing the rounds proclaiming that no decision has been taken upon negative deposit rates, says Commerzbank. "This is despite the fact that we know of commercial and retail banks already being technically prepared for such an eventuality and the fact that the ECB has been analyzing the effectiveness of such a move," CB adds. So, where does this leave the possibility of negative rates this...

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Yen Has Fallen Too Far, Study Says

The value of the Japanese yen has fallen too far and the Group of Seven leading economies may consider intervening in foreign exchange markets to reverse the trend if it declines much further, according to a new study from a Washington think tank. The sharp depreciation of the yen in the past six months has overshot the levels justified by fundamental market and economic conditions by nearly 10%, said the paper by William Cline, a senior...

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UBS : Buy Treasurys

The message from primary dealer UBS is clear--buy Treasurys because the recent rise in yields went too far, too fast. The firm contends investors seem to be overreacting to what UBS believes is a "slim" possibility the FOMC begins tapering QE fairly soon. The bank's analysis also suggests the 10-year Treasury yield, last at 2.10%, is a half-point above fair value and that Treasurys are entering a supportive time of year, having performed the best...

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MORGAN STANLEY : Shorts EUR/USD at 1.3050

As the bank looks for the USD to soon resume its broader recovery, and so sees limited upside for EUR/USD. The bank has a downside target of the November 2012 low at 1.2665, with a protective stop up at 1.3150. Now at 1.30...

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Here Are The Fed Policymakers To Pay Attention To - And The Ones To Ignore

'I would pay attention to the speeches and interviews given by a judiciously chosen set of the twelve Reserve Bank presidents. Their comments are often more revealing than those of Chairman Bernanke and the other Board members who sit in Washington. Bernanke has to be very careful about what he says, both because his words move markets and because he doesn’t want to front-run the FOMC’s decision-making. The other Board members, whose offices...

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Stock Market Investors Don't Care About Macro Issues Anymore

Citi's Tobias Levkovich is increasingly worried that investors are getting a bit too excited about buying. Among other things, he notes that correlations between stocks are breaking down.  In other words, stocks are increasingly trading independent of each other. From his recent note to clients: Intriguingly, intra-stock correlation of the top 50 market cap stocks in the S&P 500 has fallen back towards the 20% area (see Figure...

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BOC on Hold, Keeps Weak Hawkish Bias

Canada's central bank held its key interest rate at 1% and restated its weak hawkish bias, saying that borrowing costs will likely go up after "a period of time," in the final policy decision under outgoing Governor Mark Carney Wednesday. Citing economic slack, a tame inflation outlook and "constructive evolution" of household sector imbalances--code for slowing debt growth--the Bank of Canada's rate statement said the "considerable monetary...

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FX CHAT: Profit-taking on US dollar likely temporary

With no US data out Wednesday, traders are booking profits on their long dollar positions from the greenback's rally on Tuesday. Dollar is lower against most major currencies, including the euro, yen and Australian dollar. However, look for the dollar to resume its upward climb on Thursday if 1Q GDP and April pending home sales deliver a positive surprise. Citi's Josh O'Byrne says forces are still in the dollar's favor as the Fed is the one...

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MORGAN STANLEY: ECB To Cut Refi Rates Further Next Month; Stay Bearish EUR/USD

"While the latest European PMIs have continued to show some signs of stabilization, these readings remain below the 50 boom/bust level, and the debate regarding ECB policy has gained renewed momentum. The discussion of negative (depo) rates has also intensified once again as a result of the decline of inflation rates and the dovish stance of the ECB at the May meeting. In that regard, Morgan Stanley's European economists expect a further refi...

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FX CHAT: Good US economic data dollar-positive

After Bernanke's comments last week sparked talk about the possibility of a sooner-than-expected rollback of QE3 if the recovery continues to gain traction, there is no such thing as second-tier US data. This morning we have consumer confidence from the Conference Board, Case-Shiller home prices and manufacturing data from the Dallas and Richmond Fed. "From here, the winner when US data beats expectations should be the dollar as relative rates...

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Warning - Derelict Australian Economy Ahead

"The Australian economy is heading for a potentially catastrophic collapse from a devastating squeeze between a sudden and dramatic drop in demand for our major resource exports and a crippling increase in the cost of new projects. Ground zero is now the exploding LNG (liquified natural gas) sector." The retailpropshop : Not everything seems right in Asia... Along China and Japan, the Australian economy seems suffering from low global growth...

