Portuguese constitutional court rejects some austerity measures in 2013 budget

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• InTrade is dead and it’s never coming back as client funds go missing
• Brent crude oil posts biggest weekly loss since September
• ForexLive Americas wrap April 5, 2013: Jobs report can’t stop USD/JPY
• Portuguese constitutional court rejects some austerity measures in 2013 budget
• Stocks staging a late rally
• Speculators add to euro shorts and pare bets against yen in lastest CFTC data
• Commitments of Traders data coming out in a few minutes
• EUR/USD at the lows of the afternoon, nearing 1.30
• US consumer credit grows most since August
• What to make of the CHF/JPY chart
• Gold higher on expectations the Fed will keep the printing press running
• PIMCO’s Bill Gross says US economy won’t expand more than 2% this year
• Read further and you’ll feel old… Kurt Cobain died 19 years ago today
• Portugal constitutional court will rule on austerity later today
• S&P affirms UK AAA-rating
• European stocks sink further after ECB disappointment
• Time to take a stand on the US economy
• What the latest moves in bonds mean for forex
• Brent crude testing November lows
• Canada Ivey PMI 61.6 vs 52.4 exp

InTrade is dead and it’s never coming back as client funds go missing Posted: 05 Apr 2013 04:27 PM PDT InTrade has completely shut down and hopes of it ever coming back were completely smashed by a Bloomberg report saying $700,000 in customer funds has gone missing. The company is now asking members to accept immediate repayment of half their frozen money and waive claims to the rest on the "solemn promise" that Intrade will try to refund that later. InTrade was a good idea and a helpful way of understanding expectations about political events. It’s an idea I hope will be revived one day but now the InTrade brand is as likely to be resurrected as MF Global.

Brent crude oil posts biggest weekly loss since September Posted: 05 Apr 2013 03:50 PM PDT Brent down $5.90 on the week and it closed below $104.76, which was a support level I mentioned earlier. Brent crude oil daily chart April 5, 2013

ForexLive Americas wrap April 5, 2013: Jobs report can’t stop USD/JPY Posted: 05 Apr 2013 02:33 PM PDT Forex trading headlines for the US session: March Non-farm payrolls +88K vs +190K exp US unemployment rate falls to 7.6% as labor force drops US February trade deficit $43.0B vs $44.6B exp Canadian employment -54.5K vs +6.5K exp Canadian unemployment rate 7.0% vs 7.2% exp Canada Ivey PMI 61.6 vs 52.5 exp Canadian trade balance Feb: CAD -1.02bln vs CAD +0.2 bln exp US consumer credit grows most since August S&P affirms UK AAA-rating Fed's Rosengren says continuing asset purchases through this year is appropriate Portuguese constitutional court rejects some austerity measures in 2013 budget S&P 500 down 0.4% to 1553 GBP leads, JPY lags The jobs report was soft and the reaction was to sell the US dollar because it means Bernanke & Co will probably be buying bonds for the rest of the year. EUR/USD immediately jumped to 1.3020 from 1.2950. It closed just below 1.3000 on late short-term profit taking, weekend worries about Cyprus and the headlines from Portugal, which turned out to be rather benign. Cable followed the euro higher, jumping to 1.5335 from 1.5240. It later hit buy stops above 1.5350 before settling at 1.3535. My biggest takeaway from the day is USD/JPY. The jobs numbers were a negative for the US dollar and the pair hardly had time to break below 96.00 before the buyers jumped in. Afterwards it steadily climbed higher, closing the week at 97.52 — the highest since 2009. One currency that struggled was the Canadian dollar after the dismal domestic employment report. USD/CAD jumped a full cent to 1.0235 but slowly fell back to 1.0175 as stocks recovered from a deep drop at the open. Gold was up $26 to $1581, wiping out more than 61.8% of this week’s losses on expectations of more printing.

Portuguese constitutional court rejects some austerity measures in 2013 budget Posted: 05 Apr 2013 01:02 PM PDT The kneejerk reaction in EUR/USD was lower but it’s bounced back because the first details coming out are things like this: The court rejects cuts in pensioners and civil servants holiday bonus payments What are holiday bonus payments? People get bonuses for going on holidays? And that’s enshrined in the constitution? There could be some more euro volatility as the market sorts through the details but these headlines just crossed on Reuters. Portuguese constitutional court upholds measures on tax brackets with the largest austerity impact Portuguese constitutional court upholds ‘solidarity’ tax on pensions

Stocks staging a late rally Posted: 05 Apr 2013 12:45 PM PDT The S&P 500 is at the best levels since the open, now down 8 points to 1551. It’s helping AUD, CAD and USD/JPY. In a bull market, prices open at the lows of the day and slowly inch higher.

