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Crush the Kremlin Ruble,
[2018-08-14   06:25 GMT]

The immediate sanctions coming into force are limited to banning exports of US electronics to Russia. But it’s what comes next that is perplexing. Washington is saying that if Russia does not give a “guarantee” on halting the future use of chemical weapons, and if Moscow does not allow international inspectors into its country to monitor alleged chemical weapons – then the second wave of sanctions will be applied within 90 days.

The subsequent round of sanctions include banning Russian state-owned airline, Aeroflot, from operating flights to the US. The impossibility of Russia meeting Washington’s absurd demands make the further application of sanctions inevitable.

A separate bill is passing through Congress which is planning to hit the Russian banking system, aimed at preventing international transactions.

Senators sponsoring that bill have labeled it “the sanctions bill from hell”. The title of the proposed legislation says it all: “Defending American Society From Russian Aggression Act”. Senators John McCain, Lindsey Graham, Robert Menendez and Ben Cardin, among other Russophobes who are pushing the bill, are explicit about the objective. They say the measures implemented will “crush the Kremlin”.

The chances are paltry that President Trump will use his executive power to block the forthcoming sanctions. The political climate in the US among the intelligence agencies, lawmakers and the mainstream media has become saturated with anti-Russian hysteria. The US is an oligarchy in throes of insanity beyond democratic accountable to its people.

Already this week’s announcement of more offensive economic incursions on Russia sent the Russian economy plummeting. The ruble, bonds and stocks all nosedived. This is an attack on Russia’s vital interests. An economic Barbarossa.

For Washington this seems to be open season for sanctions. It’s not just Russia and Iran on the receiving end. China, Canada, the European Union, Turkey, Venezuela, North Korea, among others, are also being battered with American economic warfare, either under the name of “sanctions” or indirectly using the rhetoric of “tariffs”.

From the conflict in Ukraine, to the alleged annexation of Crimea, to Moscow’s principled support for Syria being traduced as “supporting a dictator”, to alleged “meddling in US elections”, and much more, Russia has shown huge reserves of stoicism and self-discipline in tolerating what can only be called gratuitous American aggression.

The crazed American rulers are pushing the world to the brink by their belligerence. Washington has heretofore given notice that it is not interested in diplomacy, dialogue, or negotiation. It only has one mode of conduct – war, war, war.

Some of Wall Street’s biggest banks are warning investors to steer clear of Russian assets after the ruble’s worst week since the 2015 oil crash amid mounting risks of crippling sanctions from the U.S.

Both Republicans and Democrats in Congress have called for tough measures against Russia in the wake of last month’s summit between President Donald Trump and his counterpart Vladimir Putin. Still, the outlook for passage of the bill submitted last week remains uncertain, particularly since the U.S. Treasury warned that sanctioning sovereign debt could cause instability in global markets.

The U.S. is more likely to apply sanctions selectively to avoid “collateral damage” than to pass the bill in full. Pressure on Russia, however, is only likely to rise further in the near term, he said in a note.

Reduce holdings of Russian assets because the tail risk from potential sanctions is “just too large.” High foreign ownership of Russian sovereign debt means that sanctions would have a big impact on bond yields.

However, No decision can be taken on the bill until the House returns from summer recess next month, leaving a cloud of uncertainty over markets until then.

First Coup D'état, then Lira Political Plot
[2018-08-13   06:20 GMT]

The lira tumbled as much as 11 percent against the dollar in thin trading in Asia, before trimming losses after the nation’s Banking Regulation and Supervision Agency stepped in to limit swap transactions on the battered currency.

Turkey will announce measures to calm markets on Monday, according to Treasury and Finance Minister Berat Albayrak. On The other side, Turkey’s friction with the U.S. is weighing on the lira, and is unlikely to improve anytime soon.

The drivers of the lira’s decline are very specific to Turkey – therefore it should not derail the positive fundamentals in other emerging markets over a longer-term.

Goldman Sachs warned 10 days ago that further lira depreciation to 7.1 would erode all of Turkey's banks' excess capital.

Don't forget though, as Erdogan said earlier in the day, "they have dollars, we have god." Good luck buying a mocchachino with some 'gods.'

