Forex News Bailout Agreement Reached- Vote to Come by October 1st. From Bloomberg
Sept. 28 (Bloomberg) — President George W. Bush and congressional leaders said they had reached agreement on a $700 billion bank-rescue package designed to revive moribund credit markets.
“I am confident Congress will do what is best for our economy by approving this legislation promptly,” Bush said in a statement today in Washington.
The House may consider the plan as soon as tomorrow, and the Senate will vote at least by Oct. 1, said Senate Majority Leader Harry Reid. House Republican leaders, who had resisted the Bush administration’s initial proposal, urged their colleagues to support the plan today in a private meeting, Representative Mark Kirk of Illinois said in an interview.
The support of House Republicans leaders boosts the chances the rescue package will pass Congress.
Bush’s comments came during a weekend of talks aimed at reaching agreement before global financial markets reopen today. It would give Treasury Secretary Henry Paulson an immediate $250 billion to buy bad loans from financial companies, with the rest to be doled out in stages.
Lawmakers steered a path between voter anger at having to foot the bill for the mistakes of Wall Street bankers and the need to shore up a financial system shaken by the collapse of Lehman Brothers Holdings Inc. and Washington Mutual Inc. Bush, in a speech yesterday, said the package was needed to prevent a “deep and painful recession.”
The agreement alters the Bush administration’s original request for unchecked authority to purchase distressed debt securities from financial companies reeling from the record number of home foreclosures.
Forex News JPY Retail Sales Out at -2.2% Worse Than Expected, JPY Poised for Breakout
Retail Sales Expected at -1.7%
Actual -2.2%
Actual -0.7%
See Earlier Post by Greg Michalowski
Forex News NZD Trade Balance Out at -750M– Better Than expected
Trade Balance Out at -750M
Expected at -926M
Prior -781M
Official Release Site: http://www.stats.govt.nz/default.htm
This figure represents export demand and it is related to currency demand becuase foreign buyers must use NZD to make their purchases.
Weekend Press: A look at some of the stories from around the globe
Wall Street Journal:
Lawmakers Reach Tentative Bailout Deal
http://online.wsj.com/article/SB122257682963083173.html
The Real Cost of the Bailouts
http://online.wsj.com/article/SB122256539004883001.html
NY Times
Breakthrough Reached in Negotiations on Bailout
http://www.nytimes.com/2008/09/28/business/28bailout.html?_r=1&hp&oref=slogin
Editiorial: Don’t Blame the New Deal
http://www.nytimes.com/2008/09/28/opinion/28sun1.html?ref=opinion
Green the Bailout
http://www.nytimes.com/2008/09/28/opinion/28friedman.html?ref=opinion
London Times:
Bradford and Bigley talks continue ahead of nationalisation
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4841032.ece
‘We’re there,’ says Paulson as Wall Street prepares for $700 bn bail-out"
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4840110.ece
"America is lucky – it’s being saved by the mob"
http://www.timesonline.co.uk/tol/comment/columnists/simon_jenkins/article4837722.ece
Forex Weekly Roundup: No rescue plan but hope remains…I hope
CLICK HERE FOR A PDF VERSION OF THE BELOW WEEKLY SUMMARY
Well, we made it through another week.
The focus was on Washington. It started with a 2 1/2 page plan and ended with a 102 page tome from the Democrats and confusion among the Republicans in the House and Senate.
The market got it’s full of Chairman Bernanke and Treasury Secretary Paulson as they testified to three separate bodies in two days. In the process, questions were repeated and repeated and repeated again, and despite the opportunity to sell the answers to the American public as to why a plan was needed, they instead ignited a call-in campaign to Senators and Representative that rivaled the call in vote for "Dancing with the Stars". Meanwhile the President preempted new season premieres for 13 minutes, giving a history lesson of the problem. I must admit, it wasn’t the best and most believable performances by any of the three.
The week ended with nothing concrete but a promise of a plan by the end of the weekend. Included within that plan will apparently be limits on executive compensation and "Golden Parachutes", some sort of payback plan for taxpayers (warrants have been mentioned), an accountability clauses for the Treasury (note how our elected officials don’t take any accountability for their actions), and some sort of mortgage relief. Having said that, there are Republican House members who would rather see the banks buy insurance against default of the paper they own to the government. Then if there is a default, the government would get involved at that point. The problem is the bank may default before the mortgage pool does – causing a mess anyway.
