Tag Archives: boe

Currency pairs getting punished on central bank comments.

http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech986.pdf

https://www.bloomberg.com/news/articles/2017-06-28/draghi-s-prudence-warning-confirmed-by-reaction-to-his-own-words

 

 

 

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  • 78
    Press conference following the meeting of the Governing Council of the European Central Bank on 4 September 2014 at its premises in Frankfurt am Main, Germany, starting at 2:30 p.m. CET: Introductory statement by Mario Draghi, President of the ECB. Question and answer session. Registered journalists pose questions to Mario Draghi, President…
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  • 76
    Runners have target times, golfers judge themselves by their swing, while Mario Draghi watches a technical measure of inflation expectations used by financial markets. Just one problem: it suggests the European Central Bank president is not achieving his objective – and that markets’ fears of eurozone deflation are mounting. Since…
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  • 74
    Press conference following the meeting of the Governing Council of the European Central Bank on 6 March 2014 at its premises in Frankfurt am Main, Germany, starting at 2:30 p.m. CET: Introductory statement by Mario Draghi, President of the ECB. Question and answer session. Registered journalists pose questions to Mario…
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Why you should care about bonds even if everyone is talking about stocks

The US stock market gets all the attention, but the bond market is where the real fortunes are made. Chris Arnade, a former bond trader, describes the unsmiling, powerful markets that move companies and governments

On Wall Street, nearly everybody trades either stocks or bonds. Stock traders are the smiling guys with short hair, button-up blue Brooks Brother shirts, and dark navy pinstripe suits. Bond traders are the same guys, only without the smile.

Stocks do well when the world is doing well and bonds mostly do well when things are going badly. This makes bond traders widely disliked. It is not cool to smile when things are going badly for everyone else.

I traded bonds for 20 years. During that time, countless friends, relatives, friends of relatives, drunk strangers and strange drunks asked me: “What stock should I buy?”

Nobody asked me about bonds. Maybe I should have smiled more.

Stocks seem easy. They are a single price that tells a story on how a company is doing: Apple at $100? Great! Bank of America at $15? Not so hot.

Bonds don’t seem easy. They have a yield, they have price, they have maturity, and they have a coupon. There are government bonds, there are corporate bonds, there are bonds issued by cities. Bonds are individual contracts to pay back a debt. They have a lot of moving parts.

Stocks are how you make money and bonds are how you borrow money. Everybody likes making money, nobody likes borrowing money.

bonds
Specialist Henry Becker, left, directs trading at the post that handles AIG on the floor of the New York stock exchange. Stocks extended their decline and bond prices jumped a day after Wall Street’s steady collapse on the week of the crisis.

http://www.theguardian.com/business/2014/nov/03/bond-market-matters-talking-stocks

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  • 52
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  • 50
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  • 49
    The European Central Bank announced some measures to ease monetary policy two weeks ago. The euro had been on a downtrend since May and by these measures the ECB increased its support to the economy. The result? Two weeks later, EUR/USD stabilized just above 1.35. This week’s Eurozone economic calendar…
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  • 47
    http://www.bankofengland.co.uk/publications/Documents/speeches/2017/speech986.pdf https://www.bloomberg.com/news/articles/2017-06-28/draghi-s-prudence-warning-confirmed-by-reaction-to-his-own-words      
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Scottish independence special

Scottish independence: Foreign investors desert British economy amid fears of ‘yes’ vote

Up to £12bn withdrawn as Japanese bank Nomura warns of possible sterling ‘collapse’

http://www.independent.co.uk/news/uk/scottish-independence/scottish-independence-foreign-investors-desert-british-economy-amid-fears-of-yes-vote-9720967.html

Scots, What the Heck?

Comparing Scotland with Canada seems, at first, pretty reasonable. After all, Canada, like Scotland, is a relatively small economy that does most of its trade with a much larger neighbor. Also like Scotland, it is politically to the left of that giant neighbor. And what the Canadian example shows is that this can work.

http://www.nytimes.com/2014/09/08/opinion/paul-krugman-scots-what-the-heck.html?_r=3

Scotland far closer to sovereignty than Quebec as Marois heads to Edinburgh for meeting with separatists

The Parti Québécois long served as a source of inspiration to Scottish nationalists looking to achieve independence.

http://fullcomment.nationalpost.com/2013/01/27/graeme-hamilton-scotland-far-closer-to-sovereignty-than-quebec-as-marois-heads-to-edinburgh-for-meeting-with-separatists/

Scottish independence: have we seen these tactics before in Québec?

As the yes side gains momentum, parallels in the response can be drawn to the 1995 campaign in Canada

 

http://www.theguardian.com/politics/2014/sep/07/scottish-independence-tactics-quebec

Let’s push this more and post some more pages

In opinion pieces:
http://wingsoverscotland.com/a-letter-from-quebec/
http://www.newstatesman.com/politics/2012/12/independent-scotland-could-look-wee-canada
http://blogs.lse.ac.uk/europpblog/2014/07/26/what-the-independence-referendums-in-quebec-suggest-about-scotland/
http://www.bbc.com/news/magazine-29077213
http://montrealsimon.blogspot.com/2014/09/why-scottish-referendum-is-not-quebec.html

On Risks,
http://www.independent.co.uk/news/uk/this-britain/how-black-gold-was-hijacked-north-sea-oil-and-the-betrayal-of-scotland-518697.html
http://www.theguardian.com/commentisfree/2014/sep/02/scots-independence-england-scotland
http://www.theguardian.com/politics/2012/jan/14/scottish-independence-alistair-darling
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10652595/Standard-Life-to-warn-of-risks-of-Scottish-independence.html
http://www.bbc.com/news/uk-scotland-26864329

