| ECB’s Draghi Stresses Signs Of Prudent Optimism In Eurozone |  |
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Posted: 13 Oct 2012 12:30 AM PDT
– But Says Eurozone Recovery To Be Slow, Sluggish
TOKYO (MNI) – There are indications that cautious optimism is warranted in the Eurozone even if the recovery of the area’s economy will only be weak, European Central Bank President Mario Draghi said Saturday. Speaking at a press conference on the margins of the International Monetary Fund and World Bank annual meetings, Draghi spoke at length of “signs of prudent optimism.” Noting that Eurozone growth in the third quarter “is poised to be weak,” Draghi predicted that “the recovery next year will be slow and sluggish.” The feeble economy “is not conducive to think that inflation is on the upside,” he said. Despite volatile energy prices and the fact that “we have the risk that indirect taxes … could create an upside risk,” overall risks to price stability remain broadly balanced. Explaining his cautiously optimistic assessment, Draghi noted the “very significant” ongoing fiscal adjustment in euro area member states, “especially if we compare this response to what is happening in other parts of the world.” “The second reason for being relatively positive is that European banks have shown (themselves) to be pretty resilient,” he continued. “The leverage ratio has gone down and all in all the credit flows for the average of the area are at about the same levels as they were in 2008.” Nonetheless, he conceded that the averages mask the high disparity across the area and must thus be regarded “with a little bit of caution.” A further factor meriting optimism is the “enormous progress” achieved in the area of governance over the last six months, Draghi said. In this context, he urged again that the European Council regulation that would allow preparatory work on a banking union be approved by January 1. Continuing his argument in favor of cautious confidence, Draghi said that “in the last three months, financial markets seem to be less volatile. This is probably also due to the new measures announced by the (ECB) Governing Council, the so-called OMT (Outright Monetary Transactions), but also because this progress at national level, at the European level, is being acknowledged.” Finally, he noted the progress among euro area member states in the process of economic rebalancing, arguing that current account deficits have gone down not only because of reduced imports as a consequence of feeble economies, but also because of improved exports. “The process of regaining competitiveness is in motion and competitiveness is improving for these countries,” he affirmed. Asked whether the OMT could be considered a failure if no country were to use it by the end of the year, Draghi responded with some irritation. “Significant progress has been already achieved by the very presence, the very announcement that the fully effective backstop is in place, geared to remove tail risks from the euro area,” he said. The euro area is seeing real money return, he added. The ECB would not, however, seek to replace governments, he stressed. Draghi observed that monetary policy is effective only if the use of OMT is subject to conditionality. The ECB considers conditionality essential in delivering price stability and in maintaining its independence. Compared to what one might have expected at the end of last year, the banking system of the euro area is seen to be more resilient, he said. “By the end of last year there was a strong danger that the deleveraging process could become disorderly, with very negative consequences on growth,” he said. “Now, in October of this year — also, I think, really thanks to the two LTROs that took place – we can say that this process was not disorderly. It was actually an orderly deleveraging process.” –Frankfurt bureau tel: +49-69-720-142. Email: dbarwick@mni-news.com [TOPICS: M$X$$$,MT$$$$,M$$EC$,MGX$$$,M$$CR$]    |
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Posted: 12 Oct 2012 11:20 PM PDT
TOKYO (MNI) – International Monetary Managing Director Christine
Lagarde on Saturday said she expects the Bank of Japan to conduct further monetary easing “as appropriate.” She also told reporters after a meeting of the International Monetary and Financial Committee that the enactment of sales tax hike and social security reform bills by Japan’s parliament in August was “in our view a very significant step toward fiscal consolidation.” The planned gradual increase in the 5% consumption tax to 10% by October 2015 is “heading in the right direction and at the right level” for indirect taxation,” she said. Globally, Lagarde said, fiscal adjustment is “not one size fits all” and has to be made based on each country’s economic scale and weight of debt. The world cannot eliminate all uncertainties, she said, adding that “there is no cure for that.” But the IMF chief also said through the annual meetings of the IMF and World Bank in Tokyo this week, “We have narrowed down the degree of uncertainties.” The IMFC communique said: “The implementation of credible medium-term fiscal consolidation