Meanwhile, Barack Obama and John McCain became "involved" later in the week and seemed to cause more headaches then help. McCain in particular was vilified for throwing a monkey wrench in a bi-partisan compromise plan in the works. Obama got in line with others but became annoying when he insisted on having the Foreign Policy Presidential Debate scheduled for Friday. UGH. The combination reminded all that there is an election in a little more than a month and the smallest false step could snatch defeat from the jaws of victory for Republicans and Democrats alike.
For those with political aspirations, it might be the best time ever to put together a YouTube video, send some spam mail out and see if the video turns viral. If so, you might get the write in vote. Remember George W. Bush won the last election with 62 million votes and the "American Idol" vote totaled 97 million. So anything is possible.
Getting serious, in what truly is a serious time for the United States financial system, a rescue plan is still probably the best way to go. The risks are still great in the financial sector. The credit markets have seized.
Three month LIBOR, a proxy for everything from corporate loans to home equity loans, has shot up from 2.87% ten days ago to 3.76% today. Corporations are being shut out of the commercial paper market (outstandings have gone down by 113 billion in two weeks) and consumers are fleeing from banks which are the weakest.
Washington Mutual was seized and sold to JP Morgan Chase for 1.8 billion on Thursday evening and it barely caused a ripple on Friday. In fact the Dow advanced by 130 points. Thankfully, there was a buyer who assumed the good, bad and ugly and felt good about it.
So why not let the financial institutions who fail simply be bought out by the better, more capitalized banks? The reason is there is no guarantee that JP Morgan or Bank of America will be there, ready to buy. Nor is there a guarantee that they will be able to source capital by issuing more stock, like they were planning on doing to finance the WaMu purchase. In addition, not to be alarmist but Citibank is conspicuously quiet during this whole process. What does that say about them and the quality of their balance sheet? The goal is to start to lend again.
Even with a rescue plan there is no guarantee that a wiggle here or there may destabilize the economy again. The US is still at the mercy of the housing market and there are plenty of buyers who are upside down with regard to their mortgage (have less equity than the mortgage outstanding) and seem to be just as happy walking away from the payment obligation.
Although this weeks Exisiting Home Sales gave some hope as the month supply of homes dipped to 10.3 months (down from 11.2 months), it still is well above normal levels (see chart above). Moreover, New Home Sales supply numbers were not so favorable – rising to 11.2 months.
There must be a way to stimulate first time housing demand and slow foreclosures. "THINK HOUSING should be the rallying cry.
So perhaps with the weekend now here, the 24 hour microscope of the news media and Congressional photo opportunities will be replaced by meaningful discussions on what is truly best for the nation, and come Sunday a solution will be found and implemented for the good of all.
I hope that is what happens…
KEY ECONOMIC RELEASES FOR THE WEEK
The week will be dominated once again by the events of the US Rescue Plan. This is a wildcard which can lead to many implications for the market movement. However, there is also a number of key releases and events that will influence trading this week including the ECB Meeting and subsequent press conference. This will be on Thursday. The Eurozone will also release the October Flach CPI estimate. There is a feeling that the ECB time table for easings might be moved up as a result of the turmoil (slower growth) and expectation that inflation may have peaked.
In the US, the all important unemployment report for September will be released. The market may not like what is reported as jobless claims continued to be elevated and the unraveling of the financial sector started to take hold. The worst may come in future months, however, as the fallout of the crisis and a holiday sales season that should not be too jolly, will continue to pressure hiring.
Below is a listing of the key releases for the week.
