Dec 8, 2006

Dollar Remains Unimpressed by U.S. Payroll report


09:25 ET 10-Yr: -01+/32..4.487%.. GNMAs: +01/32.. USD/JPY: 115.0500.. EUR/USD: 1.3339
The Rally That Wasn't: The buck was given a strong boost over & through recent resistance zones on the majors following the data but that boost fizzled quickly. The brief rally was aggresively sold into sending the dollar well lower. The euro went from 1.3276 to 1.3237 to 1.3344 in the span of about 20 minutes. The dollar index, for all its 47 point range post-data is now sitting around where it closed yesterday at 82.72 (-0.04). Negative sentiment on the dollar was clearly unaffected by the jobs report.
Nothing about that report looked bad for the dollar as the initial bond reaction showed. Not sure how else to interpret the action other than sellers using the liquidity around the news to get out of more dollars.

In other dollar watching news Brad Setser points out ICBC's interest to repatriate $16 bn generated by its IPO. Guess the PBoC will just step up and buy them but I wonder if their will be some political chatter about the request.

Update 3:50 PM:

From the FT:
“The market was looking for the next trigger to sell the dollar, rather than buy it,” said Tania Kotsos, strategist at RBC Capital Markets.

Dec 5, 2006

We need more power!

From the Marketwatch:

LONDON (MarketWatch) -- Citigroup Inc. (C) investment bank Tuesday said it has recruited Paul Mead, the current director of continental European power and gas trading at Barclays PLC (BCS), to develop its own European power and gas trading division.

Citigroup expects to hire 20-30 traders as well as a back office team to start trading continental European power and gas, a spokesman for the company said.
The division will be based in London and is expected to start trading in the second quarter of 2007.

Mead, 38, will take up his new position in March. Mead is a well-known figure in power trading, having joined Barclays in 2002 to set up and run the bank's Continental power trading operation. Prior to Barclays, he spent six years working a Enron Europe, a now defunct unit of bankrupt energy firm Enron (ENE).

Aside from gas and power trading, the bank is also considering trading European carbon dioxide allowances, the spokesman said. He added that no specific date has been set for adding the CO2 allowances to its product portfolio list. He also wasn't able to comment on which specific European countries Citigroup plans to trade gas and power.

Citigroup already trades oil, gas and power from Houston, Texas and gas from Calgary, Canada.

Mead will report to Stuart Saley, Global Head of Power and Gas, and in London, Mark Watson, head of fixed income.
Yes, its slightly boring but I am trying to jump start my blogging mojo. Been wondering a lot lately about whether all the money flying into carbon can really be profitable and what sort of political will and understanding there really is to carry through creating a market worth playing in. Especially with the truely interesting debate going on about the value of starting now.

P.S. I widened my page first Barry.

Aug 28, 2006

Eliminating Volatility from Inflation Measures

The FT covers statement's by the BoE's chief economist, Charles Bean, that the U.S. should not strip out food and energy from the inflation measure used to set policy:

The US Federal Reserve is wrong to focus on core measures of inflation that exclude energy prices, Charles Bean, chief economist at the Bank of England, has suggested. It should focus instead on headline inflation, which is much higher, he argued. Including energy and food costs, US consumer price inflation is running at an annual rate of 4.1 per cent, against 2.7 per cent for core inflation.

Mr Bean told the Fed's annual Jackson Hole symposium at the weekend that energy prices were rising for the same reason the price of many manufactured goods were falling: the rise of China and other emerging market economies. Since both price trends had a common cause, he said it makes little sense to focus "on measures of core inflation that strip out energy prices while not stripping out falling goods prices as well."

This debate gets brought up a lot by inflation hawks but I like his reasoning about China being the driver on both fronts. Also I was struck by the idea that while the U.S. eliminates food and energy from the top line to reduce volatility in the data, U.S. overnight rates have been quite volatile.

I guess this stuff is neither here nor there since the data including food and energy is still available and the bond market approves of the FOMC's view by keeping the inflation outlook low.