plans remains critical in many advanced economies. Fiscal policy should be appropriately calibrated to be as growth-friendly as possible.” “In Japan, securing funding for this year’s budget and further progress in medium-term fiscal consolidation are needed,” it said. Before implementing the two-step sales tax hike — to 8% in April 2014 and to 10% in October 2015 — Japan’s government has to confirm whether the economy is recovering steadily. Meanwhile, the BOJ has vowed to fight deflation with zero interest rates, large amounts of financial asset buying and low interest loans to banks that lend or invest in innovative and growth-oriented areas. The central bank has raised the target for its financial asset buying to Y80 trillion through three increases this year. tokyo@marketnews.com ** MNI Tokyo Newsroom: 81-3-5403-4833 ** [TOPICS: M$J$$$,M$A$$$,MMJBJ$,MGJ$$$]  |
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Posted: 12 Oct 2012 11:10 PM PDT
TOKYO (MNI) – German Finance Minister Wolfgang Schaeuble said
Saturday that a first glance at proposals for a Greek debt-buy back program leaves questions unanswered. “I have made a habit out of not immediately commenting on every suggestion that is fleetingly read,” Schaueble said during a press conference on the sidelines of the International Monetary Fund and World Bank Group meetings here. “I would have some questions about this proposal for which I do not see any answers to.” Schaeuble also stressed the importance of Greece remaining on track in its current program, without adding new measures, to ensure markets regain confidence in the country’s commitments. ECB executive board member Jorg Asmussen told the German daily Sueddeutsche Zeitung that the goal of a Greek buy-back plan would be to get it on track to meet a key target set out in an international bailout. “At the moment it looks like Greece’s debt level will rise to well above the target of 120 percent of GDP by 2020. Thus, one has to consider elements that could make it possible to achieve that goal. One possibility would be buying back debt,” Asmussen told the paper. “A sustainable solution [for Greece] is key, the Troika is working intensively on it,” Schaeuble said. “The agreement that we made is still sound. we will discuss it when the Troika has completed its report.” During his briefing, Schaeuble observed that there is increasing recognition among advanced economies that sustainable long-term growth is more important that manipulations to spur short-term growth. Schaeuble stressed that there is no fundamental disagreement between himself and IMF Managing Director Christine Lagarde on the need for fiscal adjustments. “Deficit reduction must be. Nobody wins confidence in your commitment to reduce deficits if you increase them in the short-term because you run in the wrong direction,” Schaeuble said. The necessary speed of these steps depends on each country, he added. –Frankfurt bureau tel.: +49-69-720 142 Email: jtreeck@mni-news.com [TOPICS: MT$$$$,M$X$$$,M$G$$$,M$$EC$,MGX$$$,MFX$$$,MFGBU$]  |
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Posted: 12 Oct 2012 10:50 PM PDT
- Stresses Reduce Budget Deficit Only Over ‘Medium-Term’
By Steven K. Beckner TOKYO (MNI) – As the annual meetings of the International Monetary Fund and World Bank concluded Saturday, the IMF’s policymaking body called on principle member nations to “act decisively” to revive faltering global economic growth. While large budget deficits need to be reduced, that should only happen over “the medium-term” to avoid putting an undue drag on growth, the IMF’s policymaking International Monetary and Financial Committee said in a communique. The IMFC urged the United States to avert the “fiscal cliff” of automatic tax hikes and spending cuts due to take effect in January and to raise the federal budget ceiling. It called on the 17-nation euro zone to move beyond the emergency monetary stimulus measures taken by the Europoean Central Bank and toward greater fiscal union. European banking reforms are also needed, the communique said. Japan was told it needs to pursue medium-term fiscal consolidation as well. Emerging market and developing countries, some of whose policymakers have pointed accusing fingers at the advanced nation’s central banks for their economic woes, need to introduce undefined “flexibility” into their policies, the IMFC statement said. The IMFC, whose 24 members represent 188 nations, is chaired by Tharman Shanmugaratnam, Singapore’s deputy prime minister and minister for finance. The communique begins with a terse and gloomy description of the global economy, reflecting the IMF’s own downgrading of its economic forecasts. “Global growth has decelerated and substantial uncertainties and downside risks remain,” it said. The IMFC noted that “key policy steps have been announced,” but said “effective and timely implementation is critical to rebuild confidence.” “We need to act decisively to break negative feedback loops and restore the global economy to a path of strong, sustainable and balanced growth,” the communique said. “Advanced economies should deliver the necessary structural