2014 Greatest Hits: Presenting The Most Popular Posts Of The Past Year

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A quick glance at the 20 most popular stories of 2014 as determined by you, our readers, shows something troubling: despite the just concluded 6th consecutive year of a rising S&P 500 - the longest such stretch since 1999 of what otherwise would be deemed optimism - despite what should be a steadily improving economy and improving social and economic conditions, what readers founds most fascinating, and troubling, was the increasing preponderance of social disobedience, of covert, proxy or outright wars, and of civil unrest: all phenomena that accompany a world sliding deeper into distress, not as most central banks and their puppet media would have us believe, a global recovery.

But before we get into the details of what has now become an annual tradition for the last day of the year, those who wish to jog down memory lane, can refresh our most popular articles for every year during our brief 6-year existence, starting with 2009 and continuing with 2010, 2011, 2012 and 2013: one for every year of the most artificial and fabricated "bull market" in history.

So without further ado, here are the articles that readers found to be the most popular of the past 365 days.

• In 20th place, with over 143,000 reads, was the first hint that the second cold, and not so cold, war between Russia and the US was going to be not only fought in commodity terms - at least in the beginning - but would do all in America's power to prevent the formation of a Russia-China axis of power, when back in paril we learned that the "US Threatens Russia Over Petrodollar-Busting Deal." As noted above, conflict and its numerous variations, would be the driving feature of what readers were most fascinated by. The ever-escalating conflict between Russia and the US would be merely one of the numerous such developing plotlines that those who were not engrossed by whether Kim Kardashian's ass would indeed break the internet, followed with great interest.


• In 19th place, and rising rapidly, was Zero Hedge at what we believe is its best: peeking behind the propaganda, and revealing the lies hidding in the headline numbers. We did this most recently with "Here Is The Reason For The "Surge" In Q3 GDP." As it turns out, Obamacare may well have been an abysmal failure for many (and will be for most) and its existence depends largely on the "stupidity of American voters", but when it comes to artificially goosing US GDP at opportune times, it is second to none.


• In 18th place, and still very much unexplained, was Zero Hedge breaking one of the biggest stories of the first quarter, namely that out of the blue, none other than the small nexus of the Eurozone, Belgium had emerged as the third largest external holder of US Treasurys in "Meet The Brand New, And Shocking, Third Largest Foreign Holder Of US Treasurys." Some said this was merely China using Euroclear as a custodian service, however this story was promptly rejected when it was revealed that China's foreign reserves actually posted their biggest decline in 2014, in line with what we also revealed previously, namely that China, alongside Russia, has in fact been dumping Treasurys and its US paper holdings are now the lowest they have been since February 2013. The "Belgian" mystery continues.


• In 17th place, with well over 160,000 reads, was the shocking revealtion that in the aftermath of one of the biggest stories of 2013, the Cyprus bail-in, "Europe Considers Wholesale Savings Confiscation, Enforced Redistribution" - hardly surprising for a socialist continent that is rapidly running out of other people's money but quite stunning considering that the European dominoes are always just one bank run away from toppling. Now with Grexit is back on the European stage, keep a close eye on what happens with European deposits: if we are correct, what happened in Cyprus was merely a trial run for what is coming next as the real problem facing Europe, several trillion in bad bank loans, has never been addressed.


• In 16th place we had a somewhat different glimpse behind the biggest rags to riches story of 2014: that of China's Jack Ma, who overnight became China's richest person following the IPO of Alibaba. But it wasn't his wealth that fascinated readers, it was his austere pragmatism when he said that "If You're Poor At 35, You Deserve It." Is he right, or wrong, we don't know, but well over 100,000 readers clicked to read his opinion.


• In 15th place, with just under 170,000 reads, was a brief glimpse into what was certainly one the biggest surprise stories of 2014: that of the Islamic State, or ISIS, which emerged as if out of nowhere, and in the span of just a few short weeks controlled a territory within Iraq and Syria the size of the UK. And while ISIS took over enough oil infrastructure (not to mention US army vehicles) to become quickly self-funding, some wonder just who is behind the world's most fearsome adversary of 2014. How gruesome? Read "Footage Of ISIS Atrocities Reveals Al Qaeda Jihadists "Will Stop At Nothing" to find out.


