Who knew that some of the best action yesterday would be at Mario Draghi’s monthly press conference!? A female protester jumped on to the podium and threw confetti at the central bank President. I can’t say I blame him for flinching away, who could have known what substance she threw. At the risk of publicising her agenda it seems to have been about the anti-capitalist movement. Well I have news for her, it’s not clear to me that what’s being practiced in the world today is really capitalism anymore, but that’s a rant for another day.

What is clear is that the euro troughed before the start of President Draghi’s meeting and it has proceeded to climb since then. In light of the euros mini-rally I’m not really sure what people expected out of the meeting – rates were kept on hold (no surprise there!) and there are clear signs of improving confidence, but we’ve all been watching as the solid data points have materialised. In any case signs of an economic upturn will not be enough to stop the QE programme. I would never claim that fundamentals are my strength when analysing market moves, but I will simply reiterate my view that the US dollar remains in a trendless state and we will probably continue to see periods of dollar strength followed by dollar weakness for some time to come. As I’ve said before, only a substantial new low, i.e., EUR/USD below 1.0350 will force a change of view. As an Elliotician it is simply not credible that after a bearish move, lasting 11 months (from a peak at 1.40 in May 2014) we should see a correction lasting bearly a month. Even a relatively benign correction should take 3 to 4 months – given the length of the previous trend – in my view. This would imply a reassertion of the bullish dollar trend perhaps in the mid-summer months. Unfortunately this is not a science, precision is not possible, but common sense should have some place in the discussion! Unfortunately after such a move, market watchers become programmed to expect trend persistence. However, a look at the weekly and monthly charts for EUR/USD illustrates my concerns, with momentum still close to bearish extremes. I would at least expect some of this to be unwound before the path is clear for trend continuation.

Bank of America published a report indicating that the global outlook for inflation is rising. If this is the case then bondholders are in for a world of hurt, with European bonds in particular at or near negative yield territory, inflation is exactly what investors don’t need to see right now. Losses could be horrific! For what it’s worth, if inflation expectations are rising because consumers fear that oil prices will continue to rise from here (and indeed in recent weeks this has been the case), then I wouldn’t be too concerned. As I observed in a recent blog, the recent bounce looks like a corrective sequence to me, which should target the low $70s. After that another move lower looks quite likely to me. But I do find it credible with all the extreme monetary largesse in the global system that inflation will be a concern in the years to come. It’s worth pointing out that, James Bullard, a senior Federal Reserve policy maker, has again cautioned that the US central needs to start tightening now in order to prevent a situation where policy makers are ‘behind the curve’ and forced to raise rates as they chase inflation higher. He is concerned that the US employment rate is falling towards the 4% range and increasing the risk of higher wage inflation. This makes a great deal of sense to me. Even if rates were to rise 0.50%, they would still be extremely accommodative, in my view, so where’s the harm hiking now? As things stand, officials risk having no weaponry should another economic slowdown occur. That just seems insane to me.

Bund yields continue to track towards 0%, even as equity markets in Japan and Europe hover at multi-year and record highs respectively. Even recently shunned emerging market currencies like the naira and rouble have strengthened in recent weeks. When you consider the generally improving macro data, as well as the bounce in oil prices this makes a lot of sense. I would suggest that emerging market currencies are likely to be the first to weaken again before a new bout of dollar strength ensues, but what is of greater interest is whether the paradigm that has been in place for the last year will persist or not. We have seen the US dollar strengthen in conjunction with rising asset prices. Will this persist or could the next bout of bearish risk sentiment coincide with a new phase of US dollar strengthening? I have no answer to this question but sometimes the question itself is as important as the answer. For now currency markets appear benign, and I continue to monitor the situation wondering if markets will persist within a corrective complex which could see an outperformance of the euro versus the US dollar and pound sterling before the bigger picture bearish trends start again.