reforms and implement credible fiscal plans,” it continued. “Emerging market economies should preserve or use policy flexibility as appropriate to facilitate a response to adverse shocks and support growth.” The communique elaborated somewhat, but did not go into great detail, as it addressed what “advanced economies” and “emerging market and developing countries” need to do. Among the first group, the IMFC said “there is a need to secure a sustained recovery from the crisis.” In an obvious reference to asset purchase schemes recently announced by the Federal Reserve, the European Central Bank and other central banks, the IMFC noted that “further monetary easing has created more accommodative financial conditions.” “In the euro area, significant progress has been made,” the communique said, adding that “the ECB’s decision on Outright Monetary Transactions and the launch of the European Stability Mechanism are welcome.” “But further steps are necessary,” it said. “We look forward to timely implementation of an effective banking and a stronger fiscal union to strengthen the monetary union’s resilience, and structural reforms to boost growth and employment at the national level.” In the budgetary realm, the IMFC said “the implementation of credible medium-term fiscal consolidation plans remains critical in many advanced economies.” But it emphasized that “fiscal policy should be appropriately calibrated to be as growth-friendly as possible.” The fiscal prescription, which dovetials with the IMF staff’s own recommendations, reflects the belief on the part of U.S. Treasury Secretary Timothy Geithner, Fed Chairman Ben Bernanke and others that moving too swiftly to reduce massive deficits would endanger recovery. Specifically addressing U.S. fiscal problems, the communique said “resolving the fiscal cliff, raising the debt ceiling, and making progress toward a comprehensive plan to ensure fiscal sustainability are essential.” “In Japan, securing funding for this year’s budget and further progress in medium-term fiscal consolidation are needed,” the IMFC said. Finance ministers of some of the emerging market countries have been vocal in recent days about how the economic and financial problems of the advanced countries are spilling over into their economies. There have also been complaints that monetary easing by the Fed and other central banks is causing flows of money into poorer countries in pursuit of higher yields, resulting in upward pressure on their prices and currencies and hurting their exports. The communique addressed these concerns, but seemed to suggest that emerging markets would be better off if they did not try to maintain rigid exchange rate regimes. “Activity is slowing in emerging market and developing economies, reflecting weaker external and domestic demand and, in some cases, policy tightening to address inflationary pressures,” it said. “Risks are compounded for some countries by falling prices for non-food commodities and upward price pressures on some food items,” it added. The IMFC advised that “these economies will need to ensure flexibility in policy implementation to support growth, consistent with global rebalancing.” “The potential impact from large and volatile cross-border capital flows should be closely monitored,” the communique added. The IMF has been pushing to increase surveillance of countries’ foreign exchange policies, and the communique stated, “We welcome the strengthening of the IMF’s surveillance framework through the adoption of a new Integrated Surveillance Decision, a Financial Surveillance Strategy as well as the launch of a pilot External Sector Report.” “These initiatives will bring together bilateral and multilateral perspectives in the Fund’s policy advice and support better assessment of global and country-level risks and spillovers to economic and financial stability,” it said. “We look forward to the evenhanded and effective implementation of the strengthened surveillance framework and will assess progress at the next Annual Meetings.” [TOPICS: M$U$$$,MFU$$$,MGU$$$,M$$CR$,MT$$$$,MMUFE$,M$$BR$]  |
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Posted: 12 Oct 2012 05:10 PM PDT
– Though Unemployment Down, Job Growth Not Fast Enough
– Need ‘Balanced” Approach To Reducing Budget Deficit By Steven K. Beckner TOKYO (MNI) – U.S. Treasury Secretary Timothy Geithner pointed to “renewed strengths” in the U.S. economy despite what he conceded is inadequate job growth, but blamed European “headwinds” and other global forces for impeding faster growth. Geithner also acknowledged the need for the United States to reduce its huge budget deficit in a “balanced” way as he addressed fellow finance ministers and central bankers on Saturday during the concluding day of the annual meetings of the International Monetary Fund and World Bank. Meanwhile, he freely dispensed advice to China, Europe and emerging nations. The first needs more domestic demand, the second greater financial and fiscal integration, the third greater exchange rate flexibility, he said. With the U.S. presidential election less than a month away, the Obama administration’s