Speculators add to euro shorts and pare bets against yen in lastest CFTC data Posted: 05 Apr 2013 12:38 PM PDT Futures market speculative positioning data from the CFTC as of the close on Tuesday: EUR net short 66K vs short 49K prior JPY net short 78K vs short 89K prior GBP net short 65K vs short 66K prior AUD net long 84K vs long 85K prior CAD net short 65K vs short 63K prior NZD net long 18K vs long 17K prior CHF net short 10K vs short 13K prior US Dollar Index longs at 54K vs 54K prior Looks like the “smart money” was adding to EUR/JPY shorts just as it was about to go on the biggest run in years…ouch.

Commitments of Traders data coming out in a few minutes Posted: 05 Apr 2013 12:26 PM PDT Should be out around the bottom of the hour.

EUR/USD at the lows of the afternoon, nearing 1.30 Posted: 05 Apr 2013 12:08 PM PDT I suspect short-term euro buyers are clearing out ahead of the weekend. There is some chatter about turmoil in Cyprus and the Portuguese constitutional court decision is imminent. The risks of negative news coming out of Europe on the weekend is higher than something upbeat so it makes sense to see a slide into the weekend. In EUR/USD, 1.30 is an important psychological level but a close above/below isn’t particularly important.

US consumer credit grows most since August Posted: 05 Apr 2013 12:01 PM PDT US consumer credit rose $18.14B in February Almost all the gain ($17.6B) was in non-revolving credit If you can’t make an economy work with money that was earned, you can always try to make it work with borrowed money.

What to make of the CHF/JPY chart Posted: 05 Apr 2013 11:15 AM PDT The yen got crushed on every cross this week but the biggest gainer was a bit of a surprise — the Swiss franc. For so many years the yen and Swiss franc were attached at the hip but central banking hijinks have broken the spell. This week CHF/JPY gained a colossal 4.8% to be the biggest percentage move in the market. The chart is uber-bullish. After touching the lowest since March 1 on Tuesday, the pair rallied more than 500 pips to the highest since Aug 2011. And if the pair closes near here it will be the highest weekly close since 2008. The problem with looking at CHF charts is that the franc is manipulated. Some people believe that charts can account for everything but I think outright manipulation is an exception. Basing it on the chart alone, I would suspect CHF/JPY was headed to 108.75 and probably higher. That might be the case but it’s tricky to predict because the Swiss franc can’t rise much more without euro strength. So the next move in CHF/JPY depends on EUR/JPY. We can see that this pair has gained 600 pips this week but has not (yet) broken above the February highs. On balance, I think it’s highly likely that EUR/JPY breaks out similarly to CHF/JPY but with the February highs just 100 pips away the risk/reward for longs isn’t right until it breaks out.

Gold higher on expectations the Fed will keep the printing press running Posted: 05 Apr 2013 10:36 AM PDT Today’s non-farm payrolls report mean Fed officials will probably cut back on talk about tapering asset purchases later this year, as I told Reuters after the report. More printing is a bonus for gold and has helped the metal retrace the losses from the past two days. Today, gold is up $25 to $1579. Gold is now nearing the 61.8% retracement of this week’s declines and I expect that to be a pivot point.

PIMCO’s Bill Gross says US economy won’t expand more than 2% this year Posted: 05 Apr 2013 10:05 AM PDT Gross was on Bloomberg radio today talking about slow US growth: "A 2 percent 'new normal' economy is the best we can expect," Gross said in a radio interview. "The sun isn't going down, but there's certainly an element of dusk to it." Gross noted energy and housing as bright spots but said the impact of those industries will be limited to one or two quarters at best. His comments might not be as bearish as they sound. The current consensus estimate on US growth this year is 1.9% but the Fed is at 2.55% (avg of forecasts). Most forecasts show a trough in Q2 with growth picking up later in the year. Interestingly, following the better-than-expected US trade data today, Goldman Sachs raised its Q1 US GDP estimate to +3.4%.

Read further and you’ll feel old… Kurt Cobain died 19 years ago today Posted: 05 Apr 2013 09:38 AM PDT He died April 5, 1994. I hate to say it because I was a fan but Nirvana’s music hasn’t aged well.

Portugal constitutional court will rule on austerity later today Posted: 05 Apr 2013 09:21 AM PDT Portions of the 2013 budget are before the court, including things like taxes on pensions. If some of the taxes are ruled unconstitutional it would force the government to raise funds in other ways, it could also destabilize politics in the country. A negative ruling could weigh on the euro but I don’t expect it would mean more than 10-20 pips of declines. More background from Bloomberg.

