July 20th, 2010 15:08:29 GMT

Gold bounces from trend support

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Trendline support dating back to the depths of the post-Lehman meltdown was tested this morning but prices bounced nicely. Firmer gold tends, tends to undermine the greenback and vice versa. The correlation is not one to one,  but keep it in mind.

7-20 gold

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July 20th, 2010 15:05:32 GMT

Fed’s Tarullo: All Fin Regs Need Not Be Agreed Internationally

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–Must Balance Consistency On Global Reform W/ National Flexibility

Brai Odion-Esene

WASHINGTON (MNI) – Although adopting a strong, common set of
capital and liquidity rules for internationally active banks is
critical, “it is neither practical nor desirable to negotiate all
details of financial regulation internationally,” Federal Reserve Gov.
David Tarullo said Tuesday.

In testimony prepared for a hearing regarding international
coordination of financial regulation by a Senate Banking subcommittee,
Tarullo stressed the importance of the United States preserving the
flexibility to adopt prudential regulations that work best within the
U.S. financial and legal systems.

“Within a common set of agreed-upon global standards, each
jurisdiction will want to tailor some of its rules and supervisory
practice to national conditions and preferences,” he said.

The job of U.S. regulators, Tarullo said, must be to ensure that,
together, the various international financial organizations produce
reforms and practices that are consistent with U.S. interests and legal
requirements.

Tarullo laid out what he believes should be U.S. goals for
international cooperative efforts including; increasing the stability of
the financial system through adoption of strong, common regulatory
standards for large financial firms and important financial markets; and
working to prevent major competitive imbalances between U.S. and foreign
financial institutions.

The Fed official also repeated the Fed’s stance on capital
requirements, with the central bank’s view that large institutions
should be sufficiently capitalized so that they could sustain the losses
associated with a systemic problem and remain sufficiently capitalized
to continue functioning effectively as financial intermediaries.

“Meeting this standard will require a considerable strengthening of
existing requirements, both with respect to the amount of capital held
and to the quality of that capital,” Tarullo said.

Going on to comment on the recently passed financial regulatory
reform bill, Tarullo told the subcommittee that there are aspects of the
Dodd-Frank Act that are unlikely to become part of the international
regulatory framework.

In particular, he said the Volcker rule — that generally bans
banks operating in the U.S. from engaging in proprietary trading or
certain derivatives transactions — or the limits placed on banks’ size,
are unlikely to be adopted by many countries with concentrated banking
systems.

With regard to the Volcker rule, Tarullo said “many other
countries follow a universal banking model and are unlikely to adopt the
sorts of activity restrictions contained in the act.”

Tarullo acknowledged that not all elements of financial reform can
be designed on a national level in a way that is perfectly consistent
across countries.

“Our challenge,” he said, “is to strike the right balance between
achieving global consistency on the core reforms necessary to protect
financial stability and provide a workably level playing field, and at
the same time providing the flexibility necessary to supplement the
common standards with elements tailored to national financial systems,
legal structures, and policy preferences.”

The difficulty in implementing international financial regulation
uniformly can also been seen in discussions on cross-border resolution
of failing financial institutions, with Tarullo cautioning that despite
the progress being made through efforts by the Financial Stability Board
and domestic agencies, “comprehensive solutions to cross-border crisis
management difficulties will not be easy to achieve.”

At least for the foreseeable future, he continued, “a focus on
regulatory coordination and supervisory cooperation and planning before
a large firms failure becomes a real possibility is likely to yield the
greatest benefit.”

A difference of opinion between U.S. regulators and their European
counterparts can also be seen in the approaches towards addressing the
risk posed by compensation practices.

Tarullo noted that the European Parliament in July approved a
directive that has the potential to lead to a number of formula-based
restrictions on employee compensation at financial services firms
operating in the EU, the Fed does not believe that will be an effective
strategty.

“Our view continues to be that a uniform or formulaic approach to
all such employees would be neither efficient in motivating and
compensating employees nor effective in preventing excessively risky
activity, particularly among non-executives such as traders,” Tarullo
said.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MI$$$$,M$$CR$,MK$$$$]

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July 20th, 2010 15:00:33 GMT

Is cable a proxy for the financial industry?

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Trades like it today. We bottomed at the 1.5155 level not long after Goldman’s earnings report spooked the markets. On second glance, the market decided the Goldman numbers were not that bad and the stock has recovered its early losses. Cable looks to be trading in lockstep. Makes a certain amount of sense given the UK economy’s reliance on financial services for growth.

Cable has bounced sharply, now at 1.5235 from 1.5155 lows. Downtrend resistance comes in around 1.5288.

7-20 gbp

2 Comments

July 20th, 2010 14:51:49 GMT

EUR/GBP retesting the breakout

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EUR/GBP has retreated to retest the broken trendline which today comes in at 0.8457 level. The textbook tells us to buy the retest for fresh rebound. Keep stops tight if establishing fresh longs, below 0.8420, say for a further rally toward the the 100-day average at 0.8604.

7-20 eurgbp

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July 20th, 2010 14:45:20 GMT

US’s Reid: Senate To Vote At 2:30 P.M. To Extend UI Benefits

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–Senate Majority Leader: Vote Will Occur After New Senator Sworn In
–Senate Minority Leader Says UI Extension Should Be Offset
–Sen. McConnell: UI Extension Should Be Offset With Unused Stimulus

By John Shaw

WASHINGTON (MNI) – Senate Majority Leader Harry Reid Tuesday said
the Senate will vote at 2:30 p.m. in the afternoon to end the debate on
extending unemployment benefits.

