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Brad Bechtel is the Head of Sales and a Managing Director at Faros Trading, LLC. Mr. Bechtel joined Faros Trading with over 15 years of experience in the financial services industry and capital markets. Most recently, Mr. Bechtel was a Vice President in Foreign Exchange Sales at Goldman Sachs,... More
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  • Faros Morning Update - Rumor Mill 0 comments
    Nov 10, 2010 7:47 AM | about stocks: USD, CNY, KEF
     Rumor mill

    Rumor mill has been running in full steam the past couple of sessions with the BoE inflation report allegedly leaked in the NY session and the Chinese RRR hike discussed in the market the previous Asian session, along with more discussion about a deal brewing between the IMF and Ireland.  Robert Zoellick has been on the tapes about a potential Gold standard and then has retracted somewhat saying it is more a tool to be used to measure financial assets.  He then went on to indicate that the CNY should be in the SDR basket, a thought that was echoed by Chinese officials last night.  CNY inclusion in SDR seems to be something that is gaining steam in central bank circles.  Jim O’Neill of GS was on the tapes indicating that the ‘grand bargain’ between the US and China allows for a more rapid rate of CNY appreciation which will then result in more power within the IMF for China. 

     

    Critisism of QE2 and the US Fed actions is continuing to grow as we head into early round meetings between G20 leaders as even Sarah Palin has become vocal against the Fed as an institution (funny but true), in addition to other Congressmen who have been quiet previously.  Brazil’s Mantega was again on the tapes whipping the Fed verbally and calling out the active devaluation of the USD by the US Fed.  He too called for the CNY in the SDR basket. 

     

    China did hike the RRR requirement by 50bps across all banks, which adds to the 50bps hike done previously on the largest banks.  China also fixed USD/CNY 130 pips lower again in the face of a lower EUR/USD.  Better than expected trade figures reflected a $27.1Bn surplus, led by imports more than exports with exports +22.9% on the year.  Imports reflected less Oil imported. 

    Korean officials talked about reintroducing a 14% tax on bonds held by foreigners as rhetoric on capital controls increases in pockets around the world.  USD/KRW traded lower into the close in Asia with 1110.00 holding after 1119.00 the high.  MYR price action followed KRW with a move above 3.1000 before a drift back to 3.0890.

     

    GBP caught a significant bid on the UK inflation report which had been leaked yesterday as potentially dovish, but has come in today as actually hawkish, with the forecast implying that QE in England will be unnecessary.  GBP/USD rallied back to 1.6100 after 1.5960 area the low and EUR/GBP is testing 200 day at 0.8571 now after taking out the 50 day at 0.8602. 

     

    EUR/USD caught some tailwind from the GBP move but rumors of an Irish / IMF deal, combined with an EU extension to Jun 2011 of the debt guarantee, and a slightly better than expected Portuguese debt auction did little to push EUR/USD higher.  Spreads continue to widen as Greece revised their 2010 budget deficit to 9.3% from 7.8% target, while Ireland’s Honohan says the government is ‘putting together a package that the IMF would like to see’.  So the news in Europe is mixed and tensions remain high.  EUR/USD failed above 1.3800 and tests the 1.3730/60 range again.   A break here opens a move to 1.3578, the 50 day moving average.

     

    Interesting that CHF and JPY are weakening in the face of a potential deal between Kirin and Evian which would be JPY negative and CHF positive.  USD/JPY above 82.20 on good volume and USD/CHF above 0.9740 now.

     

    EUR/PLN is breaking through the 3.8910 support level this morning with 3.8790 trading now and PLN/HUF has taken out the 50 day at 70.25 and appears ready for a rip higher.

     

    Volume in Silver was astounding  yesterday with a margin hike fueling an ugly close.  Good Luck



    Disclosure: I do not take positions in the assets mentioned
    Themes: USD, DXY, currency, fx, G20 Stocks: USD, CNY, KEF
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