• In 14th place was one of the most "self-explanatory" posts of the past year: one which showed the symbolic placement of world leaders by China during the APEC economic forum which took place in Beijing a month ago, and which made us wonder if "China was Sending America a Message." Putin and Obama were there, and therein lay the punchline.


• In 13th spot we are reminded that the biggest international conflict was not that taking place in Iraq between ISIS and everyone else, but in Ukraine, where a proxy government was put in power by the US State Department in order to facilitate the encroachment of NATO and to assure that hostilities with Russia were only a matter of time. How do we know Ukraine's government was a puppet regime of the US? Because as a leak in March revealed, "Behind The Kiev Snipers It Was Somebody From The New Coalition", a new coalition which came into power only after Victoria Nuland's leaked recording confirmed all everyone had to know.


• In 12th spot we reminded over 150,000 of our readers that as the mainstream media desperately scrambles to sucker in the retail bagholder into the "stock market", which as we have revealed over the past 6 years is rigged by central banks and HFT algos beyond recognition, the richest and smartest people in the room are quietly cashing out in "Icahn, Soros, Druckenmiller, And Now Zell: The Billionaires Are All Quietly Preparing For The Plunge"


• In 11th spot, and surprisingly not higher was a reminder that while the US president droned on about Russia being isolated, the BRIC nations, those countries which actually produce "stuff", and who collectively account for half the world's population, are "Morphing Into An Anti-Dollar Alliance." What will it take for the metamorphosis to be complete? A few more months of global developing market pain and capital outflow as a result of the soaring dollar, and the BRICs may have no choice but to conclude their transition to a post-dollar world.


• In 10th spot was an article that dealt with America's own urban decay: not in its shiny, glitzy metropolises, but in the heartland: the city that once symbolized America's manufacturing strength and productive ingenuity, and which now lies in ruins. Literally. Don't believe us? Then see for yourselves in "The Death And Decay Of Detroit, As Seen From The Streets"


• In 9th, and 7th spots were a vivid reminder of just why the S&P at all time highs feels so wrong: because while in modern US society the richest have never been richer, the schism between the rich and poor has never been greater, and where racial, ethnic and class conflict is stirring and ever more often rising to the surface with deadly consequences. In 2014, the Missouri town of Ferguson symbolized this lethal divide. For those who missed it can relive this preview of what is to come to ever greater parts of the US in "Ferguson In Flames, Shots Fired, Police Car Destroyed, Tear-Gas Deployed, Looting; NYC Brooklyn & Triborough Bridge & LA Freeways Blocked" and "Ferguson Violence: Protesters Warn "The Revolution Won't Be Televised" - 'Rubber Bullets & Tear Gas' Update."


• Another confirmation that all is not well, and that the disconnect between the S&P and the underlying economy has grown to farcical levels, was revealed with the 8th most popular article of 2014 in "People Not In Labor Force Soar To Record 91.8 Million; Participation Rate Plunges To 1978 Levels." No further explanation is necessary.


• In 6th place was the "other side" of the argument of the story that shook the world over the summer: who brought down Malaysian airlines flight MH-17 over east Ukraine. The mainstream western media made up its mind within hours that it was all Putin. And then there was the other side of the argument such as when "Russia Says Has Photos Of Ukraine Deploying BUK Missiles In East, Radar Proof Of Warplanes In MH17 Vicinity."


• The 5th most popular article, with over 184,000 reads, was a simple reminder that math and the current US financial state simply can no coexist, because "Paying Down The Debt Is Now Almost Mathematically Impossible." Sure, the chartalists, acronymists and other monetary dogmatists will say: there is no point in actually repaying the debt. And yes, as long as there are those who are willing to fund America's growth, growth can continue. If and when those benign entities disappear it's game over. In 2014 we saw many such formerly benign entities decide they have had it with the US. But at least there is always the Fed willing to monetize all US debt if it has to...


• In 4th spot we were reminded that even as the S&P hit new record highs over 50 times in the year, one of the smartest people in the room has zero faith in a rigged, manipulated, liquidity-drrenched "market" which is only where it is simply due to the generosity of printer-armed central planners. Proof? The ""Soros Put" Hits Record As Billionaire's Downside Hedge Rises By 154% in Q4 To $1.3 Billion." One day the put will pay off very handsomely.