top economic spokesman put a largely positive spin on the United States’ economic performance and suggested that shortfalls in growth and job creation have been due to factors beyond the Obama administration’s control. “The U.S. economy has been expanding at a moderate pace since 2009,” he said in remarks prepared for delivery to the IMF’s policymaking International Monetary and Financial Committee. “We have made significant progress in addressing the causes of the financial crisis — private savings have increased; private debt has decreased; and the financial system is now much stronger.” The U.S. is “continuing to recover from the most severe financial crisis in several generations,” Geithner said, adding that “real economic activity has expanded consistently for 12 straight quarters.” He also said “banks are much better capitalized, more conservatively funded, and less leveraged,” that “credit in the nonfinancial business sector has expanded for the last eight quarters” and that “the private sector has created jobs for 31 straight months.” “The housing sector – while still fragile – is showing encouraging signs,” he added. Geithner went on to speak even more affirmatively about the U.S. economy. “We see renewed strengths across a broad spectrum of the U.S. economy — in energy, autos, high tech, manufacturing, and agriculture, while recognizing the damaging impact of the recent drought,” he said. “Productivity has been strong, U.S. energy costs are falling, and companies are once again investing in the U.S. Exports have been strong. We are building a sounder foundation for long-term growth by undertaking significant structural reforms in our financial, and health sectors.” Geithner was less rosy about labor market conditions: “While our unemployment rate came down to 7.8 percent in the most recent employment report, economic and job growth are not yet strong enough.” “We of course still have more to do,” he continued. “Not just in strengthening the pace of job creation, but also in dealing with our long-term fiscal challenges.” But Geithner suggested that the U.S. economy is struggling in good part because of global weakness. “Although the world economy is expanding and progress has been made since the peak of the crisis, we still face a complicated mix of challenges to achieving stronger global economic growth,” he said. “The nature of the challenges differs across countries and regions, but what is common to us all is the challenge of creating the conditions for stronger demand growth.” Elaborating, Geithner complained that “our recovery, and the global recovery more broadly, face headwinds from Europe” and suggested the continent has more to do on a number of fronts. “Europe has moved forward on a stronger firewall with key tools that provide breathing space to ensure sovereigns retain access to sustainable market financing as they undertake challenging reforms,” he said, noting that “the central bank and governments of Europe are working together in support of a strategy to give more time to the governments that are undertaking difficult reforms, while moving together toward greater financial and fiscal integration — the necessary complements to monetary union.” “Europe is also making progress on outlining a road map toward banking union, which is a critical step to ensuring a sustainable long-term framework,” he continued. “This broad framework offers a more promising strategy for addressing the crisis.” “However, what is important is how it will be applied in practice,” he added. Turning to the emerging economies, he said growth has slowed there over the last year, “partly due to the crisis in Europe, but also partly to factors unique to each of the economies.” “Many of these economies are in the process of adjusting policy to boost domestic demand which will help strengthen global growth,” he went on. “This requires structural changes supported by greater exchange rate flexibility, especially in emerging Asian markets.” As for the biggest “emerging market,” China, Geithner was restrained at best in his praise ahead of a delayed determination as to whether Beijing is manipulating exchange rates. “The U.S. has seen some progress toward a more balanced economic relationship with China, though more progress is needed,” he said. “U.S. exports to China have doubled as China’s exchange rate has appreciated by about 11% in real terms against the dollar, while China’s current account surplus has fallen from 9% of GDP in 2008 to less than 3% last year.” “But as China’s slowdown in response to weak export demand highlights, domestic consumption still does not play a sufficient role in driving China’s economy,” he continued. “Progress toward strengthening domestic demand will be good for China, and good for the global economy.” The U.S. Treasury announced Friday that it would delay publication of the semi-annual Report to Congress on International Economic and Exchange Rate Policies of major trading partners “in order to assess progress following the G-20 Finance Ministers and Central Bank Governors Meeting next month.” China’s top economic policymakers were not in Tokyo to hear