Drumroll Please...

Well, today provides the crescendo of the week’s excitement (this is relative, I appreciate) and all eyes will be on the NFPs. Before that though, we have the ECB decision to contend with, although it is expected they will keep rates unchanged, but then so was it expected with the Riksbank and they chimed in with a 25bp cut and extended loan facitilities. Another Central Bank talking down any imminent rate hikes after the Fed did similar last month. It would be hard to envisage Trichet et al with their traditionally hawkish bias, do anything other than hold at 1% however. They’ve been digging their heels in the whole way down and won’t change their tack now.

The UK data continues to come in worse with the PMI construction number light at 44.5 vs estimates of 46 and Sterling continues to be sold on the back of it. EURGBP having broken through the 86 level which had provided resistance in the last few weeks. Resource currencies ex CAD are falling today and NZD in particular has fallen heavily (admittedly after being on a one way ticket to the moon for the past 4 months). According to MacroMan, there are cNZD4bn of Uridashi bonds (bonds denominated in higher yielding currencies, typically NZD & AUD, sold to Japanese retail buyers) maturing at the end of the month and the majority apparently are not likely to be rolled.

Oil has taken a dirtnap since yesterday’s lofty $72 levels. There’s much speculation about the price action over the last couple of days. I would say a) the $ rally and then fade, b) the market rally and then fade and hence risk rally and fade (and we know these are all the same trades) c) come on, oil yo-yos all over the place, it’s the way it trades. Anyway if none of those are good enough, there’s a story that a big London oil brokerage has sacked a trader for building a position equivalent to 9m barrels (Saudi can produce 11m bpd at max capacity I’m told). Apparently he started building this in the early hours of Tuesday morning and it was discovered and began to be unwound as soon as it was discovered at open on business on Tuesday morn. Maybe this story is true but oil did move with the $ and the equity market too during this period so it would just have exaggerated the moves I would think.

Moving not so smoothly on to the Greenback, there were some conflicting statements from China on the $ yesterday. They keep on changing their mind, don’t they? No, they don’t. Its two different sources. The Central Bank advocates a stronger Renminbi and has come out advocating the establishment of a new reserve currency. The Government however, wants the $ to be strong, hence making Chinese exports cheap. This is something which seems to get lost in the ether when these things are reported. The market paid more attention to the comments from the Foreign Ministry anyway hence the $ rally today.

Lastly, I mentioned a few weeks back about hearing some guy on CNBC who was talking about some UK banks offering 90% mortgages again and how this was a good thing. That is a bad thing surely and displays little if any grasp of what got us into this situation in the first place. This however takes this biscuit…the GSEs offering 125% mortgages!! This time it’ll be different though, right??