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ECB Noyer: Negative Deposit Rate is Very, Very Complex Question

The European Central Bank is technically able to cut its deposit rate below zero, but it remains a very complex question, governing council member Christian Noyer said Tuesday. "We have what is necessary technically. Concerning the opportunity of doing it, it is a very, very complex question," Mr. Noyer said, noting no major central bank has tried it. In Denmark, a negative deposit rate had the opposite of the desired effect, Mr. Noyer said,...

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The Debate Regarding Japan

Here's A Rorschach Test That Says Everything About The Debate Regarding Japan "Do you see a chart that says people are freaking out about Japanese debt, and a surge in interest rates that will undermine the entire point of The BOJ's monetary easing and Abenomics? Or do you see evidence that at long last, markets are predicting some inflation, which is then being reflected in the market, which is what Abenomics aims to pursue?" Read more : ht...

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6 Factors That Influence Exchange Rates

Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country's relative level of economic health. Exchange rates play a vital role in a country's level of trade, which is critical to most every free market economy in the world. For this reason, exchange rates are among the most watched, analyzed and governmentally manipulated economic measures. But exchange rates matter on a...

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Foreign Exchange Market Participants

Have you ever thought about who is participating in the foreign exchange market besides your fellow retail traders? If the answer is no, you should certainly change that. Although we can not have directly an insight into the order books of the large banks, we can identify some of the characteristics of important market participants and use this information in our trading. In order to try to reconstruct what other traders might do, you have first...

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JAPAN : Another Interesting Video On Japan Monetary Policy

 Christine Hughes, President and Chief Investment Strategist, discusses details of Japan’s radical monetary policy. The retailpropshop is particularly attentive since the start of the year to what is currently happening in Japan. This type of global macro changes should be monitored closely by any Yen traders, particularly the next few weeks as the sensitivity is huge (cf last week Nikkei performance). But, do not...

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KYLE BASS: Discussing Japan's New Monetary Policy And Its Implications

Myron Scholes Global Markets Forum: The Coming Crisis in Japan - Kyle Bass Gleacher 621 NOTE: THE SLIDES ARE NOT AVAILABLE Kyle Bass, founder and principal of Hayman Capital Management, LP, will describe why he sees a looming economic crisis for Japan. Bass has previously predicted and profited from the collapse of the subprime real estate market and the rise in precious metals starting in 2009. This event is part of the Initiative...

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ROGOFF: There's No Magic Keynesian Bullet That'll Save Europe

There is no magic Keynesian bullet for the eurozone’s woes. But the spectacularly muddle-headed argument nowadays that too much austerity is killing Europe is not surprising. Commentators are consumed by politics, flailing away at any available target, while the “anti-austerity” masses apparently believe that there are easy cyclical solutions to tough structural problems. The eurozone’s difficulties, I have long argued, stem from European financial...

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The Japanese Chart That Has People The Most Freaked Out

The big story in global markets is Japan. On Thursday, the Nikkei crashed 7%. Then on Friday it gained less than 1% after a bizarrely volatile day. But the chart garnering the most interesting is not on the equity side. And it's not a chart of the yen, which has been famously diving. The chart getting the most attention is the yield on Japanese Government Bonds, which have spiked in recent weeks (albeit from an extremely low level, to a still...

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This Simple Thought Experiment Shows How Investors Are Biased

James Montier’s bible on behavioural finance, ‘Behavioural investing’, points out two recent discoveries by neuroscientists that have relevance to all investors: We are hard-wired to think short-term, not long-term We also seem to be hard-wired to confirm to the herd mentality A particularly intriguing experiment used by Montier to illustrate these points relates to our tendency towards ‘anchoring’. In his words, anchoring is “our tendency...

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Fed Enters Delicate New Phase Of Communication

Investors' hair-trigger reaction to Federal Reserve Chairman Ben Bernanke's testimony on Wednesday marks a delicate new policy phase for the U.S. central bank in which communication is paramount. Pitfalls lurk as the Fed approaches the time when it will begin to withdraw its extraordinarily accommodative policies, probably starting some time this year with a tapering of its $85 billion in monthly bond purchases. The question of when the...

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