s&p 500

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.

US Economy Officially In Deflation

US Economy Officially In Deflation

We spoke, we warned, and it has now happened. For reference, we have included a bevy of links documenting our explanation of why deflation was going to be the elephant in the China room.

With the significance of this being the first deflationary headline figure 6 years after Lehman collapsed, low oil prices have conveniently been cast as the straw man. There is some truth to this - the energy index fell 9.7% while the gasoline index fell 18.7% in January, both over December. This marks the fiercest plunge in the 7 consecutive negative prints; the report also noted that the decline in the gasoline was "overwhelmingly the cause" for broad weakness in overall prices. When annualized, the energy index and gasoline index fell 19.6% and 35.4% respectively. Staggering figures!

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.

19-22 December: Reeling From Russia's Pain, Belarus Implodes; Global Markets Rebound Sharply; Sony Hacking Satire

19-22 December: Reeling From Russia's Pain, Belarus Implodes; Global Markets Rebound Sharply; Sony Hacking Satire

The overnight night unsecured deposit rate on BYR has exploded north of 30% as the national bank has made it too expensive to lend BYR even amongst banks. As we learned from the bank's press release, it wants to halt sales of BYR by as much as possible though pseudo and conventional capital controls. The interest on commercial and retail deposits at local banks has also spiked to encourage individuals and businesses to leave their currency in their banks. Apparently enough, we know this is not working one bit and the run on banks continues and will probably extend all the way to Christmas Eve before there is any easing of tensions.

Indeed, just a few hours after AFP broke this news, the overnight interbank BYR deposit rate has surged past 50% as the fire intensifies.