Keith Underwood No Comments

Notable events the week of 23rd March 2015

Expect more headline trading this week with a plethora of Fed speakers littering the calendar and Bullard, the loose cannon) speaking twice this week (see below).  The best one is saved for last though, as Yellen speaks on Friday afternoon, near the close of the market.  I would imagine that weekend gamma will be expensive, due the timing of this speech, and the potential for the Yellen cake hole cannon to let loose.


Monday the 23rd:

US Fed’s Mester speaks in Paris

US Existing home sales 4.94m expected versus 4.82m prior

US Fed’s Williams speaks on economic outlook

US Fed Vice Chair Fischer speaks in New York

Tuesday the 24th:

China Flash HSBC/Markit PMI manufacturing index 50.4 expected versus 50.7 prior

Eurozone Flash Composite PMI index 53.6 expected versus 53.3 prior

Eurozone Flash Manufacturing PMI index 51.5 expected versus 51 prior

Eurozone Flash Services PMI 53.9 expected versus 53.7 prior

UK CPI %m/m 0.3 expected versus -0.9 prior

US Fed’s Bullard speaks on Global Recovery in London

US CPI %m/m 0.1 expected versus -0.7 prior

US CPI %m/m (ex food & energy) 0.1 expected versus 0.2 prior

US Flash Manufacturing PMI index 54.7 expected versus 55.1 prior

US New home sales 475k expected versus 481k prior

Wednesday the 25th:

German IFO Business climate index 107.3 expected versus 106.8 prior

German IFO Current conditions index 111.8 expected versus 111.3 prior

German IFO Expectations index 103 expected versus 102.5 prior

US Fed’s Evans speaks on the economy & monetary policy in London

US Durable goods orders %m/m 0.5 expected versus 2.8 prior

Thursday the 26th:

US Fed’s Bullard speaks on US Economy & Policy in Frankfurt

Eurozone M3 Money supply %y/y 4.3 expected versus 4.1 prior

UK Retail sales (ex auto, fuel) %m/m 0.3 expected versus -0.7 prior

US Initial claims 295k expected versus 291k prior

US Fed’s Lockhart speaks on Economy & Monetary Policy in Detroit

Canada BoC’s Governor Poloz to give speech

Japan CPI Core (nation) %y/y 2.1 expected versus 2.2 prior

Japan Real Household Spending %y/y -3.2 expected versus -5.1 prior

Japan Unemployment % 3.5 expected versus 3.6 prior

Japan Retail Sales %m/m 0.9 expected versus -1.9 prior

Japan Retail Sales %y/y -1.4 expected versus -2 prior

Friday the 27th:

US GDP Annualized (3rd est.) %q/q ann 2.4 expected versus 2.2 prior

US University of Michigan sentiment index 91.8 expected versus 91.2 prior

US Fed’s Yellen speaks on Monetary Policy in San Francisco  Quick, discreet, and so worth the risk.



Keith Underwood No Comments


It is hardly surprising the moves of late in the currency markets in the run up to the Fed announcement, and at the conclusion of their two-day meeting. With short-dated gamma (rate of change of your delta exposure) at a premium, the pull back of the dollar post Fed removal of the word patient from their statement was severe, with a 4% move higher in EUR/USD. The market moved to where the most pain was centered, which were stop/loss orders higher up, in a market where almost everyone is short. So, during the NY afternoon when liquidity is not great, a lot of those who were short EUR/USD got stopped out of their positions, and a lot of people who sold into this rally were also stopped out. It was arguably a tough day for most spot dealers who have a decent order book and just about anyone else with a Euro position.

Read more

Keith Underwood No Comments

Notable events the week of 16th March 2015

Monday the 16th:

US Empire State Survey index 8 expected versus 7.78 prior

US Capacity Utilization 79.5% expected versus 79.4% prior

US Industrial Production %m/m 0.2 expected versus 0.2 prior

US NAHB Builders Survey index 57 expected versus 55 prior

ECB President Draghi Speaks in Frankfurt

Tuesday the 17th:

Eurozone HICP %m/m 0.6 expected versus -1.6 prior

Eurozone ZEW (Economic Sentiment) index 53.4 expected versus 52.7

German ZEW (Current Conditions) index 52 expected versus 45.5 prior

German ZEW (Economic Sentiment) index 59.5 expected versus 53 prior

US Housing Starts k 1050 expected versus 1065 prior

ECB’s Nouy Speaks in Frankfurt

US Federal Reserve FOMC meeting

Wednesday the 18th:

UK BoE MPC minutes released

UK Claimant Count Change -32.5k expected versus -38.6k prior

UK ILO Unemployment Rate 5.6% expected versus 5.7 prior

US FOMC – Fed Funds Rate 0.25% expected versus 0.25% prior

Thursday the 19th:

US Initial Claims 305k expected versus 289k prior

US Leading Indicator %m/m 0.3 expected versus 0.2 prior

US Philadelphia Fed Survey index 8 expected versus 5.2 prior

Friday the 20th:

German PPI %m/m 0.2 expected versus -0.6 prior

Canada CPI %m/m 0.7 expected versus -0.2 prior

Canada Retail Sales %m/m -0.5 expected versus -2 prior

Fed’s Lockhart Speaks on Monetary Policy in Georgia

Fed’s Evans Speaks on Monetary Policy in Georgia

A Currency Affair

Quick, discreet, and so worth the risk.