Sunday September 28th
5:45 PM, New Zealand Trade Balance, Expectation -912M vs. -781M
7:50 PM, Japan Retail Sales, +0.2% vs. +2.0%
Monday, September 29th
5:00 AM, Eurozone Consumer Confidence, Expectation -19 vs. -19
8:30 AM, US Personal Spending and Income, Spending Expectation +0.2% vs +0.2%, Income +0.2% vs. -0.7%
9:30 PM, Australian Retail Sales, No estimate, Last month +0.1%
10:00 PM, New Zealand Business Confidence, No estimate. Last month -20.5%
Tuesday, September 30th:
3:55 AM EDT, German Unemployment Change, -15,000 jobs vs -40,000
4:00 AM EDT, Swiss UBS Consumption Indicator, No estimate. 1.84 B
5:00 AM EDT, Eurozone Flash CPI Estimate, Expectation 3.6% vs. 3.8%
8:30 AM EDT, Canada GDP q/q 0.2% vs 0.1%
9:00 AM EDT, Case Schiller Home Price Change (Composite 20), Expectation -16.1% vs -15.9%
9:45 AM EDT, Chicago PMI Index, Expectation 54.0 vs 57.9
10:00 AM EDT, US Consumer Confidence, Expectation 54 vs. 56.9
12:00 AM EDT, ECB Trichet scheduled to speak
7:50 AM EDT, Japan Tankan Manufacturing Index, Expectation -2 vs. 5, Non Manufacturing Index, Expectation 5 vs. 10
Wednesday, October 1st:
2:00 AM EDT, German Retail Sales, Expectation +0.5% vs. -1.5%
4:30 AM EDT, UK Manufacturing PMi, Expectation 45.3 vs 45.3
7:30 AM EDT, Challenger Job Cuts, No estimate vs +11.7% from last year
10:00 AM EDT, ISM Manufacturing PMI 49.5 vs 49.9
All day: US Vehicle Sales, Expectation 13.6 m vs 13.7 m
9:30 PM EDT, Australia Trade Balance Expectation 0.30 billion vs -0.72 billion
Thursday, October 2nd
2:00 AM EDT, UK Nationwide Home Price Index, Expectation -1.6% vs -1.9%
7:45 AM EDT, ECB Monetary Policy meeting announcement, Exp. No Change 4.25%
8:30 AM EDT, Trichet Press Conference
10:00 AM EDT, US Factory Orders, Exp -2.3% vs. +1.3%
Friday, October 3rd
1:45 AM EDT, Swiss CPI, Expectation -0.1% vs. +0.3%
4:30 AM EDT, UK Service PMI, Exp 48. vs 49.2
5:00 AM EDT, Eurozone Retail Sales, Exp +0.1% vs. -0.4%
8:30 AM EDT, US Non Farm Payroll, Exp -100,000 jobs vs -84,000
8:30 AM EDT, US Unemployment Rate, Exp. -6.1% vs -6.1%
10:00 AM EDT, US ISM Non- Manufacturing PMI, Exp. 50.0 vs 50.6
GBPUSD
Moves above or below these levels should solicit additional moves in the direction of the break. USDJPY
The USDJPY is moving sideways with no discernable trend. The 100 and 200 hour moving average are currently identical at 105.81. The pair had two attempts at a breakout during the week. There was a move through upside resistance at 106.34 which reached a high of 107.01 but quickly moved back lower, and a stop hunting move through 105.15 that was over before it got going. The pair is being influenced by the Yen crosses such as GBPJPY and EURJPY which makes focusing on it as a pair difficult for the time being. When a currency pair remains in a sideways pattern for an extended period, it may frustrate in the short term for breakout/trend following traders, but can be quite favorable for range traders. However, the longer the sideways motion, the greater the chance (generally) for a sharp move in the direction of the breakout. Usually, there is a fundamental story for the break one way or the other. Have a great weekend and good luck with your trading next week.
Greg Michalowski
Vice President
Chief Currency Analyst
Forex Trading GBPUSD in a lower range after breaking through 100 hour moving average yesterday.
Like the EURUSD, the GBPUSD is trading in between the support and resistance levels. The pair has moved to a new lower level range (1.8305 to 1.8481) after failing on a break to new weekly highs yesterday. The pair moved to a new high at 1.8667 above the 1.8639 high for the week, before moving down sharply for the rest of the day.
The consolidative decline over the last few days has allowed for the 100 and 200 hour moving averages to catch up to the market after the sharp rise last Friday and Monday. The current price is in between the 100 hour moving average (currently at 1.8505) and the 200 hour moving average at 1.8297. The break below the 100 hour moving average yesterday came at 1.8484. The high today was 1.8467.
Short term, the trend is down, but as warned, the markets are still randomly walking and news is changing by the hour. So expect profit taking and stop buying/selling to keep things interesting.
Forex Trading. EURUSD moving back down, but randomly wandering.
The EURUSD moved below the 100 hour moving average (currently at the 1.4687) but above the 200 hour moving average (currently at 1.4500). The market is still randomly walking through buying and selling binges There is not much conviction either way at this point since the news is so fluid. The wiggles and waggles are becoming increasingly more random with less and less liquidity behind the moves
Forex News Senator Dodd and Reid (Democrats) speak
Sen. Reid and Dodd reiterate that a plan will get done no matter how long it takes.
Insertion of Presidential politics has not been helpful. Says McCain has not made a stand.
Dodd comments that certain things are not negotiable:
- Executive compensation
- Accountability
- Payback to taxpayers
- Mortgage help.
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