Geithner’s comments in person, having boycotted the annual meetings because of a territorial dispute with Japan. Geithner voiced support for “rigorous surveillance by the IMF over members’ exchange rate policies, which remain at the core of the Fund’s mandate.” With a “fiscal cliff” looming in January, Geithner did not say what specifically the administration will do to avert the hefty automatic tax hikes and spending cuts, which the IMF and others have warned could push the U.S. back into recession. He contented himself with making a more broad-brush statement about the federal budget. “It is important that we in the U.S. enact a balanced framework to bring down our fiscal deficit and debt over several years, while continuing to provide support for jobs and growth in the short term,” he said. “President Obama has advocated a plan that reduces our fiscal deficits gradually over the medium-term and puts our debt-to-GDP ratio on a declining path through a balanced approach that reduces spending and asks for a modestly increased contribution by the most well-off taxpayers,” he said. “It also preserves our ability to invest in infrastructure, education, research and development.” In the just concluded fiscal year 2012, the U.S. deficit was $1.08 trillion — the fourth straight year of deficits in excess of $1 trillion. [TOPICS: M$U$$$,MFU$$$,MGU$$$,M$$CR$,MT$$$$,MMUFE$,M$$BR$]  |
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Posted: 12 Oct 2012 02:29 PM PDT
It was a choppy week of trading but the best overall trade was short EUR/AUD. The pair bounced 80 pips today but is still down 140 pips on the week.
 You might remember that last week, long EUR/AUD was the best trade. Here is what I wrote then (at 1.2810): There is scope for a pullback to 1.26 and that would be a solid entry point but might be overly optimistic. The upward momentum in this pair is likely to continue as speculators exit large EUR shorts and AUD longs.I said the 100-week moving average was the target and that remains the case. Looking back at the week as a whole, it was a chance to take advantage of similar pullbacks/consolidation. Expect some better trends to develop in the next week or two.  |
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Posted: 12 Oct 2012 01:20 PM PDT
No fresh hints out of the G7 or Japan on intervention but it will be on the agenda on the weekend. USD/JPY range 78.29-46. Cable tested 1.61 but offers stopped the move and the remainder was consolidation around 1.6075. AUD/USD wilted throughout the session. Overnight rumors about a Chinese RRR cut boosted the pair close to 1.03 but they were false and the Aussie bears sold relentlessly down to 1.0217 before at late 15 pip bounce.  |
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Posted: 12 Oct 2012 01:10 PM PDT
By Denny Gulino
WASHINGTON (MNI) – The Treasury Department and the Office of Management and Budget Friday made it official, the deficit racked up in the government’s just-ended fiscal year totaled $1.08 trillion, slightly less than expected, underlining the challenge that faces the nation as big decisions on fiscal policy are forced on Congress in the months ahead. The latest fiscal year’s deficit was $207 billion narrower than last year’s, an improvement buried by the reality it was the fourth-straight annual trillion-plus total of government red ink. Around the edges, AIG’s repayment of bailout funds during the year made the deficit $13 billion less. September’s deficit alone was turned into a surplus, mostly by some calendar shifts that accelerated recurring payments into August. Otherwise somewhat higher tax receipts and lower government expenditures. Payment of interest on the national debt actually was a little less than in 2011, which did almost nothing to reduce the threat that category poses for the future. The annual deficits and the national debt they’ve fed have not yet ratcheted the government’s debt service up into crisis levels. Higher interest rates in the future, though, would boost that government spending on interest a great deal. In nominal dollar terms the fiscal 2012 deficit is the fourth largest since World War II, but in debt-to-GDP terms is much smaller, about 7% vs. 113% right after the war ended, in 1947. When Pres. Obama took office four years ago, the debt was 10.1% of GDP. In the year just passed Social Security spending rose about 3% and Medicare spending rose about 6%. If the deficit stays stable in nominal dollars while the GDP avoids recession and keeps getting bigger, that deficit-to-GDP ratio will keep falling all by itself. Long before it gets down to reasonable levels decades from now, the payments on that debt may have consumed almost every dollar of tax revenue. And long before that happens markets will have marked down the dollar severely and the world, depending on what else is happening at the time, could shun U.S. debt. How long that would take is anyone’s guess but if U.S. debt keeps growing, the analysts say, the path to crisis is inevitable. Any improvement elsewhere in the world, for instance, should there ever be a perception that Europe has begun an authentic rebound from