Keith Underwood 2 Comments

The Fed’s Dual Mandate

Every person that has taken a macro-economic course is aware of the Fed’s dual mandate, but for those that haven’t, a bit of history to get this blog post going. In 1977, Congress amended The Federal Reserve Act, stating the monetary policy objectives of the Federal Reserve as:

     “The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.”

The dual mandate being consolidated down to maximum employment and stable prices, which equates to approximately 5.35% unemployment rate and 2% inflation. With the economy creating about 260,000 jobs a month and the unemployment rate at 5.5%, the Fed is accomplishing the employment mandate. Unfortunately, the inflation rate is running well below the 2% target rate and, by it’s own admission, the Fed really doesn’t think it will reach that level until 2016, as stated by is most recent economic assessment from December 2014. Their data is below:

We are in the midst of the most dramatic deflationary pressures on the US economy since the 2008 crisis. May I remind you of the effects of dramatically lower oil, a strong US dollar, and tighter money supply had on US CPI?

I am not suggesting that we have negative CPI in our midst, but I can’t ignore the potential for downward pressure on inflation with these powerful forces, once again acting in unison. In 2008 when oil (WTI) fell 69% and the dollar trade weighted index (TWI) soared 20%, CPI dropped from 5.5% to -2%! In the last year, oil is 58% lower and the dollar TWI is 11.4% higher. A back of the envelope estimation is that CPI could drop 3% or 4%? If the Fed acts according to it’s dual mandate, I can’t see how it moves rates higher, while CPI has the historical prospect of falling significantly in the coming months. Yikes!

Next weeks Fed meeting should prove interesting because the world will be watching to see if they remove the word ‘patient’ from their statement, which would signal that they are open to raising (normalizing) rates. While this development, if it occurs, will be seen as opening up the potential to raise rates, it will be difficult for voting members to square with the Fed’s dual mandate and raise rates while inflation is poised to head lower.


Quick, discreet, and so worth the risk.




Keith Underwood No Comments

US February Nonfarm Payrolls

The headline number is that total nonfarm payroll employment rose by 295,000 in February and the unemployment rate nudged down to 5.5% from 5.7% previously. Job gains occurred in food services and drinking places, professional and business services, construction, health care, and in transportation and warehousing. Added to this are revisions from the previous months where December remained at +329,000 and the change for January was revised from +257,000 to +239,000. With these revisions, employment gains in December and January were 18,000 lower than previously reported. This takes the 3-month average gains to 288,000 per month.

Read more

Keith Underwood No Comments

Notable events the week of the 2nd March 2015

Monday the 2nd March:

US Personal Income %m/m 0.4 expected versus 0.3 prior

US Personal Spending %m/m -0.1 expected versus -0.3 prior

US ISM Manufacturing index 53 expected versus 53.5 prior


Tuesday the 3rd March:

RBA – Overnight Rate 2% expected versus 2.25% prior

German Retail Sales %m/m 0.4 expected versus 0.6 prior

Eurozone PPI %m/m -0.7 expected versus -1 prior

Canadian GDP %q/q 2 expected versus 2.8 prior

Senate Banking Committee Hearing on Federal Reserve Reform

US Vehicle Sales 16.7 mm expected versus 16.56 mm prior


Wednesday the 4th March:

New Zealand GDP %q/q 0.7 expected versus 0.3 prior

US Feds Yellen Speaks on Bank Regulation in New York

French Services PMI index 53.4 expected versus 53.4 prior

German Services PMI index 55.5 expected versus 55.5 prior

ADP Employment Survey 218k expected versus 213k prior

Fed’s Evens Speaks on Economy and Monetary Policy in Illinois

BoC Overnight Rate 0.75% expected versus 0.75% prior

US ISM Non-Manufacturing index 56.5 expected versus 56.7 prior

Fed’s George Speaks on Economy in Kansas City


Thursday the 5th March:

German Factory Orders %m/m -1 expected versus 4.2 prior

BoE Monetary Policy Committee meeting and rate decision – no change expected from 0.5%

US Initial Claims 295k expected versus 313k prior

Canadian Ivey PMI index 49 expected versus 45.4 prior

Fed’s Williams Speaks on Economic Outlook in Honolulu


Friday the 6th March:

US Nonfarm Payrolls m/m change 230k expected versus 257k prior

US Unemployment Rate 5.6% expected versus 5.7% prior

US Average Hourly Earnings m/m change 0.2% expected versus 0.5% prior


A Currency Affair

Quick, discreet and so worth the risk


Keith Underwood No Comments

Bullard: The loose cannon at the FED

In an interview today on CNBC, St. Louis Fed President James Bullard gave dollar bulls ammunition that has dramatically moved the US dollar higher in today’s trading. In addition to opining that the word “patient” should come out of the policy statement in March, he also debunked US multinational companies who have warned about the strong dollar hurting earnings by saying “We’ve grown at these dollar levels before. I don’t see why we can’t do it now”. He further states that the dollar effects on the overall economy are marginal.

