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“All this liquidity that they’re creating is not going back to grow the American economy and is going to Asia and other emerging markets where it’s not wanted,” Stiglitz said. “Most of the countries around the world have begun to react. They put in capital controls, exchange rate interventions, taxes on these capital flows -- a variety of interventions.”
Consumer prices rose a more-than-forecast 5.1 percent from a year earlier, a statistics bureau report showed in Beijing today. Producer-price inflation was 6.1 percent, higher than any of 28 economists surveyed by Bloomberg News had estimated.China’s inflation accelerated to the fastest pace in 28 months in November, building the case for Premier Wen Jiabao to raise interest rates again.
The euros divergence from rising US and European equities is growing similar to the divergence prevailing in Jan-April (see 1st red circle) when EURUSD fell 15% and S&P500, Dow-30 and FTSE-100 rose 16%-19%. If the Jan-April pattern repeats itself, then it is feasible to expect equities to catch down with the euro. The fundamental rationale would be based on i) broadening Eurozone concerns weighing on UK and Eurozone banks; ii) prolonged rise in US yields and iii) growing doubts upon the completion of the $600 bln QE2. We stick with our technically negative euro stance based on: i) the inability to regain the all important 55-week MA (1.3370); ii) the inability to regain the Nov 4 trendline. EURUSD eyes short term target fo $1.3070, followed by $1.26 in mid Q1 2011.
CHINA's INCREASE of RESERVE REQMT RATIO is no longer weighing on market sentiment as participants are expecting the more aggressive option of higher interest rates (borrowing and lending). I noted in last night's IMT that a hike in the RRR would be more market friendly than a hike in interest rates. CAD IS STRONGEST CURENCY OF THE DAY so far after Canada trade deficit dropped to C$-1.71 from C$-2.49 bln. EURCAD eyes 1.3280. $EURUSD pressured by improved USD following the $7bln decline in US trade deficit. $1.3160, followed by $1.31.
Dec 9:MORE BAD NEWS FOR EUROZONE; Hours after Fitch downgraded Ireland to BBB+, Irelands centre-left opposition Labour Party said will vote against the EUR 85 bln IMF/bailout package due for approval next week. I stick with my $1.27 forecast (60% chance to take place before year-end)
http://www.fxstreet.com/education/forex-basics/women-in-forex/2010/06/09/
BEIJING - China's central bank said Friday that it would increase the bank reserve requirement ratio by 50 basis points from Dec 20.
It was the sixth such move this year to combat accelerating inflation, as China's consumer price index (CPI), a main gauge of inflation, hit 4.4 percent in October, the highest in 25 months
As you see on this chart,the short arrows represent minimum target measurements.I'll always be happy to take profits just before the minimum target is reached,so don't get greedy.
According to the latest from AAII bullish sentiment surged again to 53%. This is the 14th consecutive week in which bullish sentiment has been above the long-term average of 39%.
“…bullish sentiment is above its historical average for the 14th consecutive week. The last time we saw a longer streak was in 2004, when bullish sentiment stayed above its historical average for 19 consecutive weeks. Optimism is currently more than one standard deviation beyond its historical average, meaning that this is an unusually high reading. This is also the second time in five weeks that optimism has been more than one standard deviation above its historical average. (Bullish sentiment reached 57.6% on November 11, 2010.)
The more notable statistic this week may be the spread between bullish and bearish sentiment, which stands at +30.5 percentage points. Fewer than 15% of all bull-bear spreads throughout the survey’s history have been wider.
The last time we saw a wider spread was on July 8, 2010, when the spread was -36.1 percentage points (bullish sentiment was 20.9% and bearish sentiment was 57.1%.) This occurred just as the market was setting a bottom during the summer months. The last time we saw bigger positive spread (bullish sentiment exceeding bearish sentiment) was on February 22, 2007 when bullish sentiment was 53.9% and bearish sentiment was 22.3%. There was a short-term pullback in the weeks that followed this reading, but the market was higher in the months that followed.”
This week’s Investor’s Intelligence survey also showed an increase in bullishness to 56.3% from last week’s reading of 55.4%. “Buy the dip”, “buy the rip” and “stocks are a win win” seems to be the motto’s of choice these days.
December 9, 2010 20:47 ET: WILL ANOTHER CHINESE TIGHTENING shake off rising markets? The PBOC has raised reserve requirements twice last month after hiking interest rates on October 19. The stepping up of monetary tightening is a result of escalating bank lending and more recently mounting inflationary pressures (CPI at 4.4% in October, expected above 5% in November). The latest sign that PBOC will tighten policy is the cancellation of the 3-year auction after banks refused to buy bills at cheaper yields. The PBOCs refusal to lift yields suggests it will opt towards raising the reserve requirement ratio (RRR) instead of raising interest rates. If the PBOC goes with only the RRR and leaves interest rates unchanged, then the negative market reaction may be relatively modest. An actual hike in interest rates would have more of an impact in the form of stronger USD vs. EUR, NZD and AUD, and a short-lived pullback in yen crosses such as 62 in NZDJPY. Nonetheless, in the medium-term, I remain bullish USDJPY, expecting 85.90. |
BEIJING — Before the opening bell sounded on the New York Stock Exchange on a recent Tuesday, a group of fresh college graduates clocked in at a small trading firm on the outskirts of this capital city. http://www.nytimes.com/2010/12/10/business/global/10daytrade.html?_r=2&ref=global
The Irish Government agreed overnight to allow a full parliamentary vote on the EU/IMF bail-out package and this news will probably keep the EUR on a bearish footing for the next few sessions. Other potentially bearish factors are the Chinese rate hike (which is pretty much built into the market) and general risk-aversion, as it’s Friday.http://www.forexlive.com/152796/all/session-outlook-eurusd-12
