May 24th, 2010 23:25:25 GMT

US Senate Passes Two Non-Binding Resolutions To Reg Reform

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–Senate Approves Resolutions Related To Autos, Proprietary Trading
–Formal House-Senate Conference Committee To Start Soon
–Hill Leaders Seek Final Deal By July 4th Recess

By John Shaw

WASHINGTON (MNI) – In a pair of votes that served as a prelude to
the effort to craft a final financial services regulatory reform bill,
the Senate approved Monday evening two non-binding amendments to the
underlying bill that was passed by the Senate last week.

The Senate voted 60 to 30 for a motion by Republican senator Sam
Brownback to urge those drafting the final bill to exempt auto dealers
from jurisdiction of a new bureau of consumer financial protection.

The Senate voted 87 to 4 for a motion by Republican senator Kay
Bailey Hutchison and Democratic senator Kay Hagan regarding how limits
to proprietary trading should apply to insurance companies which have
different capital standards than banks.

House and Senate leaders are set to begin efforts to craft a
compromise financial regulatory reform bill this week by appointing the
members of the conference committee that will be charged to draft the
final bill.

The House passed its regulatory reform bill in December of 2009
while the Senate approved its bill last week.

The conference committee will work to reconcile the House and
Senate passed financial regulatory reform bills. Any compromise must
then be approved by the House and Senate.

Senate Banking Committee Chairman Chris Dodd and House Financial
Services Committee Chairman Barney Frank will preside over the
conference committee.

The top Republicans on these panels will be part of the conference
deliberations as will be the chairmen and ranking members of the House
and Senate Agriculture committees.

Dodd and Frank met with President Obama Friday and both lawmakers
said it should not be difficult to draft a compromise bill.

“This is one of the rare occasions when the two bills really are
very close to each other,” Dodd said Friday.

Frank and Dodd are expected to take the lead role in the
negotiations over a final bill, with key input from House Speaker Nancy
Pelosi, Senate Majority Leader Harry Reid, Treasury Secretary Tim
Geithner, White House Chief of Staff Rahm Emanuel–and even President
Obama.

Frank has frequently called for public House-Senate conference
deliberations which could be televised on C-SPAN. But there will be many
private talks that will occur.

“The negotiations will be on in private but the results of any
discussions are going to have to be voted on,” Frank said last week,
adding that “nothing will be ratified without a public debate.”

Both Dodd and Frank said they would like a final bill to be
approved and sent to Obama by July 4th.

One of the main issues to be resolved will be how to regulate the
over-the-counter derivatives market. Both the House and Senate bill
require most derivatives to be traded through third parties, but the
Senate bill has fewer exemptions for end-users. Additionally, the Senate
version would force banks to spin off their derivatives units.

The two bills require expanded audits of the Federal Reserve Board,
but the House version is both more expansive and intrusive and would
include some monetary decisions made by the Fed.

The two bills also differ on the precise powers of a new consumer
protection entity; the House bill creates a stand-alone agency while the
Senate bill places it within the Fed.

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

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

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May 24th, 2010 22:59:52 GMT

EUR/AUD technicals: 38.2% retracement complete

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eurauddailyThis has been an important pair to watch over the last week or so and there might be more to come. If a move is almost vertical in either direction, I find there to be an increased liklihood that the 38.2% retracement will suffice. That level is 1.4870 and that was the overnight low. If a low starts to form near there then I expect another short-covering squeeze towards 1.5600 approximately.

2 Comments

May 24th, 2010 22:38:42 GMT

PRU/AIA deal still dragging its heels

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The reason that the FX market is so interested in this deal is that there is a very large GBP/USD transaction associated with it, much of which has presumably already been hedged. If the deal falls over, the hedges will be taken off, and the cable is likely to go for a sharp run higher (especially if the cable dealers get wind of it first!). Who said we were stupid?

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May 24th, 2010 21:42:17 GMT

Quick look at the order books

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  • USD/JPY: solid buying interest reported, starting at 89.70; solid offers 90.65/80, stops above 90.90 and 91.20
  • EUR/USD: fairly heavy stops below 1.2290; Sovereign bids reported 1.2230/40
  • AUD/USD: talk yesterday of hedge fund buyers below .8200

23 Comments

May 24th, 2010 21:33:26 GMT

Be wary of moves in the twilight zone

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The NY session was very unspectacular with relatively small ranges but as soon as the NY traders turn their screens off at 5pm, the market goes for a run. This is the most illiquid time of the day, between the NY close and the Tokyo open, and it allows bigger players to move the market around with less fear of failure. Once Tokyo opens, they can then get down to the real business.

If there’s no news out and the market starts moving sharply at 5.30 pm NY time then you can be fairly sure that some big players are either trying to trigger big stop-loss orders or are trying to get the market to more favourable levels before Tokyo opens.

11 Comments

May 24th, 2010 21:11:56 GMT

ForexLive Asian market open: EUR/AUD retraces 38.2%

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We can expect a more ‘normal’ session today I think after quiet NY trade. AUD remains reasonably well bid on dips from profit takers but sizeable rallies will also encounter grateful sellers. The EUR experienced some heavy pressure during the London session with talk of SNB selling and it is opening in Asia on its lows against both the USD and the JPY. Interesting to note that EUR/AUD has now retraced almost exactly 38.2% of the violent 1.3940/1.5440 upmove.