• In 3rd place was a viral reminder that while America is a great country, it does have its drawbacks. Over 250,000 readers agreed when we showed the ""Worst Possible States To Live In" As Ranked By Their Residents." All we have to say here to our readers from Illinois: our condolences.


• Finally, with over 600,000 combined readers, we leave it to our readers to spot the common theme in the two top articles on Zero Hedge for 2014, titled, simply enough, "OECD Fears Middle Class Civil Unrest Is Coming" and "Martin Armstrong Warns Civil Unrest Is Rising Everywhere: "This Won't End Pretty.""

So with all of this pessimism behind us, does that leave us more optimistic heading into 2015?

We don't know: as frequent readers know, we do not pretend to be able to predict the future. We do know, however, that with $11 trillion in liquidity injected just by the world's developed central banks, and the tens of trillions of credit money created (and misallocated) by China - a country which was the world's growth dynamo for the past three decades and which is now rapidly slowing down - the entire world is floating on an ocean of excess money, which for one more year has succeeded in masking just how ugly the truth beneath the calm surface is. Sooner or later, the tide always comes out, and those swimming naked are always exposed. However, this time it will be the very final backstoppers of the status quo regime, the central banking emperors of the New Normal, who are finally revealed as wearing absolutely nothing. What happens then, and when that happens, is anyone's guess. But, as we have promised - and delivered - every year for the past six, we will be there to document every aspect of it.

Finally, and as always, we wish all our readers the best of luck and success in 2015, and leave off with our unwavering year-end promise: Zero Hedge will be there each and every day helping readers expose, unravel and comprehend the fallacy, fiction, fraud and farce that the system is reduced to (ab)using each and every day just to keep the grand tragicomedy going for at least one more day.

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Is The CDS Market Manipulated?

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From Joshua Rosner of Graham Fisher

Credit Event, Or Not? Is Another Market Being Manipulated? (pdf)

As investors and market participants become increasingly aware of the regulatory failures that allowed for manipulation of LIBOR, FOREX, municipal bond bidding and certain commodities markets, regulatory sources are increasingly expressing concern that they have paid too little attention to potential manipulations of an arguably larger, more systemically important and less regulated market – the CDS market as self-governed, through ‘regulatory license’, by the International Swaps and Derivatives Association (ISDA).

It appears regulators are now turning their attention toward the CDS market, its problematic self-regulatory structure, the myriad of conflicts of interest, the potential avenues for manipulation by large dealers and the opaque and potentially self-serving manner in which determinations of “credit events” are privately decided by ISDA’s Determinations Committees (DCs). A growing volume of news stories, the publication of several new academic papers, the reversal of Dodd-Frank’s “Push-Out” rule which would have forced banks to move their derivatives out of the depository, and the DCs’ handling of several recent questions have only served to increase regulatory concerns and cause some to point out numerous similarities between the various manipulation scandals, the possibility of manipulations in the CDS market and the implications to the global economy.

Source: Dan Awrey

Since 2000, and the insertion of language into the 2000 Commodity Futures Modernization Act which exempted CDS from regulation by the Commodity Futures Trading Commission, the U.S. derivative market has been largely self-regulated. After the global financial crisis, the President’s Working Group on Financial Markets (PWG) recognized that the opaque world of derivatives needed substantial changes. However, the President’s Working Group left implementation of needed changes and oversight to the industry. In effect, the same sell-side driven derivatives market that led the world to crisis was told ‘Sinner, heal thyself’.

Today, as a result of the rapid growth of the OTC Derivatives market, including CDS, the systemic risks posed by this market and the obvious conflicts of interests inherent in its current oversight, regulators are finally casting a close eye on the actions and decisions of this self-regulatory regime.

