Trade Hacking

The Trader's Edge

International Markets

3 things you need to know about the tumbling euro

The euro hit a 12-year low vs the dollar Wednesday, continuing a dramatic slump for the single currency. It’s the biggest story in the financial markets today (so far at least) so here are three things you need to know about the tumbling Euro:

Peter-Schiff#1: The dollar bears were dead wrong. The dollar hasn’t just rallied vs the euro…it’s on a tear vs. almost every other major currency. The lesson here: folks like Glenn Beck, Peter Schiff and many others who implored you to dump your dollars, stock up on canned goods and buy gold are just modern day snake oil salesman — they also have a political ax to grind vs. an economic one. The hard core dollar bears weren’t just concerned about ‘Helicopter Ben’ they also believe President Obama was a foreign-born, Muslim socialist (or worse, a Commie!) bent on destroying the greenback..and the American way of life.

(Update: A spokesman for Peter Schiff responded to the above, writing: “[Peter] says that Obama is a socialist…but he calls all democrats, and a good portion of republicans, socialists. There is nothing special about Obama on that front. He never said anything about Obama being foreign born or a Muslim, or bent on purposely destroying America or its way of life. He does believe that big government policies and central bank activism will destroy the country, but not because the policy makers want that outcome, but because they simply don’t understand the consequences of their actions.”)

#2 European Central Bank President Mario Draghi is a master manipulator. In June 2012, Draghi famously said he’d do “whatever it takes” to save the single currency. Talk may be cheap but that actually bought the ECB two-and-a-half years to think about, plan and (finally) push forward with a quantitative easing program. On Wednesday, Draghi said QE is working and having a “beneficial impact” and starting to affect the real economy in Europe. Amazing! The program only started on Monday — three days ago —  and Draghi is already declaring victory.

As evidence, the ECB chief cited “the so-called surprise index that compares actual macroeconomic data with consensus estimates of market analysts.”

In other words, sentiment about Europe’s economy got so bad that recent “green sprouts” look like tall timber – at least that’s what Mario Draghi wants you to believe.

j_yellen#3 Janet Yellen is watching. If Janet Yellen were to take a page from Draghi’s book Jawbone: How to move markets without actually doing anything, she’ll remove the “patience” language from the Fed statement next week and allow subordinates like St. Louis Fed President James Bullard to continue talk about the need to raise rates…but not actually do anything until late 2015 at the earliest.

Yellen remains rightfully concerned about lackluster U.S. wage growth and that ‘official’ inflation rates around the global remain well below 2%. Despite improvement in the U.S. economy, notably on the jobs front, Yellen likely agrees with Jason Furman, chair of the White House Council of Economic Advisers, who writes “there is more to do” to help middle class Americans in today’s WSJ.

Oh, and the Fed chair has got to be concerned about how just mere speculation of a Fed rate hike has sent the dollar soaring, especially given that 23 other central banks have eased monetary policy this year. The notion that Fed will be going against the global monetary policy grain and raise rates is spooking the stock market because a strong dollar makes it harder for U.S. multinationals to compete with international rivals and higher interest rates pose competition for stocks generally.

(As an aside, the euro’s weakness and signs of life in the EU are prime reasons why a lot of savvy investors like George Soros and Warren Buffett have been making bets on Europe, based on recent 13-F filings.)

Finally a bonus thing to know: The euro hasn’t been this cheap in 12 years and seems almost certain to hit parity with the buck by Labor Day. That means now is a great time to book your dream vacation to Europe as the dollar will go a lot further across the pond than it did six or 12 months ago. The only downside, there will be a lot of other Americans in Europe this summer.

And, yes, I know that’s four reasons but I get paid in dollars so am feeling flush today.

Source:  Yahoo! Finance (finance.yahoo.com)

Asia shares skid to 3-1/2-year lows on China anxiety

TOKYO (Reuters) – Asian shares skidded to 3-1/2-year lows and the dollar sagged on Tuesday, pulled down by a sharp losses on Wall Street after weak Chinese data rekindled worries about its fragile economy.

Commodities struggled after fears of weaker demand pushed them to multi-year lows overnight. Adding to the gloom, commodity trader Glencore’s Hong Kong-listed shares were around 28-percent lower on Tuesday, after its London-listed stock plunged on debt worries a day earlier..

commoditiesMSCI’s broadest index of Asia-Pacific shares outside Japan slumped 2.2 percent, touching its lowest levels since June 2012 and extending early declines after Chinese shares opened lower.

China’s blue-chip CSI300 index and the Shanghai Composite Index (.SSEC) were both down 1.8 percent.

Japan’s Nikkei stock index (.N225) tumbled 2.8 percent to 8-month lows.

“There is a lot of red in Asian equity markets at the moment,” said Martin King, co-managing director at Tyton Capital Advisors.

“Disappointing industrial profits in China continue to bolster concerns about growth and many investors are taking profits from the Nikkei and sitting in cash and alternatives, or repatriating capital to western markets in a perceived flight to quality.”

Chinese industrial companies’ profits fell at their fastest rate in four years, official data showed on Monday, sparking fresh fears about the strength of that country’s economy ahead the final reading of China’s Caixin Purchasing Managers’ Index on Thursday.

nyseOn Wall Street on Monday, major indexes all closed sharply down. The S&P 500 index (.SPX) hit a one-month low on bullish U.S. consumer spending data in August as it raised concerns the Federal Reserve could hike rates at a time of slackening global growth.

The Fed held off from raising interest rates at its meeting earlier this month, citing worries about the global economy, particularly China.

But New York Fed President William Dudley said the central bank remains on track for a likely rate hike this year and could move as soon as next month.

John Williams, head of the San Francisco Fed, also signaled support for an interest rate hike this year, though Chicago Fed chief Charles Evans sounded a far more dovish tone.

“Markets have heard such talk before and with equities under pressure, it was hard to take rate hike talk seriously,” Sean Callow, senior currency strategist at Westpac in Sydney, said in a note to clients on Tuesday.

U.S. non-farm payrolls on Friday could add more clarity to the timing of a U.S. policy move, and prop up the sagging greenback.

us_savings_bondsFor now, lower U.S. Treasury yields continued to pressure the dollar, as investors sought the safety of fixed-income assets.

The yield on the benchmark U.S. 10-year note stood at 2.084 percent, below its U.S. close of 2.095 percent on Monday.

The dollar was down about 0.2 percent against its Japanese counterpart at 119.70 yen (JPY=), well below Friday’s high of 121.24. The euro slipped about 0.1 percent to 134.68 yen (EURJPY=R).

The euro edged up about 0.1 percent to $1.1252 (EUR=), pulling further away from a low of $1.1116 touched on Friday. On Wednesday, a flash estimate of annual euro zone inflation is expected to show a zero reading in September, according to a Reuters poll.

The dollar index (.DXY) slipped about 0.1 percent to 95.905, extending the previous session’s 0.4 percent drop.

Crude oil futures steadied after plunging nearly 3 percent overnight as the downbeat Chinese data fueled fears about global demand.

U.S. crude (CLc1) was up about 0.1 percent at $44.46 a barrel, while Brent (LCOc1) was flat at $47.34.

Source:  www.reuters.com

Trade Hacking © 2015 Terms of Use - Privacy Policy - Disclaimer - Contact Us