US Dollar dings stock market confidence

Posted by Forexsq 1 day 17 hours ago (
img Even when it's going down, the strong dollar scares markets.

The dollar index—down about 2.5 percent in the past week—was flat Tuesday, as traders continue to adjust to the Fed's message on interest rate policy. At the same time, stocks sold off and Treasurys gained, sending yields lower.

Before the Fed sent the dollar reeling last week, stocks were spooked by the currency's quick move higher and its potential to sap profits from foreign operations.

As earning season gets closer, talk of those fears has picked up and is spreading across financial markets. Earnings are expected to be negative for the first time since 2009 in the first quarter, with an estimated 3.1 percent decline in S&P 500 net income, according to Thomson Reuters. That theme—highlighting shrinking profits versus high valuations—could continue Wednesday, as traders also position for the approaching end of the first quarter.

"It's a phobia, but I think it's a legitimate one. That's the key to what was drivi

ECB tells Greek banks to rein in on state debt

Posted by Forexsq 1 day 16 hours ago (
img The European Central Bank has instructed Greece's biggest banks to refrain from increasing their exposure to Greek government debt, according to people familiar with the matter.

The move raises pressure on the cash-strapped government in Athens to find an agreement with its international creditors to unlock billions of euros in bailout funds.

The new restriction from the ECB's bank supervisors, which was approved by the central bank's governing council, was conveyed to the Greek banks in a letter on Tuesday.

It is in line with recent policies undertaken by the ECB to restrict the amount of funding the Greek government can obtain by selling Treasury bills.

The ECB has already set a cap of EUR3.5 billion ($3.8 million) on the amount of T-bills that can be used by Greek banks for funding through the ECB's emergency lending assistance program.

Greece has been locked in tense negotiations with its international creditors including other European governments, the Internationa

Weak euro, QE work magic on German sentiment

Posted by Forexsq 1 day 16 hours ago (
img German business sentiment in March hit its highest level in eight months, the Ifo index showed Wednesday, in the latest sign that a weak euro and monetary stimulus are working their magic on Europe's biggest economy.

The closely watched headline Ifo index rose to 107.9 in March from 106.8 in February and above expectations for a reading of 107.3 by analysts polled by Reuters.

The news is in line with figures from the ZEW institute released last week showing investor sentiment in Germany rose to its highest level in just over a year in March.

The Markit Economics purchasing managers index (PMI) for the manufacturing and services sector, released Tuesday, rose to 54.1 in March from 53.3 in February.

"These numbers – the Ifo today and the euro zone PMI yesterday – show momentum for the region as a whole is strengthening," Daniele Antonucci, European Economist at Morgan Stanley told Fxstay.

"There are three headwinds for the euro zone economy this year – currency weakness,

ECB Said to Raise Cap on Greek Banks to Over 71 Billion Euros

Posted by Forexsq 1 day 15 hours ago (
img The European Central Bank increased the cap on emergency liquidity for Greek banks, two people familiar with the decision said, as it seeks to keep the lenders alive without financing the nation’s government.

The increase to just over 71 billion euros ($78 billion) was approved by the ECB’s Governing Council in a telephone conference on Wednesday, the people said, asking not to be identified as the call was private. The decision comes just after policy makers banned Greek banks from increasing their holdings of short-term government debt.

The ECB is allowing the Greek central bank to fund the nation’s lenders while at the same time striving to prevent them from breaking European Union law by financing the government. The strategy puts pressure on the government to reach an agreement with European leaders on the terms under which they’ll disburse aid payments.

An ECB spokesman declined to comment.

Fed's Evans says strong dollar 'disinflationary'

Posted by Forexsq 1 day 10 hours ago (
img Chicago Federal Reserve President Charles Evans said on Wednesday he was concerned the strong dollar's "clear disinflationary pressure" could get embedded in expectations.

That could make it even harder for the Fed to reach its 2 percent inflation target, he said, although the strength's impact on inflation - lowering the cost of imports - would be short-lived.

Until the Fed was more confident of inflation heading back to the 2 percent area, there was "no compelling reason" to hurry and raise interest rates, he added, urging a delay in rate hikes until the first half of next year.

The dollar index hit a 12-year high earlier this month against a basket of major currencies but has retreated since the Fed downgraded its forecasts for growth, inflation and interest rates last week and chair Janet Yellen cited dollar strength as an influence.