This is a textbook currency crisis that’s morphing into a debt and liquidity crisis due to policy mistakes. The way things are going, markets need to be prepared for a hard landing in the economy, corporate defaults on foreign currency debt, and possible bank failures.

Erdogan is left with three options: 1) Hike rates (he said he wouldn't), 2) Enforce Capital Controls (he said he wouldn't), and 3) Confiscate Gold/Dollars (he never said he wouldn't).

Be wary: It is yet another evidence of the train wreck that monetarists cause in economies. Those that say that “a country with monetary sovereignty can issue all the currency it wants without risk of default ” are wrong yet again. Like in Argentina, Brazil, Iran, Venezuela, monetary sovereignty means nothing without strong fundamentals to back the currency. Turkey’s lenders and governments made the same incorrect bet that Argentina or Brazil made. Betting on a constantly weakening US dollar and that the Federal Reserve would not raise rates as announced. They were -obviously wrong.

Raising rates to 18% does not encourage anyone in Turkey to keep money in the bank when the risk is to lose all the money. Rates went from 8 to 17.5% and the crisis worsened. It will not stop because of slightly higher rates.

Nucleus Dollar,
[2018-08-10   07:27 GMT]

The dollar has literally become the atomic bomb that no one else has. Disobey and sanctions would be unleashed so economy explodes. The pain in the Emerging Market Currencies has started to feel the hell - China‘s Yuan, Argentine Peso, Turkish Lira, Iran Rial, and now Russia Ruble.

Turkish Black Friday: Lira Plunges 13%,
[2018-08-10   07:05 GMT]

Between the pessimism notions of “Black Friday” and the number “13,” banks in Turkey will start a collapse mode similar to the oldish financial crisis saga of “Too Big To Fail” of 2008.

The Turkish lira hit a fresh record low amid a souring of diplomatic relations with the U.S. Traders sought out traditional havens in U.S. Treasuries and the yen. Turkish investors are looking to President Recep Tayyip Erdogan his son-in-law, Treasury and Finance Minister Berat Albayrak to calm their nerves when they speak Friday for the first time since the latest selloff began.

The government set a growth target of less than 4 percent, down from 5.5 percent on Thursday, a sign that authorities were taking whack at fixing the $880 billion economy’s vulnerabilities since a market meltdown sparked by last week’s U.S. sanctions. Yet the move has proved inadequate to temper investors unease.

Let’s not forget the Turkish central bank has a 5 percent inflation target and has not met it over the past decade.

Early Friday Erdogan called on Turks not to panic, according to state-run Anadolu Agency. “Don’t forget this: if they have got dollars, we have got our people, our right, our Allah,” he was cited as saying.

USDTRY TARGET REMAINS AT 10 WITH NO SINGLE INCH OF AMENDING

Watchdog doesn’t see the situation as critical yet: The European Central Bank has grown concerned about the exposure of some euro zone banks to Turkey following the lira’s plunge, the Financial Times reported. Banco Bilbao Vizcaya Argentaria SA, UniCredit SpA and BNP Paribas SA are particularly exposed after the Turkish currency lost more than a third of its value this year. The risk is that Turkish borrowers may not be hedged against the lira’s weakness and could start to default on foreign-currency loans.

Goldman Warns A Seven
[2018-08-09   05:41 GMT]

After its worst day in 10 years, the Turkish Lira's early rebound is already starting to fade amid denied rumors of US officials predicting Lira's demise, a record high yield at its bond auction, and Goldman warning of the collapse of Turkey's financial system

Turkey's 10Y bond yield topped 20% for the first time ever and Turkey's Treasury sold 539.7 million liras of 5Y debt today at 22.1% compound yield.

With tensions remaining high, the U.S. Embassy in Turkey has denied news in Turkish media that a U.S. official predicted the lira would weaken to 7 per dollar, calling the claim an entirely baseless "lie."

Goldman Sachs warns that further lira depreciation to 7.1 would erode all of Turkey's banks' excess capital.

Within the current backdrop, we view banks as being vulnerable to Turkish Lira depreciation given that it impacts:

(1) capital levels due to a meaningful portion of FC assets, which increase RWAs in local currency terms on Turkish Lira depreciation,

(2) asset quality and cost of risk, as Turkish Lira volatility can put stress on borrowers’ ability to repay as well as underlying collateral values. Moreover, Lira depreciation leads to higher provisioning requirements for FC NPLs, though banks are hedging this risk and can offset the impact through trading income.

