For providing the weekend media coverage. But that’s OK.

I do it because of my luv for the Forexlive family.

I was thinking, maybe now’s a good time for y’all to return some of that luv.

How can we do that? I hear you ask

Well we here at Forexlive got a favourite charity, the MDSC, and next weekend they’re holding their Buddy Walk.

So if you can find it in your heart to offer some support to Jamie and his daughter Brigid that would be really cool.

I know times are tough, but every little helps.  So if you’d like to donate please hit this link.

Thankyou.

‘Foreign envoys due back in Athens Sunday to resume talks on cuts plan’

‘If the euro zone is to survive, Germany too must keep its promises to reform’

Too true blue

Time for some further monetary/fiscal stimulus?

Here’s the press release

I spoke to Reuters with some thoughts on the Canadian dollar.

• Spanish banks need 59.3B in stress test, near expectations
• US personal spending +0.5%, as expected
• US core PCE +1.6% y/y, as expected
• Canada July GDP +0.2% m/m vs +0.1% exp
• Chicago PMI 49.7 vs 52.8 exp, lowest in 3 years
• U Mich final consumer sentiment 78.3 vs 79.2 prelim
• Fitch: UK AAA-rating at risk
• ECB's Asmussen: Europe has a decade of adjustment ahead
• Rumors Spain to ask for ESM aid
• Oil output at lowest since Jan
• S&P 500 gains 0.5%, -1.3% on week, +2.4% on month
• USD leads, AUD lags on day
• Quarterly FX leaderboard
  

EUR/USD was relatively stable through the first round of US data but freaked out after the Chicago PMI, taking out 1.2900 support and tumbling all the way down to Thursday’s 1.2830 low (200dma at 1.2825). After European stocks closed (with a whimper) EUR bounced to 1.2845.

Cable closes out the week near the lows.  In Europe, it initially bounced at 1.6175 but later ran through stops below. The weekly low at 1.6138 initially held but not for long and the pair plunged to 1.6114 before a late bounce to 1.6144. Big outside day on the daily chart.

The real story, and perhaps the underlying source of the USD strength, was USD/JPY. This pair moved relentlessly higher up to 78.02 from 77.45. Month/quarter end flows a likely culprit.

AUD/USD hit 1.0474 overnight but closes 100 pips lower. Lots of calendar risks on Monday.

Gold $1772, WTI crude $92.09.

By Brai Odion-Esene

WASHINGTON (MNI) – The unconventional measures taken by the Federal
Reserve to boost the economy might have backed the central bank into a
difficult position from which it does not possess the experience needed
to extract itself, Dallas Federal Reserve Bank President Richard Fisher
said Friday.

“We’ve had a recovery which is quite disappointing,” Fisher said in
a presentation at the Metroplex Technology Business Council Industry
Luncheon in Dallas. “Right now we are cruising along very much at stall
speed.”

And although the U.S. unemployment rate has come down to 8.1%,
“there are a lot of people that have just given up, and the fact is we
are drowning in unemployment,” he said.

“None of us really know what the right tools are to fix it, we are
trying” Fisher continued.

More importantly the Fed has no experience using such
unconventional policy tools, Fisher said, “so none of us know how we are
going to navigate out of this particular quadrant of the liquidity pool
of the ocean of money.”

“What I’m concerned about is that we may be painting ourselves into
a corner,” Fisher warned.

He described the Fed’s quantitative easing measures as “monetary
Ritalin,” intended to have a calming effect on the markets.

“So one of the things that I like to force myself to do is to look
at the side effects of this monetary Ritalin that we are applying, and
might we be over-prescribing,” he said. “That’s a big question mark.”

Fisher said the Fed is taking a gamble, given that — if it is
successful in jumpstarting growth — it will begin to incur losses on
its portfolio from price movements as the economy adjusts to higher
interest rates.

Still, “We would like velocity to pick up,” Fisher said, and for
banks to loan out the money they currently have deposited at the Fed.

The issue to consider, however, is that once this money starts
being put to use, how much pressure will it put on prices as demand
increases and how does the Fed reverse the process, he added.

The Fed’s policymaking Federal Open Market Committee announced on
Sept. 13 that in addition to its maturity extension program, it will buy
$40 billion in mortgage-backed securities a month — and undertake
additional asset buying if needed — until it sees a significant
improvement in the labor market, for a total of $85 billion in monthly
asset purchases.

Fisher said QE3 has the effect of taking a housing market that is
on the mend and — if it works — “giving it an extra push.”

However, with mortgage giants Fannie Mae and Freddie Mac also
raising the fees on the mortgages they guarantee, “in a way it’s a bit
of an offset,” he added.

Fisher noted that business are sitting on “copious amounts of cash,”
so the question is “why, with all that fuel in the tank … what’s
stalling our economy in terms of job creation?”