its problems, makes the clock tick faster toward a U.S. debt payment crisis. Meanwhile, as long as the world needs a safe haven and the U.S. needs the support of quantitative easing, a debt payment crisis is put off longer into the indefinite future. As CBO Director Doug Elmendorf showed a University of Michigan audience in September, the portion of all government spending to be devoted to debt service begins to show up as a little green patch on his charts in the middle of this decade and quickly expands from then on. By 2020 debt service alone becomes a sizable chunk of GDP. The debt service load will not be appreciably changed in the next few years regardless of what Congress does. Later on it becomes an existential threat if it is not controlled now. Next up is the “fiscal cliff,” a still ill-defined collection of events that it seems the smart money is betting won’t happen. That’s not because Congress is seen capable of assuming its responsibility for fiscal policy and overcome paralyzing polarity, but because lawmakers will be forced into budget decisions by grim alternatives and coalescing interest groups. Already top bankers Jamie Dimon and Lloyd Blankfein have made high-profile appearances this week on behalf of fiscal sanity. More bankers will follow, as well as appearances by members of a new coalition of top business CEOs who have been organizing a media campaign to commence shortly. Defense contractors have been spending PR money for months, even sending young representatives house to house in Washington suburbs talking about the threat of major job losses should defense spending be cut as drastically as scheduled. One by one interest groups on opposite poles of the political spectrum are expected to become strange ideological bedfellows as they respond to a common threat, severe cutbacks in government spending. Whether their constituents are defense industries or social lifeline groups, the threatened cuts will raise the alarm level week by week. The “Gang of Eight” bipartisan group of lawmakers on Capitol Hill have been meeting in Northern Virginia and other combinations of lawmakers have been talking of compromise despite the pressure not to, and so some estimates are that perhaps three-fourths of the fiscal cliff fight has already been resolved on a theoretical basis. When it comes to counting votes, this and forthcoming efforts on Capitol Hill could count for nothing. Votes are controlled by the leadership and both parties know it is their leadership in the House and Senate that is at stake in the coming battle. Election Day may heighten the paralysis or lessen it to some degree, but both sides have powerful strategies of obstruction to bring to bear whether in the majority or minority. Should President Obama lose the election, he might become even less inclined to compromise in the lame-duck months. Whether the fiscal cliff turns out to be more of a bumpy and bruising trip down a ramp of obstacles that takes months to complete, or whether Congress is galvanized into rapid action, late 2012 and early 2013 will be a time to remember for budget wonks and possibly a much wider swatch of the citizenry. Aside from the dreaded sequester, the national debt subject to the congressional limit on Treasury borrowing, as of Thursday, was $16.13 trillion. When it gets to $16.39 trillion late this year the debt limit will have been reached, but not yet breached. That “drop-dead” date won’t arrive until sometime in the spring, Treasury officials have said, after all of the department’s “extraordinary measures” to prevent default have been exhausted. Bush era tax cuts are set to expire along with 2012, a factor that could cut consumer spending in the New Year. As if the bundle of uncertainty needed to be stuffed with anything else, analysts are pondering what effect the expiration of the FDIC’s TAG program will have. If unlimited deposit insurance is allowed to expire Dec. 31, a massive amount of uninsured deposits, up to $1.4 trillion, will have to find a new home in a matter of weeks. The CBO concludes — and Federal Reserve Chairman Ben Bernanke appears to agree — that currently scheduled sequester levels would trigger a new recession after the 90 days pass it would take the Office of Management and Budget to put them into effect next year. Higher taxes and a possible impasse on raising Treasury’s borrowing limit wouldn’t help. But if the sequester did go into effect as scheduled, cutting government spending by large amounts, the threat of a debt payment crisis would recede. Fiscal policy would have been strengthened and the long-term future would look better. The U.S. could even get its triple A sovereign rating back. Such a sudden improvement in the nation’s fiscal future would leave many victims, a higher unemployment rate and an angry electorate looking for scapegoats. The generation not yet old enough to vote might have a happier long-term future — at the expense of their parents. ** MNI Washington Bureau: 202-371-2121 ** [TOPICS: M$U$$$,MFU$$$,MCU$$$]  |
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Posted: 12 Oct 2012 12:48 PM PDT
A whole 15 pips from the lows!