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  • 48
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  • 46
    (Source http://www.independent.co.uk/news/business/comment/david-blanchflower/david-blanchflower-we-should-fear-deflation--not-welcome-it-9986726.html ) The UK isn’t in deflation yet. While central bankers know what to do about stopping inflation, they don’t know what to do about halting deflation. The Swiss National Bank last week abandoned its attempt to defend a currency floor, which caused a sharp appreciation in its currency, which…
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August 13th 2014: Preview: Sterling faces huge event risk

Sterling fundamentals will take centre-stage on Wednesday with high volatility inevitable. The Bank of England inflation report will have a mixed tone and plenty of caveats, especially as Governor Carney will want to keep as much flexibility as possible. While not ruling out a 2014 rate increase, he will again insist that policy is data dependent. Sterling bulls and bears should both be able to find some comfort in the report with the threat of several shifts in direction. The overall tone is likely to be slightly less convincing surrounding the economy and sentiment will already be damaged if there is a negative reading for headline average earnings amid the threat of further underlying profit taking. The best approach looks to be fading any initial headline Sterling spike higher against the dollar. Alternatively, run a limited short Sterling position ahead of the unemployment release with wide stops.

 

Over the first half of 2014, Sterling pushed strongly higher as short-term funds moved aggressively into the currency with stronger growth fuelling expectations of Bank of England tightening. The mood has turned more cautious over the past few weeks with doubts over the sustainability of growth and greater doubts over the interest-rate path. After prepping markets in June for a possible 2014 interest rate increase, Governor Carney failed to follow-through on his hawkish rhetoric.

 

The fundamental reports due on Wednesday will be extremely important for sentiment and Sterling. Markets are not fully pricing in a 0.25% rate increase until March 2015 so there is certainly scope for sharp short-term Sterling gains if there are strong hints over a 2014 rate increase.

 

First up for release will be the latest labour-market data. Markets have almost become immune to strong clamant-count data with declines of over 20,00 every month since July 2013. The unemployment rate is likely to have ticked lower to 6.4% from 6.5%, in theory pushing the economy closer to full employment which could push the Bank of England nearer to tightening. The earnings data will be watched extremely closely and is likely to be the most important element given that the Bank of England is very uncertain how much spare capacity is still available in the economy. A slow rate of earnings growth would suggest that there is still considerable spare capacity even with falling unemployment. Significantly, the consensus forecast is for earnings to fall 0.1% in the year to June which would be an important negative Sterling factor. Concerns over very weak productivity would be a key long-term bearish Sterling influence.

 

One hour after the labour-market data the latest Bank of England inflation report will be released. This provides the bank’s economic forecasts and is the backdrop for yield expectations. The report will be extremely important as the central bank will want to provide the theoretical underpinning and justification for any monetary tightening. With the next report due for release in November, failure to signal a rate hike this month would substantially undermine the possibility of an increase this year.

 

 

 

 

These are several key factors to watch in the inflation report:

 

  1.  The bank will estimate how much spare capacity is still available in the economy. Previously, the estimate was 1-1.5% of GDP. Any increase in this estimate to say 1.5-2.0% would effectively rule out and interest rate increase for 2014, while a reduction in this estimate would make an increase this year much more likely.

 

  1.  The inflation forecasts will obviously be important as they are the bank’s central focus. A projected rate below 2% in two-years time would lessen the risk of an early tightening.

 

  1.  Comments on Sterling will need to be watched closely. The bank expects Sterling strength over the first half of 2014 to dampen inflation. Markets will need to watch carefully whether there are warnings over potential damage to the economy from an over-valued currency and any attempt to talk it down. Any warnings over balance of payments vulnerability will also be important.

 

  1.  International growth forecasts will be important with the bank likely to be more wary over the Euro-zone outlook and wider global trends which will also make it cautious over any early tightening.

 

  1.  Governor Carney’s press conference will need to be watched very closely as the media probes for more decisive rhetoric on interest rates and there is the scope for high volatility during the press conference as well as on the inflation report headlines.

 

Follow breaking news and analysis on Twitter –  Follow @Investicafx

 

http://www.investica.co.uk/marketreport13-08-14.htm

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    Scottish independence: Foreign investors desert British economy amid fears of 'yes' vote Up to £12bn withdrawn as Japanese bank Nomura warns of possible sterling 'collapse' http://www.independent.co.uk/news/uk/scottish-independence/scottish-independence-foreign-investors-desert-british-economy-amid-fears-of-yes-vote-9720967.html Scots, What the Heck? Comparing Scotland with Canada seems, at first, pretty reasonable. After all, Canada, like Scotland, is a relatively small economy that…
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Unprecedented stimulus by the Fed and other central banks made many traditional models useless,

If the insatiable demand for bonds has upended the models you use to value them, you’re not alone.

Just last month, researchers at the Federal Reserve Bank of New York retooled a gauge of relative yields on Treasuries, casting aside three decades of data that incorporated estimates for market rates from professional forecasters. Priya Misra, the head of U.S. rates strategy at Bank of America Corp., says a risk metric she’s relied on hasn’t worked since March.

After unprecedented stimulus by the Fed and other central banks made many traditional models useless, investors and analysts alike are having to reshape their understanding of cheap and expensive as the global market for bonds balloons to $100 trillion. With the world’s biggest economies struggling to grow and inflation nowhere in sight, catchphrases such as “new neutral” and “no normal” are gaining currency to describe a reality where bonds are rallying the most in a decade.

http://www.bloomberg.com/

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