Saudis Dump Canadian,
[2018-08-09   05:35 GMT]

The authoritative tone of Canada towards Saudi Arabia is rejected by Russia, adding that the Kingdom had the full sovereign right to manage its own affairs.


The Saudis have escalated their fury towards Trudeau's "progressive" propaganda. Having expelled the Canadian ambassador, froze new trade and investment with the G7 member, suspended a student exchange program and halted Saudi Arabian Airlines flights to Canada, the Saudis are stepping up their pressure very directly.


The FT reports that the Saudi central bank and state pension funds have instructed their overseas asset managers to dispose of their Canadian equities, bonds and cash holdings “no matter the cost.”
Third-party managers are estimated to be mandated to invest more than $100bn of Saudi funds in global markets, executives say. While the proportion of that figure invested in Canadian holdings would be “fairly small in absolute terms,” the asset sale sent a strong message, one of the people said.


The sell-off began on Tuesday and underlines how the Gulf monarchy is flexing its financial and political muscle to warn foreign powers against what it regards as interference in its sovereign affairs. “This is severe stuff,” said one banker.



New Turmoil: Russia,
[2018-08-09   05:29 GMT]

New Turmoil: Russia,
The ruble tumbled, sliding to the lowest level since November 2016, Russian CDS blew out and Russian stock and bond markets plunged after Russian Kommersant newspaper published the full text of the US bill which seeks to impose "crushing sanctions" on Moscow for election meddling.


The ruble dropped more than 2%, sliding as low as 65 per dollar, and breaking out of a range it’s traded in since April, after traders had a chance to read the full text of the sanctions draft introduced last week by a bipartisan group of legislators.
The liquidation panic set in after it was revealed that the bill includes proposals to sanction new sovereign debt and banking transactions, effectively a repeat of the US sanctions imposed on Russia in 2014 following the Ukraine coup, which sent the Ruble plunging from the mid-30s to below 70 in the span of a few months.


As Bloomberg notes, traders are particularly concerned by a clause that calls for prohibiting "all transactions in all property and interests in property" of some of the country’s largest lenders. The listed banks, Sberbank, VTB Bank, Gazprombank, Promsvyazbank, Rosselkhozbank and Vnesheconombank all saw their stocks tumble in response.


“Sanctions will remain a risk, so we have had a cautious stance particularly in the corporate space," said Shamaila Khan, who holds Russian bonds as a director of emerging-market debt at AllianceBernstein in New York. "Sanctioning sovereign debt will be a last resort and corporate debt and individuals are a more likely target."


The State Department said the sanctions tied to the use of chemical weapons are expected to take effect around August 22. A second round of sanctions will be imposed later unless Russia meets conditions including providing assurances it will no longer use chemical or biological weapons.


No action will be taken on the draft until the House is back from summer recess in September, leaving room for more market jitters through the end of the month. But with President Donald Trump calling for closer ties with Russia, and the U.S. Treasury warning earlier this year against sanctioning the sovereign debt market, it’s uncertain the bill will make it into law.


"Russia continues to become more and more isolated and the ruble will continue to weaken. Capital flight will accelerate. That’s generally negative for asset prices"


TARGET: 100

Turkish Lira, No Courage to Stand Up to Politicians,
[2018-08-03   09:59 GMT]

The Turkish lira pared its decline against the dollar after inflation accelerated less than forecast in July.

Government bonds also trimmed losses after consumer prices rose an annual 15.9 percent in July compared with the median economist forecast of 16.3 percent in a Bloomberg survey. The currency had earlier slumped to a record low as investors remained on edge over tensions with the U.S.

The data brings some relief to Turkish markets that have been hit by U.S. sanctions on two government ministers over a detained American pastor and concerns about the central bank’s willingness to tackle inflation that is three times its target. Still, the fourth month of accelerating inflation has eroded the real policy rate to less than 2 percent and leaves Turkish assets particularly exposed to a shift in investor sentiment given the economy’s large external financing needs.