I’m keeping the rock ‘n roll going with a salute to one of my favorite Aussie bands and a song that certainly applies to trading.  |
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Posted: 12 Oct 2012 12:34 PM PDT
The weekly numbers from the latest Commitments of Traders report:
I’m surprised to see the market jump back so eagerly into EUR shorts but that tells me that smart money is still feeling confident. The bigger takeaway for me is AUD, where the longs are fleeing for the exits.  |
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Posted: 12 Oct 2012 12:11 PM PDT
The deficit has improved compared to last year but any time you’re talking trillions, you should be worried. According to Bloomberg, it’s the fourth-largest deficit since WWII and I believe 2009, 2010 and 2011 were the top three.  |
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Posted: 12 Oct 2012 12:10 PM PDT
By Brai Odion-Esene
CHARLOTTESVILLE, Virginia (MNI) – Richmond Federal Reserve Bank President Jeffrey Lacker Friday said job growth in the U.S. is on a sluggish trend, and said the central bank’s policymaking body should avoid numerical thresholds for monetary policy but use qualitative language to underscore its commitment to price stability. Speaking to reporters after a lunchtime address at the University of Virginia, Lacker was asked about the mixed signals that appear to be emanating out of the jobs market. He said it appeared that in the second quarter job growth was fluctuating “around a sluggish trend,” and with the September jobs report “I’m heartened that seems to be what’s happening.” “I’m heartened we haven’t seen a secular decline in job growth,” he said. Commenting on the push by some Fed officials to tie the future path of monetary policy to the unemployment rate, Lacker said doing so would run the risk of the Fed “overemphasizing” the connection between monetary policy and unemployment. “There is a risk of leading people to believe we can do more about labor market conditions than we really can,” he said. Asked by MNI what he thought of a proposed plan that would make inflation its cornerstone but still with raising employment as the goal, Lacker said he does favor looking for ways to be more transparent about how the FOMC believes it will react to future economic developments. “Having said that, I’m wary about including any numerical thresholds apart from our stated 2% inflation objective,” he added. “The unemployment rate can fall for good or bad reasons,” he argued. An improvement in labor markets could be accompanied by a resurgence in the labor force that keeps the unemployment rate from falling, Lacker added. “So I think picking a single macroeconomic statistic as a summary of labor market conditions is risky,” he said. However, Lacker said it would be valuable for the Fed to emphasize its commitment to price stability in its forward guidance. “We shouldn’t lead people to believe we would wait until we thought we had lost a measure of confidence in price stability before we acted,” he said, as sometimes the Fed might need to act preemptively. While some within the Fed have pointed to the impasse on Capitol Hill as one reason why the Fed must continue to do all it can to help the recovery, Lacker countered that political gridlock “is just a reality we have to accept this economy needs to deal with.” “Political gridlock doesn’t imply that monetary stimulus isn’t inflationary,” he said. “Its like a game of chicken” between Fed and Congress, Lacker said. Taking questions on financial regulation from the audience earlier, Lacker said he does not believe the Dodd-Frank Act has provided the country with “a stable and sustainable” framework for regulating the financial sector. “I don’t think we’ve resolved some fundamental questions,” he said. The focus should be on measures to improve market discipline he said, as opposed to limiting risks that the government might have to bail out in future, and voiced his support for living wills in which failing firms go through unassisted bankruptcy. He projected “further episodes of instability,” unless further action is taken by Congress. –email: besene@mni-news.com [TOPICS: MMUFE$,M$U$$$,MC$$$$,MFU$$$,MGU$$$]  |
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Posted: 12 Oct 2012 12:10 PM PDT
US DATA: Sept budget +$75.0b (vs -$62.8b a yr ago), putting full FY12 at
-$1.089T or about 7% of GDP (vs 8.7% in FY11 and 10% at the worst of the recession). Budget outlook for FY13, begun Oct 1, depends on whether the fiscal cliff is hit on Dec 31 and how long restraint lasts. If there are no policy changes budget should be around -$1T but with full effect of cliff CBO ests -$641b in FY13. As for Sept’12, $26b of the improvement reflected timing shifts vs Aug, and there was $14.8b TARP repayment (AIG stock sale represented $7b of this), a $532m Tsy grab-back in MBS, $6b less UI payments as extended programs ended, and nothing paid to fund GSEs (Sept’11 payment was $7b). Receipts are running +6.4% YOY, but individ. income taxes only +3.7%.  |
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Posted: 12 Oct 2012 11:52 AM PDT
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Posted: 12 Oct 2012 10:52 AM PDT
Gold has broken the lows from earlier this week, slipping to $1754.