Good luck today.

2 Comments

May 24th, 2010 20:05:56 GMT

ForexLive US wrap-up; A blissfully unmemorable session

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  • Chicago Fed national activity index rises to 0.29 in April from 0.13 in March; highest since December 2006
  • US existing home sales rise 7.6% in April as tax credit for first time home buyers expires; inventories of unsold homes rises 11.5%
  • EU’s Barroso: Germany naive to think EU Treaty can be amended to withdraw voting rights of members with high deficits
  • Italy to ban cash transactions above E5,000 to rein in tax evasion; public-sector pay, hiring to be cut
  • BOE’s Posen: Inflation beats deflation, no big UK recovery
  • Four Spanish savings banks merge as sector shakeout intensifies
  • US equities lose ground in final hour, end near session lows at 1073, down 1.3%
  • Gold bounces from recent weakness; rises to $1195

The unofficial start of summer in the US is a week away but traders got a jump on the season today. We had one of the lower volatility sessions in recent memory with EUR/USD confined to a very civilized 67 pip 1.2350/1.2417 range during the NY session. The US pushed EUR/USD to its lows early in the session as Spanish banking woes and talk of SNB EUR/USD sales made the rounds. An oversold bounce took us to 1.2417 but Asian central bank selling helped limit the advance. A stock slide late in the day put the euro back down to the 1.2380 level.

USD/JPY was very tightly range bound during US trading, edging as high as 90.63 late this morning. It opened on its lows at 90.03 and spent the day mostly in a 90.35/55 range.

Cable fell back along with EUR/USD, bottoming around 1.4355 in early US trade before rebounding to the 1.4460 level in early afternoon. It ends better bid, around 1.4430 with EUR/GBP losing some ground late, supporting cable.

AUD was pressured late in the session by risk aversion. Mining industry push-back on the mining tax weighed on AUD sentiment as well. 0.8270/0.8342 was the US range. We end the day near the bottom of the range, at 0.8282.

3 Comments

May 24th, 2010 19:43:36 GMT

Let’s recap…

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USD/JPY offers remain in the 90.60/80 area, traders report. Strong bids down at 89.70.

EUR/USD runs into central bank sales as Asian central banks begin to BUY their own currencies for a change and and unload euros bought to diversify holdings. Sales were seen starting at 1.2405; more seen toward 1.2450. SNB rumored to have sold EUR/USD in European trade. Spanish banking jitters are a weight on the euro today after the BOS took over one savings bank over the weekend and four institutions joined forces today.

Most pairs like Cable and AUD in a holding pattern as volatility takes a break…

9 Comments

May 24th, 2010 19:25:36 GMT

Update: BOE Posen: End Of UK Fiscal Stimulus Road Approaching

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LONDON (MNI) – The end of the UK’s scope for fiscal stimulus is
approaching, and thankfully policymakers are heeding the warning signs,
Bank of England Monetary Policy Committee member Adam Posen said in a
question and answer session Monday.

Posen, asked if the time was over for fiscal stimulus, said the US
still had a lot of road to use up before it had to end stimulus, but the
UK was coming to the end.

“The UK is somewhere where we can see the end of the road
approaching,” Posen said.

“The UK, thankfully … is paying attention to the signs that says
‘caution’, ‘last exit’ as opposed to certain other countries that aren’t
seeing those signs,” Posen said.

Posen also said the main UK political parties have been right to
draw the line on fiscal expansion.

He said that while the UK had a very strong reputation
internationally, having never defaulted on its debt in “100s of years”,
it was right to announce an end to fiscal largesse.

“I do have to draw a line here in the UK,” Posen said, in
reference to fiscal expansion.

“The three parties who ran for office were right to say we are
going to have an age of austerity,” he added.

The Conservative/Liberal Democrat coalition that came to power
following the May election has already unveiled the first fiscal
tightening steps, with the public spending cuts coming into force in the
2010/11 fiscal year.

The BOE MPC member was also asked whether he thought the BOE should
take responsibility for financial regulation.

He restated his view that what mattered was not which body was
responsible for regulation, but whether it was based on rules or
discretion. He advocated a strict rules based approach.

The new UK government has advocated giving the BOE responsibility
for macro-prudential supervision, although details are still being worked
out.

In comments in his earlier speech, which departed from text, Posen
noted that UK inflation is currently running above 3% compared to the
2.0% target, but said that while he was not unconcerned about inflation
it was better to have an overshoot than to experience deflation.

In his earlier speech, Posen looked at the comparisons between the
current UK economic challenges and those of Japan during its lost
decade.

He highlighted the difficulties facing the UK if it wants to base
its recovery on export growth, noting the country’s main export market
is the euro area and “the prospects for strong growth in most of the
Euro Area are rather dim for the next several years.”

Posen also said that the UK’s fiscal tightening will hit aggregate
growth and noted the BOE, with Bank Rate already very close to the zero
bound, could not respond with a rate cut but only by postponing a rate
hike.

–London newsroom: 4420 7 862 7491; email:drobinson@marketnews.com

[TOPICS: M$B$$$,M$$BE$,MABPR$,MT$$$$]

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