But Evans said it was important to remember the potentially fleeting nature of currency market developments.

"To the extent that whate

Currency War Is Now a Dud as Windfall From Devaluations Vanishes

Posted by Forexsq 19 hours ago (
img Currency wars, it turns out, may not be worth fighting right now.

While weaker exchange rates have at times throughout history helped stoke economic growth by making countries’ exports cheaper, the benefits are becoming hard to find.

Nowhere is this more apparent than in developing nations, where currencies have slumped 24 percent on average against the dollar since 2011. Despite this, their annual export growth rate has slowed to 4 percent in the past four years from 8 percent during the previous decade, according to the CPB Netherlands Bureau for Economic Policy Analysis. In Brazil, the real’s 48 percent plunge since the start of 2011 has done little to revive an economy heading for its worst performance in 25 years.

“The relationship between global growth and trade is breaking down in a way that we cannot apply the past relationship to predict the future,” Stephen Jen, a former International Monetary Fund economist who’s co-founder of SLJ Macro Partners LLP in London, said

How Greece’s Exit From Euro Could Happen

Posted by Forexsq 19 hours ago (
img With the fight to keep Greece in the euro now in its sixth year, everyone is running out of patience. More importantly, Prime Minister Alexis Tsipras’s government in Athens is running out of money.

While bond yields suggest investors expect Greece to stay in the euro, economists such as UniCredit Bank AG’s Erik Nielsen say it may be just a matter of time before he’s forced to print a new currency.

Adopting the euro was always supposed to be a one-way ticket, so there is no legal precedent or political roadmap for an exit. If you’re waiting for a formal announcement of a clear resolution, you may be waiting a long time.

Next steps for Greece range from retaining the euro to catastrophic divorce; half-measures like having multiple currencies circulate, with aid recycled to repay foreign-currency debts, are also in the cards.

Equally unclear is who would tell the world -- and how -- that Greece has entered an economic afterlife. Possible messengers include Tsipras, the Europe

Saudi draws down Forex reserves on oil, data suggests

Posted by Forexsq 15 hours ago (
img Saudi Arabia has begun drawing down its foreign currency reserves for the first time since 2009 to cover a record state budget deficit caused by the plunge in oil prices, data from the Saudi central bank indicated on Thursday.

The central bank's net foreign assets fell 1.4 percent from a year earlier to 2.650 trillion riyals ($707 billion) in February, according to monthly central bank statistics.

It was the first year-on-year drop since February 2010, when Saudi Arabia was affected by the global financial crisis.

How the smart money is set up for a rate hike

Posted by Forexsq 2 days ago (

With the financial community abuzz over a looming interest rate hike by the Federal Reserve, the smart money is betting big on the U.S. dollar instead of Treasurys.

Instead of betting on the price of, say, 10-year U.S. government bonds, prominent hedge fund firms—including Bridgewater Associates, Brevan Howard, Tudor Investment and Moore Capital Management—have serious money on a related currency trade.

They are betting "long" that the U.S. dollar will continue to gain in value as the Fed tightens its monetary policy with a rate hike. At the same time, the funds are wagering "short" that countries in the euro zone, Japan and elsewhere will dilute the value of their currencies with fresh rounds of stimulus and low interest rates.

"The focus is really on what a rate hike means for currency movements," said Eric Siegel, global head of hedge funds at Citi Private Bank.

The most popular trade is to be long the dollar and short the euro.

The consensus view is that the U.S

Goldman: Here's how to play rising interest rates

Posted by Forexsq 2 days ago (
img Investors will be spending much time in 2015 trying to figure out how to play rising interest rates.

According to Goldman Sachs strategists, the answer is fairly simple: Bet on companies that don't see so much turnover in their shares.

Stocks that are held for longer duration in portfolios tend to outperform the broader market when monetary policy tightens, according to a Goldman analysis that peers ahead into an environment likely punctuated by higher volatility as the Federal Reserve comes off its ultra-easy measures.

"Volatility is sharply lower on low turnover stocks than on high turnover stocks, providing for a greater risk-adjusted return," Goldman strategist Elad Pashtan and others said in a recent report for clients. "While seemingly counterintuitive, stocks with very high rates of turnover are more prone to fall during periods of rising volatility and declining liquidity, precisely because these stocks trade more frequently."