 The head and shoulders pattern that targets $1734 continues to develop.  |
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Posted: 12 Oct 2012 10:36 AM PDT
Thanks for hanging out with us all week. I’ll be here until the bitter end of trading, watching to see if AUD/USD can bounce.
In the meantime, lets get warmed up for the weekend.  |
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Posted: 12 Oct 2012 10:27 AM PDT
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Posted: 12 Oct 2012 10:02 AM PDT
Assume he’s talking about the recent proposal for the euro zone to have a budget, but tough to tell from the bare-bones headline.
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Posted: 12 Oct 2012 09:58 AM PDT
Don’t they all?
You know what I’m waiting for? The first country to be downgraded to put out a statement saying “you jokers don’t know the half of it”…  |
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Posted: 12 Oct 2012 09:40 AM PDT
By Brai Odion-Esene
CHARLOTTESVILLE, Virginia (MNI) – Richmond Federal Reserve Bank President Jeffrey Lacker Friday projected the U.S. economy to begin firming in the later part of 2013, as the threat from Europe recedes and consumer spending gets a boost from a jobs market that will continue to heal. In a lunch-time speech at the University of Virginia’s, Lacker also repeated his attack on the Fed’s recent monetary policy measures arguing that the recent aggressive measures by the central bank do not address the core factors impeding a labor market recovery. Lacker is a voter on the Fed’s policymaking Federal Open Market Committee this year, and has dissented at every meeting so far. Giving his outlook for the economy, Lacker said: “My best guess is that growth will begin to firm later next year and continue to improve beyond that.” He said that as U.S. labor markets continue to heal, household confidence should “slowly firm” and bolster consumer spending. Lacker added that while the recession in Europe poses risks for this outlook, “I think those risks will likely dissipate next year as leaders work through the adjustments necessary for creating a new fiscal regime.” Further out, Lacker also has a bullish outlook, declaring that “the fundamental prospects for longer-term U.S. growth remain quite promising, in my view, and are likely to reassert themselves in the years ahead.” With regards to monetary policy, Lacker agreed that low interest rates are needed in the current environment to keep inflation above the FOMC’s 2% target. However, the FOMC’s declaration that conditions will likely warrant rates remaining at exceptionally low levels until mid-2015 is “a highly imperfect way to communicate about future policy.” He warned that such language could be misinterpreted as suggesting a “diminished commitment” on the part of the FOMC to its price stability mandate. “I do not believe my colleagues on the FOMC intended that interpretation,” he said. As for the Fed’s decision to buy $40 billion in mortgage-backed securities a month, Lacker said he believes the benefits of that action are likely to be small as any boost in growth would be accompanied by a rise in inflation. He pointed to factors holding back improvement in the labor market, with housing the primary culprit. While the sector has begun to show some “encouraging signs” he said, it is still coping with a large inventory overhang. Housing investment will continue to underperform, Lacker predicted, until demand catches up with existing stock. He also revisited the debate about structural vs. cyclical factors impeding the labor market, arguing that due to the shift away from residential construction, the skill profile of available workers “has meant that the reallocation and skill mismatch frictions affecting labor markets are at a relatively high level.” “Finally, the political gridlock that has delayed remedies to our unsustainable federal fiscal path has meant paralyzing uncertainty across the vast range of fiscal policy touch points in the economy,” Lacker said. –email: besene@mni-news.com [TOPICS: MMUFE$,M$U$$$,MC$$$$,MFU$$$,MGU$$$]  |
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