There is little doubt now that the “dollar” is wreaking havoc upon the global financial complex. Commodities are being battered almost everywhere, and in a manner not seen since the last version of “dollar” trouble prior to the March 18 FOMC “dovishness.” This time, however, there is almost nothing of monetary policy in the moves, just plain and pure uncertainty [...]
With Greece eliciting full uncertainty across the global financial complex, it isn’t unsurprising to see “dollar” proxies indicating tightness in almost uniform fashion. There isn’t as much a cascade, yet, as there had been in early October and early December last year, but the movement has finally coalesced. The “dollar” world had begun what looks in hindsight a slow turn [...]
There have been, in the past year, two great inflections in wholesale finance. The first was in late June as the “dollar” began to rise, thus signaling a massive shift in balance sheet mechanics, the modern “money supply” that so confuses economists. That is why they at first enthusiastically embraced the “strong dollar” as that anachronistic interpretation seemed on the [...]
Since hitting it most recent low in mid-March, spot WTI has rebounded about 40% reaching above $61/barrel at one point. The ultimate low, which brought the physical price down under $43, was on the morning of March 18. The FOMC statement later that afternoon has been taken as a removal of any close threat to ZIRP, taking enormous pressure off the [...]
So far, yesterday’s FOMC has not re-ignited the dreaded “rising dollar.” In fact, there hasn’t been much reaction at all as far as funding markets go. Even oil prices remain near their recent highs, with spot WTI as high as $59.40 so far this morning. That is, again, far more a reflection of this latest benign “dollar” than more fundamental [...]
It is becoming settled wisdom that the most dangerous aspects of any current financial contours are due almost entirely to some version of HFT or electronic trading. That is undoubtedly true, as far as it might relate to one aspect, but to claim that computers are the single biggest source, let along only source, of financial impropriety is obtuse. The [...]
The primary challenge of trying to unravel wholesale finance is the innumerable and often impenetrable layers. Making important distinctions is quite tricky, as you have to account for additional dimensions above and beyond what might pass for reasonable expectations. The repo market offers a good example of that, as you have supply and demand for cash “helping” set the repo [...]
So far the heavy buying after yesterday’s FOMC admission has held on the eurodollar curve. Most of the contracts along the curve have only given back a few bps after the 15-25 bps moves everywhere yesterday afternoon. The salient interpretation of trading along these lines is one of deep and abiding concerns over “dollar” liquidity and the economy. With the [...]
It’s certainly not quite the “butterfly effect” but the reality of the overall arrangements of the global economy is shockingly simple. The details, methods and interactions of the “dollar” can be incomprehensible at times, especially since there is no directly observable and thus plainly unambiguous data, but once the “big” moves entrench all that complexity recedes in importance (at least [...]
It is Tuesday which only means that whatever oil trading takes place today will be easily overwhelmed by whatever interpretation about inventory levels released tomorrow dominates. However, the last week has been interesting in the respect of a shift in the behavior of the futures curve for WTI. Up until then, almost all volatility was concentrated in the front months, [...]
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