The distinction is important as the Fe

Central banks agree new rules for Forex market conduct

Posted by Forexsq 2 days ago (
img Banks must stop traders sharing order information under a new global code of conduct that bans traditional slang usages and gives dealers more guidelines for what they can and cannot say about the world's biggest financial market.

The 8-page document, seen by Reuters, is part of efforts to head off abuses after two years of scandal over market manipulation. It was agreed this month by the foreign exchange market committees run by all of the developed world's major central banks.

It will sit as a global guide on top of the existing codes approved by each committee and also instructs asset managers to work harder at ensuring they are getting the best deal they can on currency transactions for their clients.

"FX market participants are advised to apply the global 'high-level principles' set out in this document to the FX market as it evolves, including with respect to new FX products, processes and technologies," the document, dated March 12, said.

Two years of regulatory inv

Euro shows signs of life against US dollar, Surprise!

Posted by Forexsq 1 day 20 hours ago (
img The euro is making a comeback, surprising trash-talking traders who had been predicting it would soon hit parity with the U.S. dollar.

It traded as high as $1.10 Tuesday, bouncing back from a 12-year low of $1.05 last week.

The euro's mini-surge is due almost entirely to Europe's economy finding its heartbeat again after the eurozone barely dodged a recession last year.

"Signs of improvement in the European economy and the weight of money flooding into European equity markets ... has triggered a savage correction," explained strategist Kit Juckes from Societe Generale. "Many of the euro short-sellers are running for cover."

Fresh data from Markit on Tuesday showed that business activity in the eurozone grew by the most in nearly four years in February. The euro moved higher immediately after the release.

Traders have been betting against the euro and buying the dollar for the last few months based on a combination of three factors that "are clear, and almost universall

Greece running out of time to sway creditors

Posted by Forexsq 1 day 20 hours ago (
img Greece risks running out of cash by April 20 unless it secures fresh aid, a source familiar with the matter told Reuters on Tuesday, leaving it little time to convince skeptical creditors it is committed to economic reform.

After talks with EU leaders including German Chancellor Angela Merkel in the past week, Athens said it will present a package of reforms to its euro zone partners by Monday in the hope of unlocking aid and avoiding a messy default.

"It will be done at the latest by Monday," government spokesman Gabriel Sakellaridis told Mega TV.

Merkel did not reveal details from her meetings with Greek Prime Minister Alexis Tsipras, but she did tell members of her conservative party at a closed-door meeting in parliament on Tuesday that Greece needs to work with the European Central Bank, the International Monetary Fund and the European Commission to unlock the cash injection it needs.

"Time is short," she said, according to party allies.

Comments from the German fo

US Dollar Is Down Again Today

Posted by Forexsq 2 days ago (
img The U.S. dollar is continuing its recent fade on Tuesday morning, falling for the third straight day. The Dollar Spot Index took a sharp plunge in the pre-dawn hours before bouncing back slightly, but is still down on the day.

The USD had been on a months-long tear, but it has recently hit the skids. While some think parity with the euro is still a possibility this year, worries about the Federal Reserve and its (unknown) plan for interest rates appears to have sparked some worries about ongoing dollar strength. Meanwhile, economic data out of Europe continues to look better, helping breath life into the euro.

Greece promises list of reforms by Monday to unlock cash

Posted by Forexsq 2 days ago (
img Greece said it will present a package of reforms to its euro zone partners by next Monday in hope of unlocking aid to help it deal with a cash crunch and avoid default.

"It will be done at the latest by Monday," government spokesman Gabriel Sakellaridis told Mega TV.

Greece's left-wing government and its euro zone creditors agreed last week that Athens would come up with a list of its own reforms, which must achieve a similar budget impact to measures agreed by the previous conservative-led administration.

Athens is rushing to get the list ready before state coffers run empty, which is expected to happen in a few weeks without more aid.

Greek Prime Minister Alexis Tsipras met with German Chancellor Angela Merkel in Berlin on Monday but Sakellaridis said the two only discussed the outline of the reforms without going into depth.

"I believe points of convergence were found," he said.

The reforms are a deeply politically sensitive issue for Tsipras, who stormed to powe

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