The main things weighing on the minds of businesses, he said, is
“regulation, taxes and talent.”

“We have a very bad immigration policy in this country,” he said,
which is feeding into the talent drain. “We take the most talented
people in the world who come here … we educate them … and then we
don’t encourage them to stay.”

Fisher urged Congress to get its affairs in order and implement
policies that will encourage firms to spend.

The Fed has acted to provide abundant money at very low rates, but
“whether it’s too cheap or too abundant is not the point, it’s not been
put to work,” he said. Why? “Because of enormous uncertainty.”

And as for the looming fiscal cliff of tax hikes and spending cuts
set to take place at the beginning of 2013, Fisher warned that “a short
term fix (to the fiscal cliff) would do nothing but push out the
envelope of indecision, and we’ll continue to be plagued by high
unemployment.”

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$,MCU$$$,MAUDS$]

Weekly data from the Commitments of Traders report (as of Tuesday’s close):

• EUR net -50K vs -73K prior
• JPY net +21K vs +15K prior
• GBP net +27K vs +14K prior
• AUD net +90K vs +69K prior
• CAD net +105K vs +112K prior
• NZD net +20K vs +17K prior
• CHF net -1K vs -4.5K prior

The US dollar lost ground against everything, except CAD which is near an extreme.

Euro positioning is the least bearish in a year. One way to interpret that is that it’s negative for euro, because there are fewer shorts to squeeze. But I would be cautious of that interpretation because -50K is still a sizable position, even if it’s the lowest net negative in a year.

• Colombia held rates at 4.75% in a ‘majority’ decision
• Finance minister says govt ready to help cen bank with FX intervention

Colombia is one of the better emerging markets to invest in, in my opinion, but Latin America is struggling with the weak USD and not happy about QE3.

AUD/USD touched off 1.0373 at the top of the hour.

My level to watch for AUD/USD is the 61.8% fibonacci retracement at 1.0384. A close below there points to a fall back to 1.0330.

I’m also hesitant to read too much into the market because quarter-end, the Australian holiday and the RBA on Tuesday could be causing unusual AUD selling.

One glimmer of hope technical hope for the bulls is the potential for an inverse head-and-shoulders pattern to form. If AUD grabs some momentum on Monday/Tuesday, the pattern sets up for a rally to 1.0620.

The final HSBC China manufacturing PMI will be released on Saturday.

The flash PMI was 47.8 after a reading of 47.6 in August. The index has been below 50 throughout the year.

The official government manufacturing PMI is Monday but China is closed next week for national holidays. In Australia, Monday is also a holiday.

It’s also the first trading day of a new month/quarter.

The takeaway is that there could be some sloppy, choppy trading when markets re-open.

By Denny Gulino

WASHINGTON (MNI) – After many months of groaning under the burden
of threatened Dodd-Frank regulations, some U.S. marketeers are
brightening their outlook as the regulatory noose promises even more
damage for their competitors across the Atlantic.

Friday’s UK Wheatley report attempt to salvage what has been viewed
as a doomed LIBOR benchmark and the European Parliament’s proposed
half-second “resting period” for high frequency trades are the week’s
latest examples of good news for U.S.-based trading firms.

“London’s days as the world’s premier financial centre are
numbered, with New York set to take over,” writes one former London
journalist turned New York analyst.

Despite the skyscrapers going up around the City of London,
“gleaming mirrored windows do not reflect reality,” Will Rhode wrote
Friday for the Tabb Group Forum, a public opinion exchange for more than
10,000 people linked to the markets.

Rhode seems to be trying to warn his friends back in London that
American regulators are more clever than they look on the surface,
despite the opposite opinion of some observers closer to the action,
like Kansas City Federal Reserve Bank President Esther George. She told
an audience in Beijing overnight that from her perspective, she has her
doubts U.S. regulators who created Dodd-Frank’s threatened 30,000 pages
of regulations knew what they’re doing.

Rhode cited CFTC Chairman Gary Gensler’s Wednesday testimony to the
European Parliament that is apparently being closely scrutinized for its
aggressive tone. Gensler suggested that since some banks, mostly from
Europe, go three months without changing their LIBOR submissions, or
when LIBOR and EURIBOR diverge widely day after day, month after month,
that something is fundamentally wrong.

Ever since Gensler’s CFTC extracted $200 million and the Department
of Justice another $160 million from Barclays in July for attempting to
manipulate LIBOR, he’s had the attention of the London financial
establishment.

Gensler is co-chairing a task force for the International
Organization of Securities Commissions with Martin Wheately, the head of
the UK’s Financial Services Authority who earlier in the day said he
concluded LIBOR can be salvaged and not replaced. Gensler and Wheately
have been tasked by IOSCO to come up with recommendations for the future
of LIBOR, an interesting pairing since they appear to disagree on the
degree of change that is necessary.