In each global region, determinations regarding credit events are made by 15 of the largest users of credit default swaps. Ten voting members are sell-side firms, and five are buy-side firms. The voting members are the institutions rather than the individuals voting on their behalf. These users of CDS, who vote to determine when a credit event has occurred and therefore whether there will be a payout on the swaps, appear likely to have positions in nearly every issue they are tasked to decide – and their decisions are binding on all market participants and issuers. The determinations of these DCs, which are less regulated than rating agencies and expressly shielded from certain types of legal liability, have become more powerful and of more importance those of the ratings firms. The DCs’ disclosure language highlights the problems inherent in the current process:

The procedures of the Determinations Committees are set forth in the DC Rules. A Determinations Committee in accordance with the DC Rules may amend the DC Rules. None of ISDA, the institutions serving on the Determinations Committees or any external reviewers owes any duty to you in such capacity, and you may be prevented from pursuing claims with respect to actions taken by such persons under the DC Rules. Institutions serving on a Determinations Committee may base their votes on information that is not available to you, and have no duty to research, investigate, supplement or verify the accuracy of information on which a determination is based. In addition, a Determinations Committee is not obligated to follow previous determinations or to apply principles of interpretation such as those that might guide a court in interpreting contractual provisions. Therefore, a Determinations Committee could reach a different determination on a similar set of facts. If we or an affiliate serve on a Determinations Committee, we may have an inherent conflict of interest in the outcome of any determinations. In such capacity, we or our affiliate may vote and take other actions without regard to your interests under a Credit Transaction.

Yet, more troubling, the Determinations Committees’ Rules appear to actively court trading ahead and/or manipulation. These rules do not offer any meaningful guidance regarding Determinations Committees’ members’ conflicts of interests; ability to vote on issues in which they have a financial interest; recusal from voting; or sharing of information regarding discussions and determinations of DCs with others (including traders) within their own firms. Even those rules that exist appear meaningless given that ISDA doesn’t appear to monitor compliance and, given that it is a trade association, is unlikely to sanction its own members even if there were a mechanism to do so. As a result, it is not impossible to believe that in cases in which a vote is delayed for another meeting, or in cases in which a second vote occurs, a DC member may use any delay to reposition their book in anticipation of a final determination.

The ISDA Determinations Committees wields unprecedented, largely unbridled and unchecked power to declare corporations and sovereigns in, or not in, default, and they are therefore are in a position to define the contractual solvency of their member firms.

Recently, it has been proven that without governmental oversight, there are many opportunities for ISDA member banks and the voting members of the DCs to secretly manipulate markets for their own benefit. As example, recent lawsuits have been filed based on CFTC referrals to the Department of Justice. The CFTC has claimed that criminal behavior has been found which demonstrates ISDA member banks manipulated “ISDAFIX”, a benchmark used to set rates on trillions of dollars of derivatives. If proven, the scale of these manipulations may be far larger than LIBOR, FOREX or the municipal bid-rigging manipulations.

As witnessed through the lens of AIG’s failure, in which the majority of CDS that AIG insured were used by banks and investment banks for regulatory relief, CDS have become a means for banks to engineer a reduction of their risk-weighted assets and raise their capital ratios.

The potential use of CDS to artificially manipulate corporate solvency, the imbalances in the amounts of CDS outstanding relative to referenced debt and ongoing allegations that ISDA’s Determinations Committee is deeply conflicted and “operates as a quasi-Star Chamber or cartel”, are finally being scrutinized.

As one source recently suggested, “It would be a surprise if determinations of default, made by a committee of interested parties, don’t lead to findings of manipulation similar to those found in LIBOR and FOREX”.

The Problems of Determinations Committees

As highlighted by John Biggins, “direct public regulation of OTCD trading between sophisticated counterparties in the US was substantially abolished at the turn of the 21st century”. While Dodd-Frank in the U.S. and regulations overseas have sought to rein in certain activities, move trading to centralized exchanges and move certain exposures out of banks, there has been little done to create direct government oversight of the processes of determining defaults, clearing positions, overseeing auctions or settling trades. The bulk of these activities remain in the hands of private players – some with inherently conflicting roles – such as ISDA.

When, in the wake of the global financial crisis, the industry saw that it was going to come under increased scrutiny and pressure, ISDA took a lead in lobbying and in the creation of new standards of self-regulation. Included in these was the creation of the Determinations Committees. Before the DC member selection process was finalized, investors were told that the DCs would be “balanced between dealers and investors” and that “It only works if people believe in it”. Yet in fewer than five years since the creation of the Committees, it has become clear that they are neither balanced nor worth meaningful belief.

While ISDA has routinely sought to defend itself from criticism, the realities of the DCs is that even a routine review of their actions undermines their credibility as market gatekeepers.