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Good morning

Key reversal day yesterday saw both the EUR and GBP (vs the USD) gain significantly despite strong Retail Sales and PPI numbers in the US. The market is OVERBOUGHT USD and yesterday strikes me as one of those days where despite strong US numbers (giving further support to the FED’s intentions to raise rates) the market decided to take profit. As soon as the rates turned, the herd jumped in and covered taking whatever profit they could so as not to risk losing the pot altogether. GBP rallied to (at one point) over 1.4800 and has since settled back to circa 1.4760 as I write this while EURUSD jumped to over 1.07 and too has settled back at 1.0650 as I write this. The overall big picture has not changed. We know that there will be times when profit taking takes place and best to step aside and let it happen. I am convinced that the large Macro Hedge Funds and Sovereign Wealth Funds who have all been long USD for quite some time remain long USD and have by no means been spooked by yesterday’s moves. In fact it would not surprise me if yesterday’s move actually gave them the opportunity to add to their positions. So who was involved yesterday, I would say it was the banks (and the FX options desk trading their “positive gamma” (long options) and day traders who were bailing out some of their positions. If you look at the options market, GBP vol remains ABOVE EUR vol in the 1m bucket ahead of the UK elections.

Talking about the UK elections, GBP is likely to remain highly volatile ahead of the May 7th elections given the uncertainty of who will run the country for the next 5 years. The UK economy is performing amazingly well with our growth rates exceeding all other Western economies. That is by no means something to sniff at. The Chancellor and Gov. of the BoE should be mighty proud of what they have achieved in the face of extreme adversity. Austerity is simply a MUST if we are to sustain this momentum and keep the economy on the current course. And it is for that reason the markets are “petrified” about the results. As the 150 business leaders who signed “THAT LETTER” a Labour/SNP Govt. will in all likelihood derail this economic growth and set us back to the dark days of the financial crisis. As I have written before one has to be financially prudent in good times and bad and overspending will lead the UK back towards bankruptcy (Labour admitted as much). I hope when the day finally arrives and the voters are standing by their booths about to tick the box, they think long and hard about their finances and long term prospects. Economic growth is dependent on the survival and growth of our businesses so keeping them financial sound is imperative if we want the UK to flourish. One thing (and the FX traders have all commented on this), a change in leader and a swing to the left will not be seen positively and you will see the GBP almost certainly take a battering vs the basket if currencies (and especially vs the USD and EUR). The warning shouts have been made, let’s hope people sit up and take notice.

Emerging Market (EM) currencies on the back of the weaker USD saw gains with the ZAR appreciating from 12.16 down to 11.96 at one point. The ZAR has fallen back slightly to trade at 12.02 as I write this. ILS rallied from over 4.01 to trade as “high” as 3.9496 currently trading at 3.9700. Do not be fooled by the rally in EM currencies overnight. This is all on the back of the weaker USD. When the USD rally commences again be rest assured EM currencies will begin their fall again. China recorded their LOWEST growth rates in over 5 years with the GDP number at 7%. The spate of bad economic numbers continue to plague the economy and as we have said previously, the bad data adds to speculation that the PBoC will ease monetary policy (lower rates). Lastly let’s NOT FORGET Greece. 24th April is a crucial date for the Greeks on whether they can repay the €1.5bn owed to their creditors. The GREXIT rhetoric continues and while we still maintain Greece will not exit the EU, one must never rule out the impossible. Perhaps it would be a good thing for them to leave and go it alone. I am sure the Russians will have their say….

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Some positive macro-economic data out this morning, with: Spanish deflation not as deep as expected; excellent retail sales data in the UK; and stronger than expected GDP growth in Singapore. Of all the aforementioned data events, the one that I find most constructive is the Singaporean economic growth. When you consider that there are growing concerns that emerging markets could be the weak link in the global economy, if East Asia is able to hold up its end, then perhaps things aren’t as dire as some would have us believe.

I note, with interest, that the strong dollar is the number 1 concern of US companies reporting Q1 earnings. As many as 70% of companies which have reported have identified currency as a major issue going forward (http://uk.businessinsider.com/sp-500-companies-citing-negative-impact-2015-4?nr_email_referer=1&utm_source=Sailthru&utm_medium=email&utm_term=Markets%20Chart%20Of%20The%20Day&utm_campaign=Post%20Blast%20%28moneygame%29%3A%20The%20No.%201%20thing%20companies%20are%20complaining%20about%20right%20now&utm_content=COTD?r=US). That has to be significant. As I’ve noted before, the Federal Reserve has to be concerned about this, and only strong wage growth can counter-balance this, otherwise it’s tough to see how the US central bank will be able to start the hiking cycle. Granted these companies are large capitalisation companies and are less important to the US economy in terms of employment growth than one might think, but it is an issue.

