Is EUR/USD heading to 1.40?

Posted on 17. Feb, 2014 by Jean Jacques Ohana in Weekly Focus

The outlook of the dollar has been indecisive since Mario Draghi’s pledge to “do whatever it takes to save the euro” and the subsequent announcement of the QE3 Federal Reserve program. For sure, the emerging currencies have been hardly hit but the euro has served too as a repatriation currency during market stresses.

As showed in [...]

Financial consequences of the ECB’s impotence

Posted on 09. Dec, 2013 by Jean Jacques Ohana in Weekly Focus

Before the last ECB meeting, we could wish that several ECB council members were determined to fight the deflationary threat in the Euro zone southern countries (figure 1). For instance, the last surprise move of the ECB refi rate down to 0.25% seemed to show that the ECB wanted to move towards a proactive quantitative [...]

A cornered ECB

Posted on 23. Sep, 2013 by Jean Jacques Ohana in Weekly Focus

Since the successive announcements of the OMT by the ECB and the QE3 by the Federal Reserve, the trend of the EUR/USD (presented in figure 1) has permanently drifted higher despite the broad based strength of the dollar (see figure 3). By deciding not to taper its program of asset purchases, the Fed unwillingly trapped [...]

Why Japanese markets are still worth the while

Posted on 16. Sep, 2013 by Jean Jacques Ohana in Weekly Focus

We had warned that a speculative bubble was building on the short yen and long Nikkei bets since March 2013. As showed in figure 1, the bubble has landed and is now back to more neutral level. Therefore, the threat of a brutal reversal is less acute as investors’ expectations are less consensual.

The short yen [...]

Developed vs. emerging stocks: mind the gap!

Posted on 08. Jul, 2013 by Jean Jacques Ohana in Weekly Focus

The divergence between the trends of connected assets conveys a very different type of information than the decorrelation between their daily returns. While the latter corresponds to a genuine change of status (e.g. one of the assets shifts from “risky” to “safe haven” or the other way round) and is very rarely observed, the former [...]

Bonds deleveraging and spring clean up

Posted on 03. Jun, 2013 by Jean Jacques Ohana in Weekly Focus

We have downplayed the bonds’ deleveraging stating that the objective of Central Banks, and the Federal Reserve in particular, was to maintain negative real interest rates. Meanwhile, the interest rates have sharply risen in the US.

The rise in interest rates is for sure not related to doubts about US solvency (as the US CDS drifted [...]

Bond bubble or new normal?

Posted on 27. May, 2013 by Jean Jacques Ohana in Weekly Focus

As Ray Dalio put it in a key note about deleveraging, the key variable of deleveraging is the difference between the nominal growth and the nominal cost of debt. Provided that interest rates are maintained below the nominal growth for a long period of time, any country can eventually succeed in alleviating its debt burden. [...]

Commodities dismal performance conveys global deflation pressure

Posted on 02. Apr, 2013 by Jean Jacques Ohana in Weekly Focus

Despite supportive liquidity and global monetary easing from Central Banks, commodities have been unable to perform since 2011. Commodities had the worst returns among every asset class over the past 250 days. Commodities, currencies and basic resources equities sectors have been under pressure, as illustrated by figure 2.

The poor performance of cyclical markets such as [...]

Throw out the Eurozone crisis by the financial door, it will come back by the political window

Posted on 18. Mar, 2013 by Jean Jacques Ohana in Weekly Focus

Three years after the outbreak of the Eurozone crisis, we know now with certainty that this crisis is not whatsoever a sovereign debt crisis. OECD countries which issue debt in their own currency have no problem to fund their debts. UK, US, Japan, Switzerland, Sweden, Norway, Australia all have different solvency and external balance features. [...]

An equities bubble is swelling now: drawing lessons from past episodes

Posted on 11. Mar, 2013 by Jean Jacques Ohana in Weekly Focus

Global Equities markets are evolving in bubble as showed in figure 1. Riskelia’s bubble indicator measures the regularity of price dynamics over various time frames. An excessive degree of monotonicity in price dynamics characterizes mimetic behavior among market participants who will simultaneously sell their accumulated positions when complacency is called into question by adverse fundamentals. [...]