Hilsenrath Takeaways: Fed Sets Bar on Tapering

Federal Reserve officials stuck to their plan to reduce the central bank’s bond buying program to $65 billion per month. Here are five takes on what it means: VALIDATION OF THE TAPERING PLAN:Ben Bernanke suggested in December that the Federal Reserve would continue reducing the central bank’s monthly bond-buying in $10 billion increments at upcoming meetings, but he didn’t state it directly. He said the Fed would take “further modest...

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Rout In Emerging Markets May Only Be In Phase One

The flight of investors from the once-booming emerging markets they previously favored with $7 trillion-worth of inflows may have only just begun. It is mainly retail investors who have packed their bags and moved on to date. If and when big institutional firms join in, there is a risk of wholesale capital flight. Signs of China slowing down and the global impact of a wind-down in U.S. monetary stimulus - effectively...

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LARRY FINK: 'The Experience Of The Marketplace This Week Is Going To Be Indicative Of This Entire Year'

Just as they were getting their swagger back, the global elite stumbled last week on an emerging market sell-off that served as a reminder of the risks the global economy still faces. Veterans of the annual World Economic Forum in Davos seized on the wobble as a warning that expectations for a smooth upswing were misplaced, and that recovery would likely be volatile and uneven. The euro zone crisis is out of its acute phase and growth...

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A Complete History Of Quantitative Easing In One Chart

This chart illustrates the complete history of the Federal Reserve's quantitative easing program, along with Goldman Sachs chief economist Jan Hatzius's forecast for how "QE3" will be wound down. "The January FOMC should be fairly uneventful, following significant policy changes made at the prior meeting," writes Hatzius in a preview of next week's monetary policy decision. "The FOMC will likely continue to taper the pace of its asset purchases...

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These Are Exciting Times For Traders Of The Canadian Dollar

The Canadian dollar is hitting another new 5-year low this morning following the Bank of Canada's decision to maintain its benchmark interest rate at 1%. "Although the fundamental drivers of growth and future inflation appear to be strengthening, inflation is expected to remain well below target for some time, and therefore the downside risks to inflation have grown in importance," said the Bank in a statement, causing traders to push the loonie...

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Here's The Advice UBS Is Giving Its Millionaire Clients

Investors still cowering in fear from their 2008 losses might have missed the stock market rally in 2013. Many chose to sit on the sidelines, and others are worried about a looming stock market bubble. Cash holdings on the UBS Investor Watch Survey were at 22%. And globally, UBS clients hold 30% of their assets in cash or cash equivalents. But this isn't the best idea because interest payments on cash deposits don't exceed the prevailing...

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Seasonality Approaching Its Worst Point

We have entered the Mid-Term cycle in the Quadrennial Presidential Cycle, in which the months April through to September typically represent the worst SP-500 seasonal period for the entire 4 year cycle. The current cycle which commenced in 2012 has performed way above average so far, as shown below with the black dotted line: However it is plain to see from the chart above that the average gains through the 4-year cycle are composed of...

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HSBC- EUR: Myths Vs Facts

"We are not convinced by a number of suggestions offered for the EUR’s resilience to wider USD strength. One idea is that EUR is gaining on the basis of its improving current account balance. Yet the US deficit has seen an even greater correction in its imbalance. In addition, the swing into surplus for the Eurozone reflects economic weakness or collapsing domestic demand not strength. The second suggestion is that the EUR is being...

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CITI - Here Are The Best 5 FX Trade Ideas For 2014

Citibank expects the USD to rally versus G10 in 2014 - pretty much across the board. "GBP and NZD are the only currencies we expect to hold their own versus USD. Weakest currencies are likely to be JPY, AUD, CAD and CHF. The surprise in 2014 FX markets will likely be how well risk appetite survives tapering given the low volatility across asset markets," Citi projects. "Carry is attractive under these conditions. The winning currencies will...

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Citi's Economic Surprise Index Is Now At Nosebleed Levels

Citi's economic surprise index, which measures the actual outcome of economic data releases relative to consensus estimates, is at its highest level in nearly two years after a streak of stronger-than-expected data in the last few months has sent it on a tear. Now, the index is at levels often associated with a rolling over of this measure, as Chart 1 shows. If the index does roll over soon — as economists' expectations outpace actual further...

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CITI - Is EUR/USD Resilience Coming To An End?

EUR/USD resilience could come to an end if supportive December flows like corporate yearend earnings repatriation and banks’ euro buying ahead of the AQR do not extend into January, argues Citibank. "EURUSD remained rather resilient of late consistent with the pattern of euro outperformance in the month of December we had in recent years... Bank inflows into EUR in particular have intensified noticeably in Q4 according to Citi FX flow data," Citi...

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GEORGES SOROS: The World Economy’s Shifting Challenges

As 2013 comes to a close, efforts to revive growth in the world’s most influential economies – with the exception of the eurozone – are having a beneficial effect worldwide. All of the looming problems for the global economy are political in character. After 25 years of stagnation, Japan is attempting to reinvigorate its economy by engaging in quantitative easing on an unprecedented scale. It is a risky experiment: faster growth could drive...

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Expectations: A Market Time Machine

In H. G. Wells’ novel, The Time Machine, a traveler’s desire to find out what will happen to the human race ultimately leads him on a tremendous expedi- tion into a terrifying and perilous future. Metaphorically, the expectations of market participants also function like a time machine, as they allow partici- pants a glimpse into the market’s future. Foreign exchange traders stress that expectations play one, if not the, leading role in...

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