Anniversary of the End of Bretton Woods: Thoughts Going Forward

Nixon cut the last lifeline of Bretton Woods 47-years ago today.  The world will never be the same, but could there be another such agreement in the foreseeable future?

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Crude Approaches Year-Old Trend Line

Crude oil has been climbing a trendline for the past year.  This chart depicts this trend on a weekly bar chart.  Depending exactly the line is drawn, it comes in now near $65 a barrel.  The technical indicators are consistent with further losses.

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Lira Rallies on Cut in Swaps, Fails to Dent Broadbased Dollar Demand

  • The Turkish lira is extending yesterday’s recovery today on the back of actions by officials that are aimed at limiting foreign access to the lira to short
  • If the lira’s dramatic plunge hit other markets, its recovery appears to have gone largely unnoticed
  • After a quiet couple of days, the US economic calendar is chock full today
  • Bank Indonesia delivered a hawkish surprise
  • Argentina July CPI is expected to rise 31.2% y/y

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Argentine Markets Still Suffering Despite Bold Actions

Argentine central bank surprised markets with a 500 bp hike in the policy rate yesterday. It is clear that an aggressive orthodox policy response is a necessary but not sufficient condition for stabilizing a nation’s financial markets. We warned back in May that regardless of the measures taken, Argentina is likely to remain under pressure within the context of a broad-based EM sell-off. Continue reading “Argentine Markets Still Suffering Despite Bold Actions”

JPY Struggles at Trendline

The dollar is consolidating in a large triangle against the yen.  Below we discuss the technical implications.  We also note that if pressure on EM returns after today’s respite, the yen is likely to strengthen.

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Brief Respite but Little Relief

  • Corrective pressures grip the capital markets today, helped by the easing of the selling pressure on Turkey
  • Favorable European economic data was insufficient for the euro to hold on to even modest upticks
  • Nor was the UK data enough to deter selling into sterling’s gains
  • Disappointing Chinese data could not send the yuan lower, though Chinese equities are a different story
  • Turkey may not be a systemic shock to the EU, but it is still a new headwind
  • Argentina’s central bank hiked rates 500 bp to 45% yesterday; Poland, Czech Republic, and Hungary reported Q2 GDP

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From the Securities Lending Trading Desk

US high yield bond total returns have seen their best results as of late, causing easing in short demand. China Evergrande Group, China’s second largest real estate developer surprised investors last week with better than expected positive earnings guidance. In Europe, Pandora issued a profit warning which sent shares in the jewelry-maker lower.

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Lessons from the Past for Turkey

The Turkish lira continues to tumble as officials refrain from taking any significant actions. We look at two of Turkey’s past crises to gauge the economic toll that this current crisis is likely to take. Continue reading “Lessons from the Past for Turkey”