In comments on the Senate floor, Reid the Senate will vote to
invoke cloture after the new interim senator from West Virginia, Carte
Goodwin, is sworn in.

This would give the supporters of the legislation the 60 votes
needed to end the debate on extending the benefits.

A final Senate vote on the UI benefits could occur later Thursday.
The measure must still be approved by the House.

The bill would retroactively give UI benefits to more than 2
million people who have lost them since the end of May. It extends
funding through Nov. 30.

Speaking after Reid, Senate Minority Leader Mitch McConnell said
Republicans continue to believe that the $34 billion UI package should
be offset by tapping unused funds from last year’s fiscal stimulus bill.

“The debate is not about UI,” McConnell said, adding that
Republicans believe the nation’s debt is “spinning completely out of
control.”

McConnell said it is wrong to add $34 billion to the public debt.

Senate Majority Whip Dick Durbin then chided McConnell for
insisting on offsets for the UI extension, saying that Congress has
typically extended UI benefits without offsets.

He said Republican insistence on offsets for UI benefits on the
basis of fiscal concerns is disingenuous, given their support for tax
cuts that are not offset.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

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July 20th, 2010 14:42:14 GMT

Another nation heard from

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All the Spanish banks have passed the stress test, according to an article in El Pais, traders say.

That makes it Germany (ex-Hypo Real Estate), France, Spain…am I missing anyone?

Could be an early night on Friday for our European readers, at this pace…

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July 20th, 2010 14:30:20 GMT

Powerful US custody bank buys up EUR/USD

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The buying began around the 1.2870 level and reached 1.2896 before stalling. They took out the BIS offers in the 1.2880s along the way…

Just crossing the wires, Fitch says that they are concerned about bank funding markets remaining tight even after the stress tests.

That means, in essence, even the banks won’t believe the stress tests…

4 Comments

July 20th, 2010 14:26:06 GMT

Fed Text:Approp For Tsy To Cut TALF Cred Protect/TARP To $4.3B

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– Retransmitting to Add ‘Fed’ in the Headline

WASHINGTON (MNI) – Following is the text of a statement issued
Tuesday by the Federal Reserve:

The Federal Reserve Board on Tuesday announced that it had agreed
with the Treasury Department that it was appropriate for Treasury to
reduce from $20 billion to $4.3 billion the credit protection provided
for the Term Asset-Backed Securities Loan Facility (TALF) under the
Troubled Asset Relief Program (TARP). The Board had authorized up to
$200 billion in TALF loans, but when the program closed on June 30,
2010, there were $43 billion in loans outstanding.

Under the TALF, which began operation in March 2009, the Federal
Reserve Bank of New York extended loans to investors in highly rated
asset-backed securities (ABS) and commercial mortgage-backed securities
(CMBS). By encouraging issuance of ABS and CMBS, the TALF was designed
to increase credit availability and support economic activity. Although
the TALF extended $70 billion in loans, many TALF loans, which have
initial maturities of three or five years, have been repaid early, in
part because the interest rates on TALF loans were designed to be higher
than market rates in the more normal conditions that have come to
prevail in a number of securitization markets.

Any losses on the TALF program would first be absorbed by the
accumulated excess of the TALF loan interest payments over the Federal
Reserves cost of funds and then by the TARP funds. To date, the TALF
program has experienced no losses and all outstanding TALF loans are
well collateralized. The Board continues to see it as highly likely that
the accumulated excess interest spread will cover any loan losses that
may occur without recourse to the dedicated TARP funds.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,M$$FI$]

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July 20th, 2010 14:26:05 GMT

Text: Approp For Tsy To Cut TALF Cred Protect/TARP To $4.3B

by

WASHINGTON (MNI) – Following is the text of a statement issued
Tuesday by the Federal Reserve:

The Federal Reserve Board on Tuesday announced that it had agreed
with the Treasury Department that it was appropriate for Treasury to
reduce from $20 billion to $4.3 billion the credit protection provided
for the Term Asset-Backed Securities Loan Facility (TALF) under the
Troubled Asset Relief Program (TARP). The Board had authorized up to
$200 billion in TALF loans, but when the program closed on June 30,
2010, there were $43 billion in loans outstanding.

Under the TALF, which began operation in March 2009, the Federal
Reserve Bank of New York extended loans to investors in highly rated
asset-backed securities (ABS) and commercial mortgage-backed securities
(CMBS). By encouraging issuance of ABS and CMBS, the TALF was designed
to increase credit availability and support economic activity. Although
the TALF extended $70 billion in loans, many TALF loans, which have
initial maturities of three or five years, have been repaid early, in
part because the interest rates on TALF loans were designed to be higher
than market rates in the more normal conditions that have come to
prevail in a number of securitization markets.

Any losses on the TALF program would first be absorbed by the
accumulated excess of the TALF loan interest payments over the Federal
Reserves cost of funds and then by the TARP funds. To date, the TALF
program has experienced no losses and all outstanding TALF loans are
well collateralized. The Board continues to see it as highly likely that
the accumulated excess interest spread will cover any loan losses that
may occur without recourse to the dedicated TARP funds.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,M$$FI$]

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