First, bravo to the Bernanke Fed for staying the course and learning from its September mistake: Don’t mislead the markets with a sudden change of direction. It appears that the Fed will provide investors with enough “forward guidance” if they wish to alter the market’s perceptions. FOMC members had plenty of time to dissuade traders if the recent slew of tepid data was going to steer Bernanke and Company away from another cut in QE purchases. The FED erred on the side of consistency rather than swerving to avoid the skidding emerging markets. Again, a FED pause would have further roiled a very nervous global financial market.
Posts Tagged ‘Real’
Notes From Underground: The Power of Big Data In the Time of Correlative Investment
January 30, 2014Notes From Underground: Does the Central Bank of Brazil Get “REAL”?
August 29, 2013Yes, the pendulum of market prices is a cruel mistress. Two years ago, Brazilian Finance Minister Guido Mantega was voicing concerns about the developed economies declaring a currency war on the emerging markets through the use of its quantitative easing programs. The Brazilians reacted by imposing various forms of exchange controls to slow the inflow of “hot money,” as well as cutting Brazilian interest rates. Now that the Brazilian Real has depreciated by 50% since August 2011, the Brazilians believe that they have had enough and want to stem the depreciation because of the inflationary effects of a rapid depreciation. The Brazilian Central Bank (BCB) raised interest rates again last night by 0.5% to 9% in an act to help end the REAL‘s recent downward move. Last week, the BCB announced a large currency intervention package of $60 billion involving swaps and loans to the markets. This program ensures that the Brazilian financial markets will have a steady stream of dollars and will prevent a fear among investors that Brazil will not be able to meet investor demands for currency redemptions.
Notes From Underground: The BOE and ECB Let Us in On Their Secrets
January 9, 2013Thursday brings the announcements from two of the major rate setters in Europe: the Bank of England and the European Central Bank. First the BOE will announce at 6:00 a.m. CST and consensus says the bank will keep rates steady at 0.50% and the QE program at 375 billion pounds. Though the U.K. economy is soft, Governor Mervyn King will maintain a steady path so to keep his options available in case the global economy begins a new downturn. The present BOE head is retiring July 1 so it would be prudent to let his successor have as many tools to work with in a new regime.
Notes From Underground: The Markets Are Wrong (Or Draghi Lets Us Know Who Is In Charge)
October 25, 2012Following up last night’s post, Arthur left a note on the blog linking an article from Bloomberg Businessweek, written by Brendan Greeley. The language of the article is crystal clear and provides another example of a Euro policy maker claiming far more insight than the collective wisdom of Mr. Market. “Investors ,he told the Bundestag, are ‘charging interest rates to countries they perceived to be the most vulnerable that [go] beyond levels warranted by economic fundamentals and justified risk premia. This fear is “unfounded. The market is wrong.'”
Notes From Underground: Brazil Shaves Their Rates Unexpectedly
September 1, 2011First of all, NOTES will be on HIATUS for a well deserved rest from the turmoil of global events and the chaotic impact they have had on markets.
Notes From Underground: Let’s Make A Deal … But Will It Be The Full Monty?
July 31, 2011DON’T SPEAK TOO SOON
FOR THE WHEEL’S STILL IN SPIN
AND THERE’S NO TELLIN’ WHO
THAT ITS NAMIN’
FOR THE LOSER NOW
WILL BE LATER TO WIN
FOR THE TIMES THEY,
THEY ARE A-CHANGIN’
The markets have greeted Sunday’s purported U.S. budget deal with a great sigh of relief as the S&P futures have opened 1.5% higher. At this moment it is difficult to determine what exactly has been agreed. It seems that Boehner was able to placate the “TEA PARTY” caucus for the moment–enough to get some compromise.
Notes From Underground: The Swiss are yodeling about the strength of the FRANC; Brazil wants the capital markets to get REAL
January 10, 2011There were a few stories today about the SWISS complaining about the negative impact the FRANC‘s record strength is having on the economy. Both Bloomberg and the Financial Times ran articles citing Swiss policy makers and SNB officials raising the issue of currency strength and the possible need for intervention to halt the FRANC‘s rise. In an article by Haig Simonian in the FT, he details the high cost of SNB intervention on the CANTONS. Under Swiss law, the central bank disperses a share of its annual gains to the different CANTONS to help them meet their budgets. This year, SNB has a sizable loss of 21 billion FRANCS through November from foreign exchange and an overall loss of 8.5 billion FRANCS because of windfall gains from GOLD and other trading.
Notes From Underground: The markets will labor with the unemployment report
January 6, 2011Let me state out again as to why the FOREX markets are going to be a difficult investment in 2011. The emerging markets and commodity-based currencies have been the repositories of global capital seeking to take advantage of the Chinese and India growth phenomena without having to actually invest in the countries themselves. If you like China, buy the Australian equity or currency as it provides a proxy on Beijing’s growth policies: A classic case of providing picks and shovels rather than mining yourself.
Notes From Underground: In a tribute to the Chantays–PIPELINE
January 2, 2011No major stories this New Year’s weekend. Dilma Rousseff was sworn in as the new president of Brazil and spoke to the need to continue the policies of LULA. She said her influence will be on battling inflation but the markets will watch her cabinet’s actions as she has also voiced concern about the rapid appreciation of the REAL, as the Brazilian currency has appreciated 39 percent during the last two years. The strong REAL has begun to hamper the Brazilian equity markets as it was up a mere 1.25 percent in a year that global commodities were the star performer. Brazilian debt markets are anticipating rates to rise this year so our eyes will be on the Brazilian central bank and watching to see how aggressive it is in stemming inflationary pressures.