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Euro Parity, Coming Sooner Than You Expect

Euro Parity, Coming Sooner Than You Expect

The time from when we last published our latest addition of the Daily Grail has been rather eventful. From the blistering jobs report 2 weeks ago that propelled market's expectation for a June rate hike even higher, to the continuation of monetary policy bifurcation by the world's central banks that will soon see the Euro trading at par to the Dollar, the month of March has so far endowed the financial markets with much needed cross-asset volatility.

On 22 January, the ECB unveiled something the world had never seen before. Mario Draghi, President of the European Central Bank, announced that for the first time in the 14 years of the Euro's existence, the ECB was going to monetize debt securities to the tune of €60bn/month. Just 2 short months ago, the ECB termed this open market operation the EAPP (Expanded Asset Purchase Program).

2 months and 1000 pips later, the ECB has coined a new term - the PSPP (Public Sector Purchase Program).The big question on the minds of currency traders across all trading desks is when will parity be attained on EURUSD. Not if but when.

A Crazy Week In Charts

A Crazy Week In Charts

What a week of utter craziness! After last week's inexhaustible flurry, we thought we'd see some respite. But no, the events just ratcheted one notch higher; with volatility in the financial markets at year-to-date highs and global developments on geopolitical, financial and economic fronts, we can barely keep up the the trance that is raving. So rather than using narrative to summarize what has been a very busy week, we thought of using charts to highlight the key talking points of the past 7 days or so.

This edition of the Daily Grail will be the first ever to feature a compendium of graphics and charts but we might indeed start to adopt a similar format in future editions for time constraints. We have tried to broaden the subjects covered under each piece while ensure each note remains relevant to our readers.

Jim Reid: Volatile Volatility

Jim Reid: Volatile Volatility

What makes this move shocking is that just last month the SNB committed themselves to preventing their currency appreciating beyond 1.20 to the Euro and vowed they would enforce the policy with "the utmost determination". The risk for the global financial system is that if the SNB can make such a dramatic u-turn could other central banks follow at some point. We're not so concerned here as their situation is arguably a lot different to the ECB. The ECB might actually look at the wider market moves yesterday and be scared to disappoint.

1-7 January: Oil & Euro Lowest Since Lehman As Grexit Fears Loom, EU In Deflation

1-7 January: Oil & Euro Lowest Since Lehman As Grexit Fears Loom, EU In Deflation

What a way to start 2015. The first deflation in the EU since 2009, record low yields on German sovereign debt, global energy prices keep tanking, US equities down for 5 consecutive days, and the news (or not) keeps flowing. For the record, major equity indices have started 2015 with the worst performance since the financial crisis of 2008. Whatever remnant of the 2014 "Santa Rally" turned out to be a ghost in a shell, and has now spooked global market participants.

The past week has been all about ratcheting up the "Grexit" rhetoric across the markets. Readers should be no stranger to the situation in Greece and the entire periphery of the Euro Union, which we touched upon in our last update preceding the New Year. The risk has indeed never been greater as it seems Germany has openly voiced that it won't be blackmailed by a Greek plunger. Remember, Greece is bounded by €240bn to the Troika under the various bailout packages extended to her.

29-30 December: Greek Parliment Fire; AirAsia Shares Plunge As Flight Vanishes

29-30 December: Greek Parliment Fire; AirAsia Shares Plunge As Flight Vanishes

In what has to be the most heart wrenching year in modern civil aviation history, another civilian airplane has vanished without a trace over an area spanning between Indonesia and Borneo.

Earlier this year in March, Malaysian Airlines Flight MH370 flying from Kuala Lumpur, Malaysia to Beijing, China lost radio contact with Malaysian ATC while flying over the South China Sea towards Vietnam. Almost 9 months after its mysterious disappearance, the Boeing 777-200ER airplane that serviced MH370 is still not found, nor have parts that belonged to the aircraft been found despite extensive international search efforts across millions of square miles over the Indian Ocean. The conclusion of MH370 is still open ended, but consensus is that it has crashed in open waters West of Australia. MH370 was carrying 239 passengers in total, the world has never heard from them since.

The flight in question is QZ8501 operated by an affiliate of AirAsia, AirAsia Indonesia whose parent company is PT Fersindo Nusaperkasa. The firm was founded in December 2004 under the brand "Awair". As we go to print, the airplane is still missing after 48 hours since it broke contact with Jakarta ATC. No distress signal was given.

17-18 December: Negative Swiss Rates; FOMC Shows Resolve Despite Risks; Russia Goes Full Frontal Amid Crisis

17-18 December: Negative Swiss Rates; FOMC Shows Resolve Despite Risks; Russia Goes Full Frontal Amid Crisis

It just keeps coming. In this week alone we have already seen 4 central bank events starting with Russia's immense 6.5% rate hike and other policy accessories that eventually led to the chaos we saw on Tuesday; the ECB then dropped hints that it might extend its QE to sovereign bonds instead of the covered securities it currently purchases; the the planned FOMC statement and press conference with the chair woman yesterday; and then the SNB (Swiss national bank) unexpectedly cut its deposit rate.

11-13 December: Ruble Sees No Respite Despite Rate Hike; Oil Continues Massacre; Weak TLTRO Results

11-13 December: Ruble Sees No Respite Despite Rate Hike; Oil Continues Massacre; Weak TLTRO Results

The IEA (international Energy Association) cuts global oil demand forecast for fourth time in 5 months as OPEC refuses to blink and global growth forecasts dim to a twinkle. This has sent WTI prices below $60 and printed a low of $57.31, the weakest since July 2009. Across the board, Brent and Canadian Heavy prices are also crashing through the floor. Corporate credit and equity of companies in the energy sector continue to take relentless beatings as analysts continue to predict ever lower prices. The contagion effect has major oil producing countries all over the world scurrying to prevent their respective economic meltdowns as revenues are clawed back by the markets for every additional cent oil prices decline.