As I mentioned in yesterday’s blog Hillary Clinton has put her name forward to run for the US President. I read an interesting article yesterday in the Financial Times which argues that Mrs Clinton would be wise to harness the female vote during her campaign. I believe this is correct. Women in America get a very raw deal in terms of state support to continue in employment, but here’s an excerpt from the article which I found quite astonishing, I’m sure you will too…

“There are few worse countries to be a woman than Saudi Arabia. Yet the kingdom’s recent adoption of four weeks paid leave means Saudi women now have better maternity benefits than their US counterparts.” (http://www.ft.com/cms/s/0/cc676678-df8b-11e4-a6c4-00144feab7de.html#axzz3XBZTTYpU).

This leads me to one of my great concerns over the last decade. The percentage share of profit growth has swung more dramatically towards corporates than at almost any other time in history. Workers have seen their share diminish as they are forced to compete globally for jobs. This has to be seen as a failure of globalisation. Unless something is done to swing the pendulum in the other direction it is hard not to imagine dire political consequences. A century ago the solution to this problem, or at least the attempted solution, was communism. No one wants that, but what’s to be done? A big part of what should be done has to be enabling women to get a greater opportunity in the workplace, and if Hillary Clinton is able to raise the profile of this issue in the coming campaign it will be hard for the winner not to try to move in a positive direction. It’s not just the United States, emerging markets are surely (and understandably) behind on this issue as well, and I would guess (although I admit I haven’t checked this) Japan as well. It is simply untenable that workers continue to get a smaller share of global profits, I mean.. think about it.. they are the consumers! There has to be a tipping point and the chaotic protests of the Occupy movement some years ago should have served as a warning that this is an untapped political issue. Better it be resolved by mainstream politicians than political revolutionaries somewhere down the road.

A quick update on the oil markets. Using my technical spectacles, I see a market which remains in corrective mode after the precipitous fall from the middle of last year. It would be easy to be complacent about this, and make assumptions that a recovery is underway. While I concede that this is a possibility, what seems far more likely to me, is that we are in the last phase of the corrective process, but this could persist for another month or so. If this view is correct, then we could see the oil price (Brent), move back up to the low $70s before another test of the lows occurs. Be warned.

We have some important macro-economic data coming out of the US later on this week. Inflation data and Michigan sentiment data. These will be welcome additions to our understanding of what’s happening in the macro-scope. For now, and despite all the evidence of US dollar strength, I remain sceptical that the bigger picture bullish greenback trend has re-asserted. But plenty of damage can be done even if we remain in trendless markets….

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The US dollar is looking stronger across the board with GBP/USD testing 5 year lows. In front of a ‘too close to call’ general election currency traders are shying away from pound sterling, and as much as any Greek exit concerns continue to trouble the euro, the British pound vies for most disliked amongst the major currencies.

Some terrible trade numbers from China has sharpened focus on the global economy this morning. Year on year exports fell 15% versus forecasts of a 12% rise, and imports fell more than expected as well. It is difficult to avoid the conclusion that all is not well in the Chinese economy at the moment, but this view needs to be tempered by the distortions which tend to arise in Q1 due to the Chinese New Year. Still it would be far too optimistic to just assume that this is all about the New Year, and commodity prices have reacted negatively as should be expected. The Chinese central bank has already cut interest rates twice since late last year in a sign that the government is increasingly concerned about decelerating economic growth.

From a technical perspective, I will stubbornly stick to my cautious mentality where dollar strength is concerned, particularly regarding EUR/USD. There are clear signs of weakening momentum at the moment, even as the single currency edges closer to the mid-March lows. As I’ve mentioned before, I will only gain confidence that the bigger picture trend towards US dollar strength has re-started once we have made a substantial new low. For the sake of clarity, I would suggest a breach to the downside of 1.0350 should be sufficient for me get back on board. As things stand, the momentum profile does not suggest the trend is back in place, and EUR/USD still appears to be trading within the huge channel that has been in place since the global financial crisis back in 2008 (have a look at the blog posted on 26^th March 2015 for the illustration).