“This number is not going to let the central bank off the hook. The pressure is still on. The central bank and Treasury and Finance Minister Berat Albayrak “need to wake up and quickly to roll out some credible policy responses.”

The lira climbed as much as 0.1 percent after earlier touching an all-time low of 5.1146 per dollar. The currency was down 0.2 percent at 5.0782 per greenback as of 11:41 a.m. Istanbul time. The yield on 10-year government bonds fell as much as 9 basis points after the inflation numbers before rising 4 basis points to 19.08 percent.

The central bank is scheduled to next meet on Sept. 13. Policy makers unexpectedly left rates on hold last week, saying the economy was slowing, and it wanted to see the impact of 500 basis points of hikes since April. But many investors worry that it acted too late to contain a more than 25 percent slide in the lira his year, and that it is coming under from President Recep Tayyip Erdogan not to raise borrowing costs further.

The bank obviously does not have the courage to stand up to politicians and pursue a more restrictive policy.

Gold’s Appeal Waning,
[2018-08-03   09:53 GMT]

Gold’s appeal has waned, even amid ongoing trade-war tensions, partly because of an upbeat outlook on the U.S. economy that’s strengthened the dollar.

While gold is traditionally viewed as a haven in times of uncertainty, U.S. tax cuts and the Federal Reserve’s guidance for more interest-rate hikes has made the dollar an attractive alternative. There are other signs of investors getting out of gold -- holdings in exchange-traded funds are at a four-month low and money managers are holding their biggest bearish bet on record.

Trading In August,
[2018-08-01   07:25 GMT]

Gold has not confirmed a bottom yet and the low seems far from expectations.

AUDUSD has consolidated for a whole month within 150 pips signifying trend continuation: downward.

Sterling may revive a bit and the upbeat will sound like a dead cat bounce. Low is yet to be sealed.

EURUSD has managed charting a descending triangle along with a thin trading in July – quite an impressive wave ahead targeting 1.1200 when technical confirmation below 1.1530 is alarmed.

Have a Happy Holidays and be careful of thin trading in August

Lebanon, Iraq Uncover Scam Network Targeting Lebanese Banks
[2018-08-01   04:40 GMT]

Lebanese and Iraqi security services have uncovered an Iraqi network that spread false information about Lebanese banks in order to extort them, and several of its members have been arrested, Lebanon’s official National News Agency said Tuesday.
The agency cited an Iraqi statement issued by the national intelligence service on Monday. The network’s members claimed to have millions of dollars in assets in the banks, but the supporting documents were forged, the statement said. The intelligence service said the network attempted to defraud Bank Audi SAL, but didn’t say whether any money was extorted.
The bank issued a warning about the scam in a July 17 statement, saying it had been the subject of “fabricated, cheap and untruthful rumors on certain social media platforms, all of which are completely inaccurate and totally fallacious.”
Bank Audi is one of several Lebanese banks operating in Iraq and other cities in the region. Lebanon’s banking sector has remained stable amid political upheavals, an influx of 1.5 million refugees who have strained the country’s resources and slow economic growth.

Iran Rial Death Spiral, Can Be Stopped by Gold,
[2018-07-31   12:18 GMT]

Iran's rial has entered a death spiral, with the rial losing a stunning 12.5% in one day and annual inflation surging to 203%. To stop the death spiral, Iran should establish a gold-backed currency board.

The chart shows the downward roller coaster ride the rial has been on during the past six months, as well as this weekend’s free fall. As the chart indicates, the official IRR/USD rate is 44,030; whereas, the rate in the black market (read: free market) is 112,000. That widespread rate is now measured by a huge black-market premium of 154%. This means that those who are privileged and have access to the official exchange rate can turn handsome profits of 154% in the blink of an eye.

To stop the rial’s death spiral immediately, Iran should install a currency board and anchor the rial to gold. With such a currency board system, Iran would still have its rial. But, instead of being a junk currency, it would be as good as gold.

The currency collapse was encouraged by the US announcement in May that it was pulling out of the 2015 nuclear deal, that lifted certain sanctions in exchange for curbs to Iran's atomic programme. The US is set to reimpose its full range of sanctions in two stages on August 6 and November 4, forcing many foreign firms to cut off business with Iran.

