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  • Rescue plan not an instant fix...

    * Rescue plan to take time... * Pound sterling rallies (for now)... * Brazil supports the real... * Iceland cuts rates... ** Rescue plan not an instant fix... Good day...Another roller coaster of a day, as the dollar continued to slide through lunch but then rallied back up in the afternoon. As I walked out the door last night, most of the major currencies were trading right about where they were when I turned the screens on. The dollar has started to fall again in overnight trading, so the up and down of the past few weeks looks to continue. The news stories coming across the wires this morning seem to be as volatile as the currencies. I have now counted three different stories which state the markets are moving back into higher yielding currencies and riskier investments after the coordinated bank bailout plan which was announced yesterday. But several other stories are talking about how investors are moving out of the higher yielding assets because of concern that the bank rescue will take too much time to unfreeze global credit markets. I tend to agree with the latter of these....
  • Fed floods the markets with US$...

    * Bernanke gets help opening the spigot... * Euro and Pound rally... * Yen to continue to benefit from carry reversals...* Aussie $ rallies... ** Fed floods the markets with US$... Good day...and happy Columbus day! This is an official bank holiday here in the states, so all of the banks are closed, but the stock markets are open. We will have a half day here on the desk to try and catch up with all of the work which has been piling up the past few weeks. The phones are turned off, since it is an official bank holiday, but we will be checking messages and try to get back to everyone as quickly as possible. It is a very unusual holiday, as the banks are all closed with no funds transfers possible, but the stock markets are open. Currency desks are lightly staffed, so we will have to really work to get the trades done this morning. These strange holidays usually can lead to some real market volatility, and with today will probably be another rollercoaster. In an all out effort to ease the credit freeze, the Federal Reserve recruited help from the ECB, Bank of England, and the Swiss central bank to flood the market with US$. These central banks will auction unlimited dollar funds with maturities of seven days, 28 days, and 84 days at a fixed interest rate. This move is unprecedented, as all previous dollar swaps were capped at a maximum amount while these auctions will be for unlimited funds....
  • Coordinated Rate Cuts!

    * Yen trades to 98! * Carry Trades unwinding hurt high yielders... * Gold rallies back to $900! * Central Bank rate cuts.... ** Coordinated Rate Cuts! Good day... And a Wonderful Wednesday to you! Well... There's a ton of stuff to talk about today, one of which is the amazing run that Japanese yen has had in the past month, but particularly the last week! No need to sneak a peak at the currency round-up, Japanese yen is trading 98.80! WOW! I could be acting like a contortionist and trying to slap myself on the back, but that would unprofessional... And besides, the rest of the currencies are taking shots to the mid-section. Anyway... Blow the horn, the Carry Trade (for yen) is dead, may it rest in peace! OK... The currencies tried like all get out yesterday to rally VS the dollar, the euro did end the day 1% higher on the day, which after the bloodshed of the past month, I'll take that any old time! I would love to go back to 2005 (not really, but for this conversation's sake I will) and pull out some old Pfennigs where I talked about all the naysayers talking about a break up of the euro... We had the NO votes from France and Denmark on accepting the European Union's (EU) Constitution, we had riots in the streets of France, we had rising interest rates in the U.S. and dozens and dozens of naysayers called out the euro and said it would collapse under the weight. I said then, and I'll say now... HOGWASH!...
  • Iceland Melts Down...

    * RBA cuts rates 100 BPS! * Iceland to peg the krona... * High Yielders get whacked! * Gold rallies in the face of a strong dollar! ** Iceland Melts Down... Good day... And a Terrific Tuesday to you! Well... Folks... The wheels, what was left of them, are really coming off this economy. It's a sad sight to see, but it's happening nonetheless, and there's no bailout, stimulus check, mortgage bill, truck loads of money supply, or whatever, that's going to stop this recession bus.. Memo to Paulson and Bernanke... Don't throw yourself under this recession bus... Well... The dollar continued to push the envelope against a handful of currencies yesterday. Up front and center, the high yielders got beaten about the head and shoulders by the dollar. Aussie, kiwi, real, rand, all took major hits from the dollar. It was one of the worst days I can remember seeing for these currencies. This huge sell off showed two things going against the high yielders... 1. Commodities (other than Gold) are getting whacked, and 2. The Carry Trade is Dead......
  • King Henry Was Wrong Again!