German 10 year bonds (Bunds) are approaching 0% yields, to be precise they are now yielding 0.16%. Even at the height of Japanese deflation I don’t believe we saw something as extraordinary as this. A whole new branch of economics is being developed on the hoof to accommodate a world where negatively yielding assets are prized by rational investors, what a crazy world we live in! The rush for safety and also for returns are a consequence of the monetary tsunami created by the policies of the ECB and the Bank of Japan. We can look at European equities at record highs, Japanese equities at multi-year highs, and despite the poor macro data from China we have soaring Chinese equity markets and a veritable stampede into Hong Kong equities. Indeed, such is the clamour – from mainland investors – to purchase Hong Kong equities that the monetary authorities there are defending the USD/HKD peg from excessive Hong Kong dollar strength. It is difficult to see any end to this paradigm in the short term, unless the US Federal Reserve tightens policy, but how can that happen if the US dollar continues to strengthen? One possibility would be continuing strong employment data in the United States, or at least stronger wage growth, but this month’s non-farm payrolls have suggested a slowdown in employment growth. Needless to say, the US central bank will have to juggle a lot of moving pieces in order to come to a determination about monetary conditions in the United States. I don’t envy their choices!

One final comment… in the United States, Hillary Clinton has announced her candidacy for Presidency of the United States. It is likely she will contest the elections against Jeb Bush. Another Clinton – Bush battle. Dynastic politics? Who would believe it, if it was fiction?

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Recent polling of the UK election outcome suggests that the Labour party is edging ahead of the Conservative party and may indeed end up as the largest party. For now the lead appears to be within the margin of error but still, a clear 4 – 5% swing in recent days could be significant. While the US dollar has strengthened in the last 48 hours on the back of Fed minutes suggesting the chances of a June hike are higher than currently discounted, the specific weakness of pound sterling and the fact that it is only slightly above year to date lows (1.4635), while the euro is still some distance away might be taken as a sign by some that concerns about a future Labour coalition are starting to tickle the market.

Recent comments from the US Treasury has brought the strength of the greenback sharply into focus, with that venerable institution raising legitimate concerns about an unbalanced global economy. If Europe, the United States, China and Japan are considered the columns upon which global growth rests, it’s fair to say the United States is the only one lifting a full load at the moment (at least relative to expectations over the last decade). The US Treasury is pushing for Europe to stop relying exclusively on monetary policy. This is an entirely reasonable request… if you view the Eurozone as a discrete politico-economy…. which of course it’s not! More surprisingly the US Treasury has conceded that the Chinese are not manipulating their currency, it’s ironic that the perennial accusation has been dropped even as the superpower rivalry warms up. All of this reinforces a growing concern about US dollar strength going forward…. it will not be welcomed by the US, but as long as other major currencies engage in monetary policies which are considerably easier than that of the Federal Reserve it’s hard to see a different outcome. What it does suggest is that we have seen the end of the really impulsive period of US dollar strengthening, but a persistent appreciation still looks likely. I would just add, finally, that I still remain sceptical about whether the dollar bullish trend has re-started. From here, I still see a not insignificant probability that we see another bout of dollar weakness.

Chinese inflation came in as expected, albeit significantly undershooting government targets, a further sign of the deflationary (or should I, as I would prefer, say disinflationary?) forces sweeping the macro-scope. Indeed if Emerging markets as a whole were a metaphorical fifth column in the example of the preceding paragraph this group would also not be pulling a full load at the moment. There are few reasons to be cheerful about growth right now, but also few reasons to be too gloomy. Certainly if you’re invested in major stock markets outside of the United States, you would have every reason to be uncorking the champagne, with 15 year highs in Japan, record highs in Europe and multi-year highs in China. These are not markets discounting future positive growth, but the evidence of central bank inspired largesse desperately seeking a home. There is little further to report at the moment, in the immediate future, the focus has to remain on the Eurozone, and more specifically Greece. There are hurdles to be cleared, and Grexit is still a possibility. The fate of the euro, the US dollar and global risk sentiment will be heavily influenced by a civilisation that might not have had such prominence for two and a half millennia..