S&P affirms UK AAA-rating Posted: 05 Apr 2013 09:14 AM PDT Ratings agency Standard & Poor’s affirmed the United Kingdom at AAA but says the outlook remains negative. They note that the government remains committed to implementing fiscal reforms. S&P sees the general govt net debt over 95% of GDP Expect the deficit down to 4.2% of GDP in 2016 Negative outlook on the possibility of weaker than expected economic and fiscal performance No immediate reaction from GBP.

European stocks sink further after ECB disappointment Posted: 05 Apr 2013 08:49 AM PDT Rough day for European bourses: Stoxx 50 -1.4% UK FTSE -1.4% German DAX -2.0% French CAC -1.6% Spain IBEX -0.7% Italy MIB +0.7% Draghi hung the market out to dry and the stronger euro makes it worse. The good news is that European bond markets are doing much better.

Time to take a stand on the US economy Posted: 05 Apr 2013 08:28 AM PDT The first quarter of 2013 was smooth sailing for the US economy but recent economic numbers since the end of March have hit some kind of wall. Here’s a recap of the recent economic numbers: March ISM manufacturing 51.3 vs 54.0 exp March ISM non-manufacturing 54.4 vs 55.5 exp Employment and new orders sub-indexes in ISM non-manufacturing were weak March ADP 158K vs 200K exp March Non-farm payrolls 88K vs 190K exp February core durable goods orders -2.7% vs -1.1% exp The last two initial jobless claims reports have been worse than expected by an avg of 24.5K That’s basically a collection of the biggest economic data points and they’re all pointing in the wrong direction. The last good economic data point was February retail sales but the most-recent indications on the consumer look less optimistic, including consumer confidence. This is the first sign of adversity and it will be the turning point — one way or the other. Either it’s a mixture of seasonality, cold weather and delayed tax refunds or it’s real. If it is real, the situation is about to get worse because the sequester is just beginning to weigh. The highlight next week will initial jobless claims and retail sales but it will be another three weeks before we get a better look at the current economy so uncertainty in the near term is here to stay. As we wait for more data, look for comments from executives. Trading is about picking sides and I still believe the US economy is turning higher. House prices are rising, companies are investing and the jobs picture is okay. It’s not an easy call because there have been so many false starts in the past. If the US economy is picking up, it’s an absolute green light for USD/JPY to go to beyond 100. Maybe even to 110. Europe, on the other hand, is languishing so the rallies in EUR and GBP will be selling opportunities but not until they run higher. In short, the trends we have seen in the last three days could easily continue for another 2-3 weeks and that will be when it’s time to stake a claim about which way the US (and global) economy will go.

What the latest moves in bonds mean for forex Posted: 05 Apr 2013 07:34 AM PDT US 30-year yields are down 13 basis points today and have wiped out all the gains this year. Does that mean all the optimism about economic recovery has been wiped out? Or is it because of the Bank of Japan moves this week? The answer is that it’s both but it’s hard to know how much of each. The bond buys from the BOJ will force Japanese investors into other assets and part of that is spilling over into Treasuries. It also appears to be trickling down to European bonds. Lost in all the excitement of the past two days, Italian yields are dropping — and it’s not because of political certainty, an ECB rate cut or a strengthening economy. The timing of the BOJ decision is a bit unfortunate because it makes it difficult to sort through the cross currents. My belief is that the BOJ is a far bigger factor than the US economy and it will be lasting. Money is fanning out of Japan in all different directions and it will make for some big, lumpy moves over the next few weeks. The best bet might be to buy trades where speculators are heavily leaning in one way — like EUR and GBP, maybe even AUD. With uncertainly rising, speculators will look to cover longer-term positions and momentum traders will pile in.

Brent crude testing November lows Posted: 05 Apr 2013 07:17 AM PDT JPMorgan was out with a report today saying there is a one-in-three chance of a flash crash in commodities. That’s a bit of a worry, although outside of oil, commodities are doing fairly well today — partly due to US dollar weakness. A fall below $104.76 is a negative development and I wouldn’t rule out a fall below $100. WTI crude is also flirting with a semi-important zone of support around $92.00. Update: $104.76 has broken, albeit marginally so far. Watch the close.

Canada Ivey PMI 61.6 vs 52.4 exp Posted: 05 Apr 2013 07:00 AM PDT Prior reading was 51.1 Strongest reading since August Some small relief in USD/CAD as it slips 10 pips. The Ivey PMI is wildly volatile so such a big miss is not a shock. It tends to be brushed aside rather quickly so don’t look for a lasting change in CAD.