    * Bailout package is voted down! * Biggest one day point drop for the DOW! * Dollar rallies hard... * Carry trades unwind... Again! ** King Henry Was Wrong Again! Good day... And a Terrific Tuesday to you! Well... Guess who was wrong AGAIN! That's right, King Henry Paulson, he of the U.S. Treasury Sec. throne... He told the world on Friday, that the bailout package was a "done deal"... And he told us again on Sunday that it was a "done deal"... The markets rejoiced, the stock jockeys danced in the streets, the karma flowed and all the stars were in alignment... And then... A (not so) funny thing happened on the way to the forum... King Henry's men revolted, and the bailout package did NOT have the votes to pass it, and the "done deal" was "undone"! Once again this man has led investors down the wrong path. I've documented the wrong statements by this man in the past year, and still, investors hang on every word by King Henry... When will they ever learn? When, will, they, ev-er learn?...
  • Turning Japanese?

    * Profit taking in the currencies... * German Business Confidence falls... * More talk of the bailout package... * A strong statement on Aussie dollars... ** Turning Japanese? Good day... And a Wonderful Wednesday to you! Another crazy day not only in the markets but on our trading desk, where the phones continue to light up. There's a ton of volatility in the markets these days, as witnessed by the roller coaster ride stock jockeys take every day, the no direction is a good direction course of currencies, and the ups and downs of bailout plans. It's all a little too much for yours truly some days, but I carry on... Take this morning... Please somebody take this morning! The euro was showing signs of wiping out yesterday's profit taking session early on, only to see its gains wiped out by a weaker than expected German Business Confidence report. Yes, German Business Confidence, as measured by the think tank, IFO, declined more than expected this month, to the lowest level in almost 3 years. I would say that with lower Oil prices, and weaker inflation, these German Business people's attitudes will be changing soon... The German economy, other than this report, is showing signs of strength, which is bang on what I've been trying to tell everyone that was throwing darts at the Eurozone economy... Remember 80% of trade in the Eurozone is among the Eurozone members......
  • Some Healing...

    * largest one-day move up in the euro! * largest one-day move up in Oil! * Gold and Silver rebound! * Renminbi finally moves! ** Some Healing... Good day... And a Terrific Tuesday to you! I heard from one of my two sisters that live in the Houston area yesterday. They rode out the Hurricane together, have some damage to her house, and is still without electricity. I can't imagine what that's all like. But they are both safe at that's what's important at this point. Well... The euro had it's largest one-day move upward VS the dollar since its inception in 1999, yesterday... We've seen some profit taking in the overnight markets, but just for good measure... I think it appropriate to show that the euro reached 1.48 yesterday... That was a 3.5 euro move, and after falling to a low of 1.3869 on 9/12 (before bouncing big that day), the euro has now recovered about 7%... I would call that "some healing"......
  • Paulson and Bernanke ride to the rescue...

    * Paulson and Bernanke ride to the rescue... * More debt for the US taxpayer... * Emerging markets rally... * Congrats to EverBank Soccer Greats... ** Paulson and Bernanke ride to the rescue... Ahoy thar maties.. Yesterday was a very volatile day in what has become an incredibly choppy week. The currency and metals markets began the day rallying vs. the dollar as it seemed yet another huge financial firm was circling the bowl. But late in the afternoon the dollar came charging back, and gold fell back below $850 after surpassing $900, ARRGH! So what caused this quick reversal? Senator Schumer was credited with turning the markets around. He announced, mid afternoon, that the Federal Reserve and Treasury were going to create a new government institution which would purchase all of the toxic debt instruments being held by Wall Street. Wall Street obviously thought this was just a fantastic idea, and the stock market immediately rallied, taking the dollar with it. The details of the plan still aren't available, but the markets have been desperately searching for a hero to come and rescue them, so even the hint of a rescue was enough to shoot stocks back up. The proposal currently being discussed in congress involves moving troubled assets from the balance sheets of American financial companies into a new government backed institution. The SEC also instituted a ban on short selling of financial stocks, copying a similar ban which was instituted yesterday in London. Chuck had a travel day yesterday as the FXU moved from San Diego to Dallas, but he was keeping an eye on the markets and sent me this last night....
  • Sanity returns to the currency market...