After Wheatley’s report, the industry British Bankers Association
that has been administering LIBOR and selling several derivative
indexes, said it would relinquish that privilege as Wheatley
recommended.

Meanwhile, the U.S. high frequency trading establishment, reviewing
a European Parliament’s recommendation that all equities trades be
delayed for 500 milliseconds, appears to be recovering from the initial
shock. The recommendation seemed to raise the possibility a half-second
pause for every trade would catch on as a worldwide standard, killing
what they do best, complete tens of thousands of trades in that brief
period of time.

Not only was the recommendation later seen to be only an opening
salvo in what may be long years of debate, it was accompanied by
reported off-the-record signals from U.S. regulators that they would
contemplate no such thing.

How could anyone see the U.S. regulatory landscape as a better
alternative, whatever it is being compared to? As Rhode points out
Europe has 27 countries, each with their own regulatory agencies. It has
the European Parliament, the European Commission and the European
Council to deal with, plus the European Central Bank and the European
Securities and Markets Authority. In the U.S. all the banking and
markets regulators are now coordinated by the Financial Stability
Oversight Council.

As slow as the Dodd-Frank implementation process is in the U.S., he
argues, it is much faster than the process in Europe and so the U.S.
standards are leading the way, something that will give U.S. trading
firms the ultimate advantage.

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: MK$$$$,M$U$$$,MGB$$$]

Fed’s Fisher opening up a can of worms with his criticism of QE3:

• If rates rise, Fed will incur losses on its portfolio ‘I am worried what that will look like’
• He’s also worried about getting stuck in QE land, worried about ‘how we are going to get out’

In my opinion, some things just shouldn’t be said. First of all, the Fed would never be obligated to take a true loss. They’re bonds, they could just hold them to maturity.

Second, if the Fed was selling bonds it would mean that QE had worked and the economy was recovering.

Third, selling bonds to trim inflation would be a more refined instrument.

Fourth, it’s all government money anyway. No matter who holds the bonds, the Treasury is paying the interest.

When Fisher says something like that, the risk is that it gets picked up by the wrong channels and politicized, which is the last thing the Fed needs.

MADRID (MNI) – Stress tests of 14 major Spanish banking groups,
conducted by an independent auditor, showed that half of them will need
an aggregate total of E59.3 billion to shore up their balance sheets,
The Spanish Economy Ministry said Friday.

The ministry said the other seven banks, accounting for 62% of the
Spanish banking system, did not need any additional capital. That group
includes Spain’s two largest banks, Grupo Santander and BBVA, which were
given high grades for being very well capitalized even in the event of
far worse-than-expected economic conditions, for which all the banks
were tested.

However, the capital-deficient banks, pummeled by real-estate
related losses, showed large capital needs. Bankia, the nationalized
lender that has posted huge losses, will require almost half of the
total, the tests showed.

Spanish officials were upbeat about the overall condition of the
Spanish banking sector following the release of the survey, which was
conducted by Oliver Wyman, an international consulting firm.

“The bulk of the Spanish financial system is solid,” Fernando
Jimenez La Torre, secretary of state for the economy, told a press
conference here. “This study should dissipate doubts about the banking
system and avoid contagion between bad banks and good ones.”

The stress test results confirmed recent government assertions that
Spain will need far less than the E100 billion that Madrid’s Eurozone
partners approved for its bank bailout in July. And the banks will
probably not need public aid to cover the entire shortfall, since some
of them can probably raise capital through other means.

The Bank of Spain noted in a written statement that “the capital
needs identified in the exercise do not represent the final figure of
state aid to banks. This aid may be significantly less.”

The European Commission said in a statement that the tests were a
major step “towards strengthening the viability of and confidence” in
the Spanish banking system.

Banks with identified capital shortfalls will have to present
recapitalization and restructuring plans to Spanish and European
authorites by next month. Once the plans have been approved, the first
recapitalizations can take place starting in November.

“If we consider an entity not to be viable, it will get public aid
and then will be sold,” Fernando Restoy, Bank of Spain Deputy Governor
told the press conference.

The European Central Bank said in a statement that it “strongly
supports the Spanish authorities’ plans to ensure that capital needs are
met in a timely manner.”

The tests showed that Bankia would need E24.7 billion under a
“stressed scenario,” which envisages a 6.5% plunge in GDP between now
and the end of2014. Bankia has already requested a E19 billion bailout.

Other banks requiring capital under the stressed scenario include
Catalunyabank, with a need of E10.8 billion, NCG Banco, with a need of
E7.2 billion and Banco de Valencia, with a need of E3.5 billion.

The Bank of Spain said that with mergers that are already underway
and some yet-unrealized fiscal assets, the total capital need of Spain’s
banks was reduced to E53.745 billion.

La Torre said Spain would request E40 billion from Brussels, and he
noted that “this money cannot be earmarked for any other purpose.”