Scrambling to put a floor under the rial, Iran’s central bank late Sunday promised new measures to restore calm. It didn’t say what those measures were, but they will likely be the first major moves for the new central bank governor Abdolnaser Hemmati.

CRUDE OIL
[2018-07-31   08:05 GMT]

SHALL WE ENJOY THE WAVE OF THE BEAR FLAG AS TOP SEEMS IN PLACE?

Rare And Beautiful,
[2018-07-31   08:00 GMT]

This is one of the rare and beautiful patterns of consolidation that lasted ONE month within 250 pips. The peak below 1.5900 has been attacked three times with no success while the valley above 1.5650 only one time.

The close beyond the mentioned bi-level is very crucial for the next trend to take a form of another 250 pips. The AUD fundamental aspect along with the release of FOMC interest rate of this week should be an added value to the signal to avoid a false break.

Descending Triangle,
[2018-07-30   06:44 GMT]

AUDCAD has been patterned well some geometrical formations that pinpoint to further plunging in the days ahead. What we got so far is impressive:

  1. Rally that started in May has ended at the 50% of the plummet that started in mid March.
  2. July, a descending triangle formation has not been prohibited.

Both factors conclude that an unprecedented low for 2018 will be on the making. The risk is set once a close above the 50% is triggered, an unlikely scenario this week. Further, you mat narrow down the risk by exiting once a close above last week’s high is confirmed.

Euro Backed by Buoyant Economy,
[2018-07-30   06:22 GMT]

The shared currency fell the most in a month against the dollar Thursday after the European Central Bank repeated its pledge to keep interest rates unchanged “at least through the summer of 2019.” But that projection was coupled with an upbeat view of the euro-zone economy, where ECB President Mario Draghi saw price pressures strengthening amid ebbing global trade tensions.

Some analysts saw this as a mismatch that could spell tighter monetary policy coming earlier than markets are currently pricing, in turn boosting the euro.

“The assumption of rates being on hold ‘at least through the summer’ appears inconsistent with the fundamental backdrop,” said Jeremy Stretch, head of Group-of-10 currency strategy at Canadian Imperial Bank of Commerce. “Despite the immediate correction, over the medium run the euro can and should trade higher.”

CIBC predicts the euro will end this year at $1.18, in line with the Bloomberg currency survey, before climbing to $1.23 by mid-2019 and then ending next year at $1.28, a level not seen since 2014. While the median forecast in the Bloomberg survey has weakened in recent months, it still projects euro strength, estimating the exchange rate at $1.26 by the end of next year.

 

Rate Decision of Six Banks,
[2018-07-30   06:18 GMT]

It is a different week and very heavy one; BOJ to have the inauguration to be followed by five other banking rate decisions including our FED decision. Bear in mind as well, that fundamental data is heavy from Dollar, NZD, GBP, and concluding the week with the booming of NFP.

This week may call all holiday vacationers back to desk a cause de volatility which would be implied for the rest of the month. Fasten your seat belt and watch!

FTSE
[2018-07-19   05:36 GMT]

FTSE OWES THE CHART A NICE DESIGN:

  1. BULLISH FLAG
  2. INVERTED H&S
  3. RETRACED 38%

THE BULL SIGN SHOULD TRIGGER A NEW HIGH

CLOSE < 38% NEGATES

Silver Line
[2018-07-04   09:25 GMT]

Silver levels between 16.35 and 16.05 are crucial. History shows that bumping onto these levels create an atmosphere of support, which is nowadays a strong resistance. One can summon up that a close above 16.35 is bullish and a close below 16.05 is bearish. The close above 16.35 may give a new impulse toward testing 17.20 and above again, or may fail and hint for a drop back below 16.05. Close below 16.05, expect a wash out towards 14.00 and much lower – which is being traded recently.

Gold Polyline
[2018-07-04   09:08 GMT]

Gold levels between 1263 and 1235 are crucial. History shows that bumping onto these levels create an atmosphere of consolidation - such condensed track record is shown in the blue polyline at the beginning of 2016 and 2017. Converging both-polyline and one can summon up that a close above 1263 is bullish and a close below 1235 is bearish. The close above 1263 may give a new impulse toward testing 1380 again, or may fail at the ascending TL near 1300/1320 and hint for a drop back below 1235. Close below 1235, expect a wash out towards 1200 and much lower.