Claims Versus History

ISDA, in defense of the DCs, claims that clear risks of individual firms voting based on their own books are ameliorated by the process in which 80% of the 15 members are needed to come to a decision. These claims appear dubious given that there is no duty, for the Committees, to disclose a transcript of the meetings or an accounting of their reasoning. Doubts are only heightened by the almost inevitable, seemingly impossible, cartel-like unanimity of the Committee’s determination votes. As example, for at least the last three years, every single one of the dozens of the Determinations Committee for the America’s has been unanimous. As one observer pointed out:

“Doesn’t it potentially create a dynamic where no one wants to be seen to be dissenting? Does this stifle genuine debate and put pressure on those who may have a different opinion? Wouldn’t true transparency mean that DC members disclosed the financial interests of their firm and their votes?"

The fact that Pimco’s Chief Investment Officer criticized the determination that Greece had not triggered its CDS, even though Pimco was part of the unanimous vote making that determination, is profoundly troubling to say the least. The discrepancy appears to suggest that the official votes of DC members do not necessarily reflect the actual views of those members and that the voting process has thus been perverted. The fact that the DC has no obligation to “research, investigate, supplement or verify the accuracy of information on which a determination is based” and members “may have an inherent conflict of interest in the outcome of any determinations” only adds credence to suggestions that the “CDS market is being manipulated and gerrymandered by the all-powerful investment banks”.

Questions about the CDS and reference debt held by Committee members are almost certain to be the subject of regulatory and legislative inquiry given the importance of Committee votes, to investors and issuers – including sovereign governments. While the public rarely has the ability to know where a specific conflict exists on the books of a Committee member, there have been circumstances in which the conflicts appear clear. Last summer, the DC met to decide whether Argentina’s failure to pay holders of exchange bonds was a triggering credit event. Given the decade-long dispute between Elliott Management – who is a voting member of the Determinations Committee - and Argentina, one has to wonder why, with obvious conflicts, Elliott didn’t recuse itself , or was it not forced to recuse itself, from the vote. One also has to wonder why ISDA doesn’t appear to have any policies governing either public disclosures of conflicts or requirements for recusal where a conflict may color a member’s vote.

Perhaps ISDA will state, in its defense, that in circumstances in which members’ views – or financial interests – make it difficult to come to the required decision by 80% of the Committee members, the determinations are subject to an external panel to review and make the determination. To be sure, external review is a good and healthy process, to the extent that it is conducted properly. In fact, one could easily argue that truly independent and non-conflicted reviewers should vet all credit event determinations in the first instance, and that the DC itself is unnecessary, serving largely as a superfluous vehicle for potential market manipulation. However, external review does not appear to happen nearly often enough. Instead, it seems reasonable to suspect that the infrequency with which external reviews occur is the result of a more frequent outcome in which most or all of the committee members (likely frequently the ten bank members) vote in unanimity and then sway at least two or more of the remaining committee members (likely frequently the investors), after which the remaining committee members fall in line.

Even the process by which issues are submitted to external review appears biased in favor of the ten banks. These banks often vote largely as a block, and due to a bizarre and potentially deliberate quirk in the determination process, a 10-member majority cannot be overturned by anything short of a completely unanimous rebuke by the entire external review panel. On the positive side, unlike Committee determinations, External Reviews are required to provide the DC with a summary of the reasoning for their decisions and that reasoning is required to be disclosed publicly. Also, although the external review process does require the reviewer to make a judgment as to whether it has any conflicts of interest regarding the issue at hand, it is unclear whether such disclosures and/or recusals have ever occurred. Moreover, given that the reviewer is supposed to consider, as conflicts, only issues “with respect to either the Reviewable Question or the related DC Questions which may be deliberated by the Convened DC”, the rules do not appear to prohibit reviewers from having conflicts relating to financial remuneration historically received by them from members of the Committee. It seems obvious, given that the external reviewers are proposed by Committee Members, that these types of conflicts are commonplace. In fact, even a cursory Internet search for pool members turned up external reviewers who clearly receive income from Committee Member firms.

These questions seem particularly timely given the DC’s meeting on December 24th to determine whether Caesars’ failure to pay all of the interest and principal owed on December 15, 2014 triggered a failure to pay credit event. Section 4.01 of the relevant 2nd lien indenture states that “[a]n installment of principal of or interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds as of 12:00 p.m. Eastern time money sufficient to pay all principal and interest then due ...”. Thus, in the event all principal and interest then due is not paid, which was certainly the case on December 15th, neither principal nor interest is considered paid. This clearly triggers a failure to pay credit event under the relevant ISDA documents. Yet the DC’s December 24th meeting concluded with a public announcement that the Committee had postponed a vote until December 29th, and the December 29th meeting concluded with another deferral, this time to January 5th.