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Good morning

Anarchy in the FOMC!!! No not literally. The minutes of the FOMC were published last night and it was noted that NUMEROUS members voted in favour of raising rates in June 2015 while a COUPLE wanted to wait until 2016. Numerous is between 2-4 while a couple is 2 making a total (potentially of 6) meaning that of the 12 members of the FOMC, a gap was opening (the remaining 6-7 members obviously were voting for a hike between September and December). So it would now appear that we have 3 camps forming within the FOC, June, Sept-Dec and 2016. I have to hold my hands up and apologise. As you know I have been saying that the FOMC COULD in fact hike in MAY 2015….with the strong USD and disappointing NFP last week I accept that that will not happen now and there will be no surprise announcement. If I had to pick a date perhaps a surprise hike in July (29th) when liquidity is thinner. Failing that the next meeting is in September (17th). Given that the FOMC have indicated that rate hikes will be gradual and small in number in 2015 one would think Sept & Dec a 0.25% each and then a wait and see hold. This sent the USD back into overdrive falling from 1.0865 down to current levels of 1.0735 (just above the low for the day as per the chart). As i mentioned yesterday, I just cannot see what will drive the USD lower (through 1.10). Every time the USD over the past few weeks has surrendered and fallen to 1.10 the market simply piles in and buys more USD pushing the USD back. The USD’s momentum remains strong overall and with instability over Greece (funny Tsipras was in Moscow of all places), Iran, Oil prices, and Chinese slowdown all roads point to a continued strong USD. PARITY PARITY PARITY. 

Bank of England announce their interest rate decision today. No change is expected nor any change to the vote’s distribution. It remains 9-0 in favour of keeping rates unchanged. No doubt the depreciation of the GBP and the uncertainty of the elections not to mention inflation at 0% is certainly giving the BoE some food for thought. In terms of my predictions for the GBP, as I wrote yesterday the chances are we will see neither party win a majority and it is this uncertainty that will punish the GBP. Having said that the GBP ROSE against the EUR from 0.7330 (1.3642) to 0.7250 (1.3793) on the back of the weaker EUR – and that is IN SPITE of better Industrial Production and Trade Balance numbers out of Germany this morning. If you have to hedge I would seriously consider doing at least 35-50% now and lock in these rates. Uncertainty is adding to the already highly volatile currency rates. Just looking at the vols market, 1m GBPUSD is trading 12.70/12.90 with the curve down sloping 2m 11.65/12.05, 3m 11.25/11.55 and 1y 9.90/10.20. In fact the GBP curve 1m-6m is trading OVER EURUSD which I can tell you is a VERY rare sight indeed. What this tells me and what it should tell you is the market is anticipating a volatile time in the GBP not only ahead of the elections but more importantly after the results are published and we find out who will run the country until 2020. A conservative win will see vols get crushed as the market LIKES the result with GBP strength anticipated, however a Labour/SNP win will see vols climb even higher as the market DISLIKES the result and the GBP gets a beating. In summary, I would make sure you have complete control over you FX needs so that you do not encounter any unnecessary shocks on the 8th May.

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Good morning

FX markets appear to have taken a breather over the past 36 hours given light fundamental events and breaking news. In fact what is setting the market alight is the stock market that continues to shine. Even the doomsday scripters have disappeared for now. I guess with interest rates at all time lows and the difficulties in getting onto the property ladder, the next best thing to earning a return that beats your interest rate are stocks. Returns > Risk!!

Getting back to FX, Greece will continue to weigh on the EUR given their ongoing financial difficulties and inability to find a solution both at home and with Troika. With the VERY disappointing NFP numbers people are now speculating that US rates will now rise in or around September. Truth is, its guess work.  And the FED has said many times they can raise rates outside the FOMC meetings. No doubt the strength of the USD has been one reason they have not indicated the rise was imminent and even at the last FOMC meeting all the negative talk on the strength of the USD has faded and we find ourselves at a pivotal point.  I personally will find it difficult to see a “mini-collapse” in the USD. I mean look at Friday (granted liquidity was thinner for Easter holidays), a terrible NFP number (half the number that was expected) the USD falls to 1.10 (EURUSD) and a mere 2 days later we pretty much back at where we started. That tells me the market continues to buy the USD at every opportunity and any pull back is a chance to merely add to the position.