Pound The Week,
[2018-06-18   10:00 GMT]

The pound began the week on the back foot as it faces political turmoil amid the Conservative Party’s ongoing internal battle over Brexit.

GBPCHF might have its plummet paused for now; the factor of retracement of 76% has materialized at the end of May for March’s rally. In June, the cross is graphing an ascending triangle at the 4hr chart. A close above 1.3280 will target the descending TL at 1.3400+. Close below last month’s low negate.

ECB HALTS NET ASSET PURCHASES
[2018-06-14   11:53 GMT]

ECB will end its bond-buying program by the end of December, Announces end of QE, taper to €15bn from Oct until end of Dec, and keepS interest rated unchanged until mid-2019.

"Bund yields and the Euro briefly spiked higher. however, just as we noted in the preview " That said, when everyone is confident that one thing will happen, don't be surprised to see the EUR tumble..." it appears the positioning is backfiring and investors are selling the news in Euro."

Draghi may announce the beginning of the end of QE
[2018-06-14   11:15 GMT]

What To Expect from ECB?

  • Unanimous expectations for the ECB to leave its three key rates unchanged
  • Will the ECB unveil its blueprint for winding down the PSPP or will they again ‘kick the can down the road’ to July?
  • Questions likely to be raised on the Bank’s view surrounding the latest developments in Italian politics
  • Macro projections likely to see oil prices curtail 2018 growth expectations whilst lifting inflation prospects
USDCHF
[2018-06-14   08:16 GMT]

USDCHF,

THE RALLY FROM 0.9200 IN FEB WAS PAUSED NEAR PAR IN MAY, A CRITICAL PSYCHOLOGICAL LEVEL.

DOLLAR WILL ATTEMPT RALLYING AGAIN TO STAY ABOVE PAR FOR YEARS. THOUGH FOR NOW, LET’S WORK ON THE SHORT TERM ENVIRONMENT:

THE DISTANCE THAT IS MARKED IN BLUE, OUTSIDE THE CHANNEL, IS EQUIVALENT – MEANING, A DROP IN USDCHF CAN’T BE HALTED BEFORE 0.9720 – AN INTERESTING BULLISH LEVEL.

THE EXTENSION OF THE DROP MAY SPIKE TOWARDS 0.9500 FOR A BRIEF STAY BEFORE RALLYING AGAIN; IF THAT SPIKE HAPPENS, THEN AN ADD AT 0.9500 IS ON THE NOTE.

CLOSE BELOW 0.9450 NEGATE THE BULLISH STANCE!

FOMC HIKES QUARTER POINT
[2018-06-14   06:59 GMT]

FED RAISES RATES, MEDIAN FORECAST SIGNALS TWO MORE 2018 HIKES. Federal Reserve forecasts unemployment will fall to 3.6% this year, the lowest since 1969 (In March, the Fed projected 3.8%). GDP expected to hit 2.8% (up from a 2.7% forecast in March). Core inflation now expected to hit 2% this year

Big change in the Fed statement when the Fed deleted the entire final paragraph that used to say interest rates were likely to remain low "for some time." 

Fed Chair Powell will have a press conference after every meeting starting in January 2019.

Powell: Monetary policy affects everyone and wants to give plain English view of economy. Says it is doing well, with unemployment remaining low. Gradual rate increases needed as economy stabilizes.

Powell puts it in plain English: "The main takeaway is that the economy is doing very well. Most people who want to find jobs are finding them and unemployment and inflation are low." 

SANCTION LIFTED
[2018-06-13   10:26 GMT]

 

North Korea Says Trump Agreed to Lift Sanctions After Meeting

G7
[2018-06-11   10:33 GMT]

Speaking at the G7 summit in Quebec, the US president claimed the EU had been economically “brutal” to America “and they understand that... they can’t believe they got away with it [for so long]”.

He said: “It has got to change – if it is not going to change, we are not going to trade with them.” And Mr Trump warned world leaders: “We [the US] are like the piggy bank that everyone is robbing – and that ends.

“If [other countries] retaliate they are making a mistake... they do so much more business with us than we do with them that we can’t lose. We win that war 1,000 times out of 1,000.”

(express)

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