Read more

Keith Underwood No Comments

Recommended Reading> Pitch Perfect: How to Say It Right the First Time, Every Time by Bill McGowan

I can’t thank Barbara Abel enough for recommending Bill McGowan’s Pitch Perfect: How to Say It Right the First Time, Every Time.  Bill has a writing style that incorporates visual ideas with real world examples that makes his points on target and easy to absorb.  In today’s media hungry soundbite mentality, this book provides powerful examples of what and how to say it and also when and what not to say.  The book can be found here at Amazon.


Keith Underwood No Comments

Notable events the week of the 23rd February 2015

The economic releases below provide additional information to the foreign exchange markets.  In isolation, each economic release will impact the spot market, to a certain degree, if the final outcome is either above or below the expected number.  While each economic release is important, I believe each release is more akin to being an ingredient in a huge recipe that is never really finished and always being put together over time.

Factors that are presently affecting the FX markets (lack of inflation in the EU and US or slow growth in the EU for example) should be viewed over a longer time frame (3 or 6 months) to assess if things are improving or not.  Monetary policy tools used by central banks globally are like turning an oil tanker whereby it may take many miles to change course and the trajectory may be only slight.  My recommendation is therefore to make note of such releases and identify and follow the trend of either improvement, stagnation, or decline of each release.


Monday the 23rd:

German IFO Business Climate 107.6 expected versus 106.7 prior

German IFO Current conditions 112.7 expected versus 111.7 prior

German IFO Expectations 103 expected versus 102 prior

ECB’s Mersch Speaks in London

Greece to submit draft reforms to EU institutions

US Existing home sales 5 mm expected versus 5.04 mm prior


Tuesday the 24th:

German GDP Final %q/q 0.7 expected versus 0.7 prior

Eurozone HICP  %m/m -1.6 expected versus -0.1 prior

ECP President Draghi speaks in Frankfurt

US Consumer Confidence 99.5 expected versus 102.9 prior

Yellen’s Semi-Annual Testimony to the Senate Banking Committee

BoC’s Poloz speaks in London, Ontario

China PMI Flash Manufacturing Index 49.5 expected versus 49.7 prior


Wednesday the 25th:

US New Home Sales 471k expected versus 481k prior

US Yellen’s Semi-Annual Testimony to House Financial Services Committee


Thursday the 26th:

German unemployment no change expected from 6.5%

Eurozone Economic Sentiment index 102 expected versus 101.2 prior

US CPI m/m -0.6% expected versus -0.4% prior

US Durable Goods Orders m/m 2.0% expected versus -3.4% prior

US Jobless Claims 290k expected versus 283k prior


Friday the 27th:

French PPI -0.6% expected versus -0.9% prior

UK GDP 0.5% expected m/m versus 0.5% m/m prior

German CPI -0.8% expected versus -1.1% prior

US GDP q/q change 2.1% expected versus 2.6% prior

US Chicago PMI 58.7 expected versus 59.4 prior


Keith Underwood No Comments

Notable events the week of the 16th February 2015

Monday the 16th:

Eurozone Euro-Area Finance Ministers Meet in Brussles


Tuesday the 17th:

RBA minutes released

UK CPI %m/m -0.8 expected versus 0 prior

Eurozone ZEW (Economic Sentiment) 52 expected versus 45.2 prior

German ZEW (Current conditions) 28.8 expected versus 22.4 prior

German ZEW (Economic Sentiment) 56 expected versus 48.4 prior


Wednesday the 18th:

BoJ Monetary Policy Statement/Governor Kuroda Press Conference

UK ILO Unemployment Rate 5.7% expected versus 5.8% prior

US PPI -0.4 expected versus -0.3 prior

US Industrial Production 0.4 expected versus -0.1 prior


Thursday the 19th:

French CPI %y/y -0.3 expected versus 0.1 prior

French HICP %y/y -0.3 expected versus 0.1 prior

US Initial Claims 295k expected versus 304k prior

US Leading Indicators %m/m 0.3 expected versus 0.5 prior


Friday the 20th:

German PPI %m/m -0.4 expected versus -0.7 prior

French Flash Manufacturing PMI Index 49.6 expected versus 49.2 prior

French Flash Services PMI Index 49.9 expect versus 49.4 prior

German Flash Manufacturing PMI Index 51.4 expected versus 50.9 prior

German Flash Services PMI Index 54.3 expected versus 54 prior

UK Retail Sales (ex Auto Fuel) %m/m 0.2 expected versus 0.2 prior

Canadian Retail Sales %m/m -0.4 expected versus 0.4 prior

US Flash Manufacturing PMI Index 53.6 prior versus 53.9 prior


A Currency Affair – Quick, discreet, and so worth the risk.