Keith Underwood 2 Comments

FX Volatility on the Rise

Major currency pairs (GBP, YEN, USD, CHF) have seen significant increases of implied volatility over the course of the last several months.
Implied cross volatility pairs such as AUD/YEN and NZD/YEN have moved into crises levels not seen since 2011.
Equity portfolio managers re-hedging (liquidating dollar positions), against established long USD positions.
Market uncertainty of what the Yellen cakehole cannon might say tomorrow.


Equity portfolio managers (PM’s) are heading for the door. They have been selling winners (Netflix and Amazon for example) to lock in profits against the losses incurred on their dogs (European energy and banking). This liquidation (fancy word for sell at market order or ’Get me out!’) of positions is forcing PM’s to hedge their resulting USD exposure. They have sold USD aggressively over the last several months in the face of a market that has been long USD positions.

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Keith Underwood 5 Comments

China Stirs up the Asian Currency Depreciation Pot

More government intervention by the Chinese (sound familiar?) and this time it’s in their currency rather than their equity market. The PBC today released on it’s website a stunning literacy of how it’s going to improve the central parity rate of the RMB against the US dollar. It has to be a language translation issue at play here because the information provided is little more than explaining what took place after the depreciation. It’s like they were providing color commentary on what took place and laying the blame on the strong US dollar and impending interest rate hike by the FED. I’m no China expert but I think that there are several key takeaways from this abrupt departure from the norm.

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Keith Underwood No Comments

Notable events the week of 6th April 2015

Opening pitch of the 2015 Major League Baseball season is 8 p.m. EST Sunday, April 5 between the Cardinals and the Cubs and the 28 remaining teams will open the season on April 6.  After this past winter in the Northeast, baseball is a welcome sign of the impending warmer weather that is long overdue.  I make no predictions on the World Series other than to say Go Yankees!

Monday the 6th:

Japan Leading indicator (Prelim.) index 104.9 exp. versus 105.50 prior

US Fed’s Dudley Speaks on Economic Outlook in New Jersey

Canada Ivey PMI index 49.5 exp. versus 49.7 prior

US ISM Non-Manufacturing index 56.6 exp. versus 56.9 prior


Tuesday the 7th:

New Zealand RBA overnight rate 2.25% exp. versus 2.25% prior

Spain, France & Germany Services PMI

Eurozone Composite PMI index 54.1 exp. versus 54.1 prior

Eurozone Services PMI index 54.3 exp. versus 54.3 prior

UK CIPS/Markit Servies PMI index 57 exp. versus 56.7 prior

Eurozone PPI %m/m -0.7 exp. versus -0.9 prior

US Fed’s Kocherlakota speaks in North Dakota


Wednesday the 8th:

Japan BoJ Policy statement and Governor Kuroda press conference

German factory orders (sa) %m/m 1.5 exp. versus -3.19 prior

Swiss CPI %m/m 0.1 exp. versus -0.3 prior

US Fed’s Dudley speaks on monetary policy in New York

Canada Minister Olivers to speak on state of the Canadian  economy

Japan BoJ MPC- Overnight rate % 0.1 exp. versus 0.1 prior


Thursday the 9th:

German industrial production %m/m 0.1 exp. versus 0.6 prior

UK BoE Monetary policy committee meeting and rate decision

UK BoE MPC – APF total 375 bn exp. versus 375 bn prior

UK BoE MPC – Base rate % 0.5 exp. versus 0.5 prior

Canada Building permits %m/m 8.5 exp. versus -12.9 prior

Canada House price index %m/m 0.1 exp. versus -0.1 prior

US Initial claims 278k exp. versus 268k prior


Friday the 10th:

China CPI %y/y 1.3 exp. versus 1.4 prior

China PPI %y/y -4.7 exp. versus -4.8 prior

Swiss Unemployment 3.2% exp. versus 3.2% prior

France Industrial production %m/m -0.5 exp. versus 0.4 prior

France Manufacturing production %m/m 0.0 exp. versus -0.1 prior

UK Industrial production %m/m 0.3 exp. versus -0.1 prior

UK Manufacturing production %m/m 0.3 exp. versus -0.5 prior

Canada Housing starts 170k exp. versus 156.3 prior

Canada Net change in employment -10k exp. versus -1k prior

US Fed’s Lacker speaks on economic outlook in Florida

US Import price index %m/m -0.6 exp. versus 0.4 prior

US Fed’s Kocherlakota speaks in Minnesota

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

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 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.

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Keith Underwood 2 Comments

The Ruble: A bear of a market

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The Russian ruble fell to a record low against the dollar today, losing 5.7%, in a stinging rebuke to the central bank’s attempt to stop the carnage by raising interest rates to 17%. While on the face of it a 650 basis point rise may seem huge, it does little to convince the market that the Russian economy will recover from sanctions and a collapse in the price of oil. One should expect the ruble to face continued headwinds as a result.

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Keith Underwood No Comments

Karl Otto Pöhl – the man behind price stability

The Bundesbank announced yesterday that Karl Otto Pöhl, former president of Germany’s central bank, died at age 85. For those of us who traded currencies during his tenure at the central bank, we remember him as always being resolute in his belief that price stability should be the core of everything that the central bank represents. This faith is still in practice today at the ECB, thanks in a large part to Mr. Pöhl.

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