    * Sanity returns to the currency market... * Chucks thoughts from San Diego... * CDS market explanation... * Swiss central bank to leave rates unchanged... ** Sanity returns to the currency market... Good day...Wow! What a day it was yesterday on the currency/metals desk here at EverBank. Finally, some sanity returned to the markets as investors moved out of their dollar holdings and into both currencies and metals. Gold was up over $80 yesterday, and continues to climb this morning. The Aussie dollar was up over 2%, climbing back above .80 cents and the Euro climbed back above $1.45. The dollar was up pretty much across the board, making for a very busy day here on the desk. Chuck also had a great day down in San Diego with FXU. He sent me the following late last night which he asked me to share with you....
  • Paulson speaks with forked tongue...

    * Paulson speaks with forked tongue... * Fed leaves rates unchanged... * A look back at the data... * Japan to weather the financial Tsunami... ** Paulson speaks with forked tongue... Good day...Another day, another $85 billion of US taxpayer used to bail out an ailing financial firm. Yes, our Treasury Secretary went on another shopping spree, and this time he was accompanied by Fed Reserve Chairman Ben Barnanke. Just two days ago, Paulson drew a line in the sand when he let Lehman Brothers collapse into bankruptcy. The non-action from Paulson was seen as a good move by most, as he was sending a signal to the markets that the US taxpayer couldn't be seen as the buyer of last resort for failed financial firms. And Paulson talked tough with regard to AIG. Paulson was asked about reports that AIG wanted an emergency loan to help it through its troubles. "What is going on right now in New York has got nothing to do with any bridge loan from the government," he replied. "What's going on in New York is a private sector effort, again, focused on dealing with an important issue that's, I think, important that the financial system work on right now, and there's not more I can say than that....
  • Financial storms claim two more...

    * Financial storms claim two more victims... * Yen and Swiss Francs move back up... * Euro approaches 1.45 before reversing course... * Oil below $100... ** Financial storms claim two more... Good day... The financial storm claimed another victim this weekend as Lehman Brothers Holdings Inc. filed for bankruptcy after being unable to find a buyer. Bank of America, who was rumored to be bidding on Lehman ended up buying Merrill Lynch & Co and AIG Inc. is asking the fed for an emergency loan. All of this financial turmoil has sent the dollar lower vs. most of the major currencies as investors are beginning to realize the situation in the US markets is worse than the rest of the world. Over the past three months, currency traders have rallied the dollar on the basis that the US was in better shape than Europe. They will now need to rethink their strategies, as the past few weekends show just how bad the US financial sector is ailing. And unfortunately, their will likely be more to come. Risk aversion is a popular theme in the markets again, and the purchase of US treasuries actually helped to keep the US$ from falling further....
  • Dollar bulls take a breather...

    * Dollar bulls take a breather... * Paulson is out of control... * From the mouth of babes... * Fingers crossed for Chuck... ** Dollar bulls take a breather... Good day...Just as Chuck predicted, we had a Thundering Thursday yesterday, as thunderstorms moved into the St Louis area early yesterday and are expected to stick around throughout the weekend. Yesterday was a pretty slow day in the currency markets, with the dollar trading in a fairly tight range, but overnight the dollar changed direction and we saw it lose ground across the board for the first time in weeks. This turnaround was seen in the European markets as traders finally started to realize the speed of the increase in the US$ was overdone. But before I get going this morning, I need to run a public service announcement for Chuck. Yesterday's Pfennig announced that the Reserve Bank of New Zealand cut interest rates .25%. This was in error, the bank actually cut .50% to a rate of 7.5%. Chuck realized his error just after hit the send button, and wanted to make sure I let everyone know (He received more than a few emails from readers letting him know his error). The extra quarter point cut was aimed at giving the NZD a good jump start, and Governor Alan Bollard is indicating more rate cuts will be on the way: "We've got room to move,.. We're in a loosening mode." The reaction of the currency markets was the same with a 50 bps cut as it would have been with a 25 bps cut, they sold off the kiwi as the interest rate differentials narrowed....
  • A Huge Data Week...

