The press reports that Asian equity market investors are spooked by European economic and debt problems, and Europeans are worried about a slowdown in Asia. In the US, analysts say we need to worry about a bad earnings season, which starts today with Alcoa and ends on Friday with JPMorgan and Wells Fargo. (Wall Street guru Lynne says the banks are likely to set the tone going into next week.)
This looks like a lot of finger-pointing without enough emphasis on the World Bank’s statement that a sharp deterioration in the Eurozone debt crisis could reduce global growth by as much as 2% next year. Yes, China is failing to address the economic slowdown, presumably because it’s preoccupied with the party Congress, and yes, the US needs to address the fiscal cliff, but the immediate risk is Europe.
The Greek and Spanish situations remain murky and are a real threat to the euro’s dip turning into a rout, although that’s not what we expect. Instead we will probably get joy over some partial solutions to some of the problems and a renewed buy-on-dip mentality. Even so, we won’t get anything that might be named “final” until the Oct 18-19 summit. Europeans lack the stomach to withhold bailout money from Greece, although it might be delayed another month. In this matter, the IMF’s Lagarde may have more guts than European leaders. In a nutshell, traders are not terribly impressed by the euro remaining under 1.3000 and instead of forecasting the downside, are speaking of what benchmarks the euro must reach to resume the upmove.
The calendar is somewhat lacking hard data this week but full of big shots giving speeches. The Fed releases the Beige Book on Wednesday and Friday brings PPI. Next weekend, China releases PPI and CPI. We don’t see much here that makes the world safe for risk. Political junkies will be watching the VP debate with bated breath. Biden can be a powerful speaker but also sometimes a bit wild and prone to gaffes. It’s not clear what this has to do with the world economy or FX, but it’s a preoccupation.
|SPOT||CURRENT POSITION||SIGNAL STRENGHT||OPEN DATE||OPEN RATE||POSITION GAIN/LOSS|
|USD/CAD||0.9795||LONG USD||WEAK||10 /04/12||1.0229||-0.67%|