Eurogroup President Jean-Claude Juncker said in a statement that
the stress-test results showed “the total financial assistance agreed in
July should be more than adequate to cover the final capital needs,
including a comfortable safety margin.”

–Paris newsroom, 33142715540; jduffy@marketnews.com

[TOPICS: M$$CR$,M$X$$$,M$S$$$,MGX$$$]

• Fed could be painting itself into a corner, worried about exit strategy
• If economy rebounds Fed will incur losses on portfolio; not sure what that will look like (I do. Ugly)

Guess there must have been some serious month-end demand for USD/JPY today. Not sure if it was organic or was engineered by our friends at the Ministry of Finance in order to allow corporates to revalue their books at the end of the quarter. I would have expected them to hold off until the end of the Japanese fiscal year on Oct 31 before trying to push the dollar up. The spent over $100 bln to accomplish that goal last year to little lasting effect…

We’re up above 78.00 at the moment having spent much of the US session grinding higher. The buck was firm during the risk-off phase this morning and is even firmer now that risk aversion has eased following the Spanish stress test.

• US drowning in unemployment

Sounds like the one of the most ardent opponents of QE3 is coming around…

According to a Bloomberg headline. Rating affirmed but outlook stays negative.

• Debt levels and lackluster growth are the main threats

A bit of risk-off on the headline.

FRANKFURT (MNI) – The following is a statement from Jean-Claude
Juncker, president of the Eurogroup of euro area finance ministers,
following the publication Friday of Spanish bank stress test results:

“On 20 July 2012 the Eurogroup decided to grant financial
assistance to Spain in the form of a banking recapitalisation programme.
It was agreed that it would cover financing needs of up to EUR 100
billion, while the specific amount would be determined based inter alia
on a thorough bottom-up assessment of capital shortfalls for individual
banks.

The results of the bank-by-bank stress test conducted by an
external consultant with regard to 14 banking groups comprising more
than 90% of the Spanish banking system were published today.

I am comforted by the fact that the total capital shortfall of the
Spanish banking sector comes out at slightly less than EUR 60 billion.
The final State aid provided to Spanish banks will be lower than the
reported capital shortfall, given measures to be taken by the banks in
accordance to their recapitalisation and restructuring plans.

The assessment shows that the total financial assistance agreed in
July should be more than adequate to cover the final capital needs,
including a comfortable safety margin. It should ensure that the
recapitalisation process of banks can proceed efficiently and in
accordance with previously agreed timelines.

I very much welcome that progress on implementing the commitments
as defined in the Memorandum of Understanding is well on track. I am
confident that the reforms attached to this financial agreement will
contribute to ensuring a return of all parts of the Spanish banking
sector to soundness and stability.”

–Frankfurt bureau tel.: +49-69-720142. Email: frankfurt@mni-news.com

[TOPICS: MT$$$$,M$$CR$,MGX$$$,M$$EC$,M$X$$$,M$S$$$]

FRANKFURT (MNI) – The following is the European Commission’s
statement on the publication of results of stress tests of Spanish banks
released on Friday:

“European Commission statement on the publication of results of
stress tests of Spanish banks The European Commission welcomes today’s
publication by the Spanish authorities of the results of the independent
valuation of Spanish banks. This is a major step in implementing the
financial-assistance programme and towards strengthening the viability
of and confidence in the Spanish banking sector.

In line with the Memorandum of Understanding governing the
financial-sector programme for Spain, an external consultant conducted
over the past few months a stringent bank-by-bank (bottom-up) stress
test and a thorough asset quality review. The European Commission was
closely involved in this process, as were the ECB, the EBA and the IMF.

The capital needs for individual banks disclosed today are a key
step in the process of restoring and strengthening the soundness of the
Spanish banks. They will form the basis for the eventual
recapitalisation of banks with the help of the programme. The necessary
State aid provided to Spanish banks will be determined in the coming
months. It will be based on today’s published results. It will also
reflect measures to be taken by the banks, such as the disposal of
assets, other restructuring measures and tapping funding markets, and
subordinated liability exercises. In addition, the capital shortfall of
credit institutions receiving public funds will be adjusted as a
consequence of the transfer of assets to the Asset Management Company.

Banks with a capital shortfall will present recapitalisation plans.
Upon approval of these recapitalisation plans by the Bank of Spain and
the European Commission, banks requiring state aid will present
restructuring or orderly resolution plans to the Spanish authorities,
which will notify these to the European Commission for approval under EU
state aid rules. Upon approval of these restructuring and/or orderly
resolution plans, the recapitalisation of a first group.”

–Frankfurt bureau tel.: +49-69-720142. Email: frankfurt@mni-news.com

[TOPICS: MT$$$$,M$$CR$,MGX$$$,M$$EC$,M$X$$$,M$S$$$]