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Euro Bank News Doesn’t Sound Good

Maybe I’m jumping to conclusions here but I don’t get the market reaction to the European bank news.

• These banks may be forced to seek funds immediately, so the market knows they’re under pressure.
• The banks are named in the report, so you have the possibility of a run on deposits.
• The only good news would be state aid and that could bring stability
• But at the same time, you have to think that if these ‘mid-size’ banks are hurting, the bigger ones are as well.

EU to Speed Up Bank Capitalization

The FT is reporting that Europe will speed up the recapitalization of 16 banks. This is driving the rally in EUR.

Update: the report cites a French official saying the 16 banks aren’t French, they’re ‘mid-tier’ and did poorly in recent stress tests. The banks will be encourage to seek capital from the private sector.

The story is here.

EUR and GBP Pop

EUR/USD just darted to 1.3520, cable to 1.5394. Nothing on the wires driving it and SNB intervention doesn’t look to be the cause.

EUR/CHF Can’t Hold Gains

The market has been eager to sell EUR/CHF around 1.23. So far buyers have come in below 1.22.

I’m long but this (strange-looking) chart looks like it wants to go lower.

Oil Below $80

WTI below $80 for the first time since Aug 18. Here’s the chart I posted Aug 29, it still applies.

Here’s the updated chart:

It would be extremely negative to have a close here. I doubt it happens.

Shirikawa Says Yen’s Rise Reflects Uncertainty

BOJ leader Shirikawa say the current yen rise reflects uncertainty about global economy, need to remove this uncertainty.

This echos what Azumi said earlier.

EUR/USD Hits 1.35

The short squeeze finally came even if it didn’t play out as early as I envisioned it. The series of higher lows in the intraday chart so the squeeze could continue.

Schumer Says Obama Does Not Support China Bill

So far diplomacy has been the Obama/Bush tactic on China but Congress (and the public) wants more action. There’s no way Obama would veto this bill and it looks like Congress will pass it. The most likely course is that Obama will use the threat to get concessions from China while leaning on Congress to water it down.

Japan Repeats Yen Warnings

• Fin Min Azumi on the wires saying Japan will take decisive action against excessive yen rises.
• Wants yen to be at appropriate levels reflecting the Japanese economy.
• Yen rises will ease if confidence in euro is restored.

The first two comments are repeats. The third is new, and suggests they are not currently contemplating intervention because there is a real reason for JPY strength.

Chinese Currency Bill Slated For October

This is going to be a big story in the next few weeks and could spark some serious fears. A bipartisan group on Senators are unveiling a bill that will trade currency undervaluation as a subsidy and will open the door for countervailing duties. Senator Schumer says the bill “will send huge short across China’s bow that we finally mean business.”  He expects the bill to pass “resoundedly” in the first few weeks of October.

A trade war between the world’s two largest economies is just what we need right now.