Later today sees the FOMC minutes being published. This will make for interesting reading as it provides further insight into the factors that prompted the FOMC committee to end the use of “forward guidance” as well as revise their economic projections. No doubt excluding last Friday’s NFP number the committee must have been satisfied that the solid growth in labour was sufficient to remove patient and end the forward guidance. No doubt friday’s number sent them back to the drawing board!! The strength of the USD no doubt also had a hand in the change in the rhetoric. My predictions remain the same and I continue to look for PARITY IN EURUSD in the coming months.

GBPUSD….I have read newspaper stories recently on whether one should buy “holiday money” now or after the election. Unless there is an outright win for the Conservatives (pro business), I really do believe that the GBP could be heading for a hiding both against the USD and EUR. In fact a Labour/SNP government could send the GBP to 1.4000 as investors pull the plug. If i was in their shoes I would consider hedging at least 50% NOW with perhaps 25% just before the election and the rest after. I do not think any one party will win a majority so it will be very interesting indeed to see who will be the strongest party that leads a coalition. To add fuel to the fire, Labour is now promising to scrap the non-dom tax status of British citizens who do not pay tax on earnings made outside the UK. As the Telegraph newspaper reported this morning, “The pledge came after business leaders from 30 of the country’s biggest companies ADDED their names to a letter warning about the consequences of a Labour government”. The paper added The Labour leader’s latest pledge to increase the tax burden on Britain’s wealthiest came as more chief executives sought to publicly endorse the Chancellor’s decision to cut corporation tax, warning that a “change in course” would “put the recovery at risk”. With the latest additions that means over 150 company bosses (including 10 from the FTSE 100 firms) have signed the letter. These companies employ in excess of 100,000 people not to mention their dependents. My gut tells me the GBP is staring down the barrel of a shotgun!!

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The US employment data which came out on Good Friday was far from what the market expected which was an increase of 245,000, versus an actual number of 126,000. Perhaps Goldman Sachs has called the peak in jobs growth correctly, if they did, kudos to them, however revisions at a later date are not uncommon, so the jury is still very much out. The problem this time was, and this was what really shocked the market on Friday, not so much the relatively poor number itself, but the fact that the revisions for January and February actually reduced the original data! That’s a clear sign that job growth has peaked, over the last year revisions have generally increased the employment data. Even if the revision for this month ends up actually showing a better accumulation of jobs than initially reported, it is quite clear that the US economy has cooled off markedly from the middle of last year. This is certainly the case when you consider the totality of data we’ve been receiving so far this year. The fact remains that the unemployment rate in the United States is now low, the labour market is tightening, and there appears to be increasing evidence of this in the wage growth data which was better than expected at 0.3%. The currency markets responded to what could be an inflection point in the US growth paradigm with the US dollar selling off strongly with currency pairs like EUR/USD and GBP/USD jumping over 100pips in short order. This morning we have retraced about half of the move with the dollar attempting to recover the losses. If the data stabilises from here, there is no reason for the Federal Reserve not to push ahead with tightening of some sort, but the central bank will surely be cautious at this point, and be in data watch mode. The last thing they would want to do is start tightening if the US economy continues to cool off. On that basis, it is perfectly reasonable for the US dollar to have reacted in the way that it has so far.

The Reserve Bank of Australia (RBA) has not just contemplated a more cautious stance on rates, it has just done it, maintaining rates at current levels (2.25%), instead of a cut as some might have expected. Not ParityFX though, this blog opined that rates would be kept on hold as the prior cut is allowed time to impact the Australian economy. I would go further and suggest that the easing in Japan, China and India are more likely to have a beneficial impact on the Australian economy in the medium term, but either way, it was certainly too soon for another interest rate cut.

Even as the Nigerian equity markets have rallied in the wake of the historic national election, the naira has stayed quiet. This is, in a way, somewhat surprising, but it could illustrate a divergence between locals and foreign investors. The locals perhaps couldn’t afford the opportunity loss of not being invested in a more stable politico-economy than might have been expected, while foreigners can afford to wait on the sidelines and assess what the new administration does over the transition period. If this is the case, there is a great deal of sense in this. It is definitely noteworthy that the naira has so far not reacted, and I am duty bound to point out that it could be a sign of a negative reaction building in the near future, although I favour the view that we are seeing a dislocation between locals and outside investors..