    * Dollar rebounds... * Big Ben's imagination... * More Risk Events... * Inflation lights a fire under the loonie... ** A Huge Data Week... Good day... And a Marvelous Monday to you! A weekend that was supposed to be filled with rain, was nothing but sunshine, and beautiful days. For once, I didn't make fun of the weather people that make the forecasts! But, as always, it was too darn short! The alarm went off this morning, and for a minute I thought, "to heck with this, I'm going back to sleep!" But, then as always, I got up to start the day. Well... Recall on Friday, the currencies had rallied very strongly on Thursday, and it looked like a reversal of the month-long dollar rally could be at hand... I had this to say in Friday's Pfennig: "But today is a new day folks... And what happened yesterday is now history... The attitudes could change in a NY minute, and the dollar be back in favor. This is what I'm talking about when I say things are less secure. Wishy-Washy market sentiment leads to very volatile markets, and that's what we saw yesterday... Now, let's move on to today, and see what Bullwinkle has up his sleeve. Hey Rocky, wanna watch me pull a rabbit out of my hat?"...
  • Oil Price Slides!

    * Big Ben in a predicament! * The euro retreats after new high... * Retail Sales disappoint! * Yen and francs on the menus again! ** Oil Price Slides! Good day... And a Wonderful Wednesday to you! 3 straight days without rain here in St. Louis! WOW! It did however, rain on the currencies' parade yesterday. About mid-morning, the brakes were applied to the run on the dollar, and the car was put into reverse. Retail Sales disappointed, and PPI is not anything to laugh about... All that and more, as we head into the day after a 15-inning All-Star Game! Front and Center though is the good cop, bad cop thing that played out with Fed Chairman Ben Bernanke (bad cop) and SEC Chairman Cox (good cop)... Big Ben sent the dollar packing in the morning with his statement that highlighted the Fed's predicament... Big Ben noted the parts of financial markets remained seriously disrupted (which screams, no rate hike), but that dollar weakness had helped cause inflation to rise (Here he goes again trying to blame everyone else for the Fed's creation and feeding of inflation... Oh well, this statement screams, no rate cut!). The currencies all took turns taking a swing at the piñata (dollar)... And... It looked like the volcano was about to blow... Oh, I don't know, I don't know, I don't know where I'm a going to go when the volcano blows! (Ahhh, a little Jimmy Buffett on a Wonderful Wednesday!)...
  • Credit Woes Sink The Dollar!

    * No Bailout for Freddie and Fannie... * The euro reaches a new record high! * More risk today... * Aussie hits 25-year high! ** Credit Woes Sink The Dollar! Good day... And a Tip Top Tuesday to you! I thought I would change it up there today... Well... Overnight, we've seen the euro reach a new record high VS the dollar, only to give some of that ground gained back on some weak German data. There was more news yesterday regarding the Freddie and Fannie saga, but I've grown tired of that talk, we dance now! Seriously, though, I have grown tired of all that Freddie and Fannie talk, that I'm going to go through an exercise explaining what GSE's are and then go on with life... So... The euro reached a new record high overnight of 1.6038! WOW! This was reached based on the fears that credit problems in the U.S. are going to put the kyboshes on what little economic growth we now have. But the shine on the euro was rubbed out by a very weak ZEW... German Investor Confidence as measured by the think tank, ZEW, fell to a record low this month on the surging inflation problems, and rising interest rates. So for now, the euro is back below 1.60, but hear me now and listen to me later... This ZEW will soon be in the rear view mirror, and the euro won't have that albatross around its neck as it revisits its overnight high....