Archive for September 2011

New Overnight Developments Abroad - Daily Update

Revived Appetite for Risk, or a Dead Cat Bounce?

September 27, 2011

Markets rallied overnight, relieved at indications that progress is being made by European debt crisis negotiators to bulk up EFSF resources in ways that will not need the approval of national parliaments or continuing heavy participation of the ECB.  Warning: the European debt saga is full of prior instances of dashed hopes.  This week’s better […] More

Central Bank Watch

Turning Point in Israeli Monetary Policy

September 26, 2011

The Bank of Israel surprised analysts with its first announced benchmark interest rate cut since March 2009.  In eight steps during the Great Recession, the key Israeli rate was slashed by 375 basis points from a prior cyclical high of 4.25%.  Israel was also aggressive in tightening subsequently.  A hike from 0.5% to 0.75% on […] More

New Overnight Developments Abroad - Daily Update

Greek Debt Crisis Drags on into a New Week

September 26, 2011

Weekend talks around the IMF/World Bank meetings in Washington failed to produce any dramatic action to stop Europe’s debt crisis.  German Chancellor Merkel said a Greek default is possible.  Investors speculating that such would cut that nation’s debt in half. Stocks slumped in the Pacific Rim but rose so far in Europe.  Share prices dropped […] More

Foreign Exchange Insights and Next Week

Next Week

September 23, 2011

Central banks in Israel and Romania hold interest rate policy meetings in the final week of the third calendar quarter of 2011. A couple of EMU member parliaments will be voting on the EFSF reforms, notably Germany’s. Scheduled euro area data include money and credit growth, unemployment, preliminary September consumer prices, business and consumer sentiment, […] More

Foreign Exchange Insights and Next Week

Unlikely to Stop the Risk Aversion Express

September 23, 2011

Risk aversion, which benefits the dollar and yen, has taken hold of all financial markets, and confidence-boosting factors are nowhere in sight.  First, the economic backdrop among advanced industrialized nations recently began a fifth year of bleakness.  Substantial balance sheet deleveraging remains to be done, and these economies still cannot sustain recoveries without macroeconomic support.  […] More

New Overnight Developments Abroad - Daily Update

Only a Brief Respite after G20 Communique

September 23, 2011

Today is the first day of the semi-annual IMF/World Bank meetings in Washington.  G20 finance ministers and central bankers released a statement overnight that promised a coordinated response to five identified downside risks: Contagion from sovereign debt stresses. Financial systems fragility. Market turbulence. Weak economic growth. Unacceptably high unemployment. European share prices initially rose after […] More

Deeper Analysis

Double Blow for Canada

September 22, 2011

The Canadian economy is getting hit because of its close trade and financial ties with the United States and unfavorable commodity price trends. Canadian real GDP contracted 0.4% at an annualized rate last quarter when net exports exerted a drag of 5.7 percentage points on the growth rate.  The rate of on-year GDP expansion was […] More

Central Bank Watch

South African Reserve Bank Stands Pat for Now

September 22, 2011

South Africa’s repo rate was left at 5.5% for now, where such has been since a 50-basis point cut in November 2010.  650 basis points of easing were administered in nine doses between December 2008 and May 2010.  Although today’s statement cites some potential price risks like the rand’s depreciation of more than 14% against […] More

Central Bank Watch

Dovish Czech Central Bank Statement

September 22, 2011

The two-week repo rate was left unchanged at 0.75%, its level since a 25-basis point cut in May 2010.  The decision was expected and reached by unanimous vote.  At the previous two meetings, by contrast, two of the seven policymakers had dissented in favor of a 25-bp rate hike.   From August 2008 through May 2010, […] More

New Overnight Developments Abroad - Daily Update

A Further Spike in Risk Aversion Amid More Signs of Coming Recession

September 22, 2011

Yesterday’s FOMC announcement citing “significant downside risks to the economic outlook” but not including more quantitative easing received a poor market reaction in the United States and has seen sentiment deteriorate considerable further overnight. The dollar rose 2.5% against the kiwi, 2.1% relative to the Australian dollar, 1.8% against the Canadian dollar and Swiss franc, […] More

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