I continue to view the currency markets as generally trendless at the moment. Selective emerging market currencies are likely to weaken dramatically over the coming months as their fundamentals are shown to be weaker than is currently believed. But where the majors are concerned I don’t believe, absent really bad mis-steps by the Greeks, that we are in for much excitement as we approach the summer months. But it’s the Greeks we must turn our focus to as, the 9^th of April is the date of a €450m debt repayment to the IMF. Expectations are that the Greeks will make the payment but there is always the risk where inexperienced politicians are involved. And Syriza does lack experience. Watch this space..

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Good Morning

With the negotiations in Switzerland (US/Iran) and Greece continuing all eyes are now focused on tomorrow’s NFP and Unemployment numbers. Last month saw NFP grow by +295 and unemployment fall to 5.50%. Expectations are that the numbers will be in line with forecasts of +250k and 5.50% (unchanged). I am thinking NFP could surprise again with a print close to +300k as the feel good factor in the US continues to dominate. The USD having rallied to sub 1.07 vs the EUR has shed those gains and fallen back to 1.0825 as I write this. I mentioned yesterday there is not going to be a quick and easy fix to either the M.E or Greek negotiations. I am convinced there must be a great deal of “behind the door” negotiating to try and find a solution and quickly. Things are dragging on and while the subjects of the negotiations are critical to world peace and financial stability one cannot guarantee that a solution will be found. Even Mr. Buffett got in on the act saying Greece leaving the EUR is not necessarily such a bad thing. While I agree 100% with him, it is the potential fall out and catastrophe that will ensue. Banks will go out of business (potentially), companies will struggle, Troika will lose their money and anarchy will reign. Armageddon?  Ok maybe I am being a little too dramatic, but after witnessing the loss of Lehman Brothers and Bear Stearns (BOTH at which I worked and admired/loved) this is not a bank going under, this is a Country. So I guess I am a little worried about the fall out.

Then there is the small issue of the UK elections. Tonight sees the second debate with 7 party leaders. As long as Mr Cameron sticks to the game plan by re-iterating The Conservatives brought the UK economy back from the brink, he will have achieved what he set out to do. I am astounded and I mean astounded how any reasonably intelligent person could see the advantage of having someone like Miliband/Balls/Sturgeon in power. If that happens I will personally convert EVERY GBP I possess into USD because the GBP will become an emerging market currency (PARITY GBP/USD anyone)? Those 3 will bankrupt this BEAUTIFUL country and send us back to the financial crisis of 2008. I will pose this question to you, if you had a salary of £1000 a month would you still be going to the pub every night, going on vacations to exotic places, shopping at expensive stores OR would you cut your cloth according to your means. A reasonable person certainly would. The point I am making, austerity is taking place AROUND THE WORLD, US, China, Australia, EU, Canada, Scandinavia, Asia you name it the governing parties/Central banks have tightened their belts and cut overspending. Those 3 “leaders” I mentioned above want to do the opposite. Spend Spend Spend and hand out money to anyone that arrives and asks for it. They must not be allowed to have that chance. Even the people of Scotland voted AGAINST leaving the UK. Doesn’t that tell you everything. G-d only knows how they would have fared had they voted to leave…bet if they had another vote today with oil at $56p.b you would have 350,000 people already voting NO/NON. If I can add my name to the esteemed list of 100 business leaders (oops make that 117 now) that wrote the letter to the Telegraph saying that a Labour Govt. would “threaten jobs and deter investment” I would in a heartbeat. Those giants of business are protecting their businesses and in turn protecting the UK economy not to mention the thousands upon thousands of hard working people they employ.

Ossie and David would like to wish you and your families a happy Easter (weekend) and Chag Sameach.

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Opinions expressed are subject to change without notice and may differ or be contrary to the opinions or recommendations of ParityFX. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, ParityFX does not accept any liability arising from the use of this communication.

