World economy talk

[Lady Bathory]

Yes i'm waiting for the jobs report. My strong dollar thesis is being shot down. As expected the FOMC statement was a non-event. The Federal Reserve will taper asset purchases by another $10 billion and rate hikes are still far, far away. The market was expecting that. None of this week's positive economic data moved the dollar higher. The only hope now is the jobs report which is usually a market mover. I'm being very optimistic here but if we get a really good number like 300,000+ and the unemployment rate falls to 6.5% the Federal Reserve could accelerate the pace of tapering which would move bond yields and the dollar higher.

Eurozone April inflation data lowered the possibility of ECB action. EURUSD rallied but couldn't break 1.3900. The euro is holding at current levels because the market knows the ECB isn't happy with the strong euro. As EURUSD nears 1.400 it will run into verbal intervention by the ECB.

I'm sticking to my view that the dollar will strengthen later in the year. At the current pace of tapering the Federal Reserve's monthly asset purchases will be near zero by September or October. They will start talking about rate hikes by then. So far uls you're right. The dollar cannot rally because of declining U.S. bond yields and reserve diversification. My strong dollar thesis hasn't been proven wrong yet. Give me till the 4th quarter.

[uls]

Stocks slip but end week higher amid Ukraine worries, US jobs data

The U.S. Labor Department reported the creation of 288,000 jobs in April from an upwardly revised 203,000 in March, with the jobless rate at 6.3 percent. Expectations called for the addition of 210,000 jobs during April. Analysts polled by Reuters also saw unemployment falling to 6.6 percent.

initial reaction -- bond yields and the dollar rallied

dollar index:


very good Bathory

but the rally was short-lived

there was weakness underneath the headline number

the drop in unemployment rate is coz 800,000 people left the labor force

after realizing that the market changed direction

[uls]

DJ FXCM dollar index




as long as it's above 10,225 maintain bullish view on the dollar

[Lady Bathory]

The April jobs report surpassed expectations. The big improvement in the unemployment rate should have been positive for the dollar if not for the drop in the participation rate. Wages are stagnant so there’s no risk of inflation. I don't think this report will change the Fed's stance on monetary policy. Wait for Janet Yellen's speech on Wednesday for signs if the improvement in the unemployment rate will accelerate the Fed's tightening plans. I doubt it will.

For now there's nothing left to push the dollar higher. There are no major U.S. data scheduled for release this week but there are speeches from Federal Reserve officials so we'll be looking forward to that.

[uls]

1.39

[uls]

quoting me (from 2 pages ago)

the ECB is trying to talk down the euro coz euro strength is weighing down the euro-area economy

factors contributing to euro strength --

1. the sovereign debt crisis has faded so capital has flowed back into Europe which created strong demand for euros

2. declining US yields makes the dollar unattractive which provides upside to the euro

if US yields keep declining EURUSD could hit 1.40 which would make the ECB act (we keep hearing about negative deposit rate)

the ECB can lower the main interest rate from 0.25% to zero

they'll do that first before doing QE

OECD calls for ECB to cut rates immediately - MarketWatch

LONDON--The European Central Bank should immediately cut its benchmark interest rate, and may even then have to take additional measures to end a period of too low inflation in the euro zone, the Organization for Economic Cooperation and Development said Tuesday.

The research body raised its growth forecast for the euro zone, but warned there is a risk that it will slip into deflation--or a period of self-reinforcing price declines--unless the ECB acts swiftly.

In unusually direct language, the OECD said the ECB's main refinancing rate "should be reduced to zero" from 0.25% now, while policy makers should "possibly" cut the deposit rate "to a slightly negative level." The research body said interest rates should not be raised from those levels until the end of 2015 at the earliest.

the ECB isn't gonna do anything yet

btw, if the deposit rate is lowered to negative banks will charge clients for euro deposits

[Lady Bathory]

I'll comment after the ECB rate decision on Thursday.

[uls]

the dollar really got beat up no?

[uls]

good morning

it's ECB day

expect no change to current policy

or... they could surprise the market by announcing a small rate cut... .05%

[uls]

Euro gains ahead of ECB decision, Draghi comments - Currencies - MarketWatch

LONDON (MarketWatch) — The euro rose against the U.S. dollar Thursday ahead of a decision by the European Central Bank that may keep monetary policy unchanged, but investors will watch for comments from ECB President Mario Draghi about persistently low inflation and the potential for more easing.

[tidus1203]

good morning

it's ECB day

expect no change to current policy

or... they could surprise the market by announcing a small rate cut... .05%

Probably no change. People look for the statement afterwards though on how the ECB feels about the dis-inflation in the economy...

[uls]

Draghi will talk down the euro

like before he'll say the ECB has conventional (rate cut) and unconventional (QE) tools to fight disinflation

but he has to convince the market there will be action soon

otherwise it's 1.40 and beyond

[uls]

__________________________________________________ _________________

[uls]

...and Draghi successfully talked down the euro



will act next month

European Bonds Jump as Draghi Signals Potential June Move - Bloomberg

“The Governing Council is comfortable with acting next time, but before we want to see the staff projections that will come out in the early June,” Draghi said at a press conference in Brussels. “There wasn’t a decision today. It’s a preview of the discussion we will have next month.”

[Lady Bathory]

The ECB better follow through with action in June otherwise they're going to have credibility issues.

[Monseratto]

Hmmm...many people were lining up at Sanry money changer.

[uls]

^^

it's coz of the credit rating upgrade

[uls]

dollar positive -- US 10Y yield moving higher

[c_cube]

Babalik ba ang 44.XX na dollar?


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[uls]

^^

i think it will