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Good morning

EURUSD traded sideways overnight ahead of the Greek saga story and the US/Iran negotiations. No news emerged overnight from Greece as to the reforms (I thought they already rubber stamped these at the February deadline) and whether the international creditors were happy to accept them. Reports are now saying that Greece will run out of money sometime next week unless yet another lifeline is granted. Seems to me right now its all about Greece take take take without having to give up much. Granted the PM is trying to make both his party (anti-austerity) and the creditors happy all at the same time. Suffice to say there will have to be some give and take and while either sides demands will not necessarily be accepted by the other side, some compromise is needed. What is known is the other EU members who are currently accepting handouts will be pretty hacked off if Greece is given carte blanche while they still find themselves tied to the post. How many times can I repeat this, Greece will HAVE to accept for the most part the terms which their creditors are enforcing and demanding. If they don’t the creditors will switch off the money tap which will almost certainly see Greece go bankrupt and the creditors lose their money (at least for now). So you can see there are some pretty severe repercussions should the negotiations fail. I for one would love to be able to write one final time that a deal has been reached and we can move on. Alas this is not to be and just like in Shakespeare the show must go on and on and on (until of course someone falls on the sword).  The Telegraph today published a story saying Warren Buffett, the billionaire chief executive and chairman of Berkshire Hathaway, has said a Greek exit from the eurozone could be constructive for the region. “If it turns out the Greeks leave, that may not be a bad thing for the euro,” Mr Buffett told CNBC. He said that member countries could come to better agreements about fiscal policy if Greece left the single currency. “If everybody learns that the rules mean something and if they come to general agreement about fiscal policy among members or something of the sort, they mean business, that could be a good thing,” Mr Buffett said.

China surprised overnight when manufacturing PMI unexpectedly improved to 50.10 from 49.90. Let’s not get the Crystal out just yet to celebrate. One better reading doesn’t suddenly make things ok. I still expect the PBoC to lower rates to stimulate the economy. While GDP of 7% in Western Economies is like winning the EuroMillions jackpot, to the Chinese, 7% is a disaster of sorts. In fact anything under 10% is just not good enough. Welcome to the party. Across the road in Japan, the “Tankan” reported a rise from 16 to 19 which can also be viewed as mildly positive but again no need to crack open the champagne just yet. China, Japan, EU, Australia have a rocky road ahead with the CB likely to continue to offer liquidity, QE and lower rates to stimulate the economies. Next Tuesday sees the RBA meeting where there has been talk that another rate cut (last in Feb) is coming. I have said previously that I think the next cut will come in May (5th) as the RBA digests the changes since their last cut. Aggressive cutting can be a good and bad thing, in this case I think the RBA would be better off waiting to see how far the cut has gone to improving the Australian economy.

The deadline for an agreement between US and Iran passed at midnight last night. There was an agreement to extend the deadline though I am not privy to that agreement. I will not want to get into a debate here as to what my thoughts are regarding the outcome of the meeting and the agreement (is reached). One thing that I am certain about is when someone wants something bad enough they will do everything in their power (including hiding things from the other side) to get it. If an agreement is reached and sanctions are eased, Iranian oil will “officially” flood the market adding to the fact that the Saudi’s have refused to cut production. No wonder they have such a keen eye on developments at the meeting. Oil prices remain depressed with oil trading around $55p.b. Needless to say I think oil should remain depressed with a rebound coming once we see growth and smiles in China.

Amazing election result in Nigeria as the opposition leader Mr Buhari beats Mr Jonathan. Mr Jonathan conceded defeat and stepped aside which for Nigerian politics/politicians is a first. Mr Jonathan’s defeat is the first time in Nigeria’s brief democracy that a sitting president has not won a second term or handed power to a nominated successor.

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Any financial promotion contained herein has been issued and approved by ParityFX Plc (“ParityFX”); a firm authorised and regulated by the Financial Conduct Authority (“FCA”) as a Payment Services Institution with registration number 606416.  It is for informational purposes and is not an official confirmation of terms.  It is not guaranteed as to accuracy, nor is it a complete statement of the financial products or markets referred to.

Opinions expressed are subject to change without notice and may differ or be contrary to the opinions or recommendations of ParityFX. Unless stated specifically otherwise, this is not a recommendation, offer or solicitation to buy or sell and any prices or quotations contained herein are indicative only. To the extent permitted by law, ParityFX does not accept any liability arising from the use of this communication.

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