Where the language in an indenture is completely straightforward, as appears to be the case in Caesars, it is unclear what the reasons for these consecutive postponements may be. One has to wonder whether the DC is deliberating based on the facts or merely seeking to act in the pecuniary interests of the majority of its members. If the former, then why has the committee not yet announced the obvious - that there has been a failure to pay?

Regulatory investigations and legislative inquiries would certainly be timely given the importance of reducing systemic risks, supporting the functioning of fair and transparent markets (in which asymmetries of available information are reduced), and increasing the certainty of rights among issuers, dealers and all investors.

Full pdf report with references and disclosures attached

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Go Figure, The Poorest Place In Europe Is Run By Communists

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Submitted by Simon Black via Sovereign Man blog ,

Ah Moldova… the poorest country in Europe, which just so happens to have had a Communist party majority in its parliament since 1998.

These two points are not unrelated.

Despite having achieved its independence from the Soviet Union over 20 years ago, the state is still a major part of the Moldovan economy… from setting prices and wages to media, healthcare, agricultural production, air transport, and electricity.

Under such management, it’s no wonder, for example, that Moldova has to import 75% of its electricity. It is the exact opposite of self-sustaining.

The government does a reasonable job of chasing away foreigners as well.

Agriculture is the mainstay of Moldova’s economy… and while on one hand they say “we welcome foreign investment in agriculture,” on the other they say “foreign investors cannot own agricultural property.” It’s genius.

The average wage here is less than $300 per month… all while Moldovans’ purchasing power is getting eaten away by inflation. GDP per capita, meanwhile, is in the ballpark of many destitute African nations like Swaziland.

Of course, not everyone is poor. The politicians at the top of the totem pole are doing great, always pulling the strings in their favor at the expense of everyone else.

Since the last election in 2010, the Communists still hold the most seats in Parliament. The three other main parties banded together to form a majority coalition to take control of government.

Very little has changed. The Communists are still a powerful force in Moldovan politics, and the other parties aren’t exactly champions of economic freedom.

They bicker away about the budget, about who to tax and how much to tax, about what laws to pass and what regulation to implement. As usual, it’s the exact opposite of what they should be doing.

Economic freedom… all freedom, really, is not built by passing laws and rules and regulations.

Rather, it’s like what Michelangelo said about sculpting: to achieve growth and freedom, one need only remove the unnecessary stone, underneath which lies the masterpiece.

The likelihood of these guys figuring it out, unfortunately, is zero. And that doesn’t just go for Moldova, but all western governments.

Europe is now taking a dangerous slide back into Communism… or at least steep radicalism. Neo-Nazi parties and openly Marxist politicians are dominating the scene.

This is nothing new. As usual, history is full of lessons from when people have turned to radical figures in tough times.

The French, for example, were driven to behead their King in the late 18th century due to dismal economic conditions.

They traded an absolute monarch (Louis XVI) who wrecked the economy for a bloodthirsty dictator (Robespierre) who continued wrecking the economy, and eventually traded him for yet another dictator (Napoleon) who continued wrecking the economy.

This is the vicious cycle that forms when an entire nation reaches the point of desperation, and we are seeing signs of this forming all over the West. The only question is… who will become the next Moldova?

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AUD/USD - Aussie Steady on Mixed US Numbers

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AUD/USD is almost unchanged on Wednesday, as the pair trades in the high-0.81 range early in North American trade. Australian markets are closed for the New Year's holiday. In the US, Unemployment Claims was weaker than expected, jumping to 298 thousand last week. Pending Home Sales posted a gain of



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US Initial Jobless Claims Rose in the Week Ending December 27

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US initial claims rose by 17,000 to 298,000 in the week ending December 27, 2014 from 281,000 in the previous week (revised from 280,000), breaking a streak of four consecutive weekly declines. The latest reading was higher than market expectations for claims to rise to 290,000. The four-week moving average of



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EURUSD: One Last Gut Punch

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The success of the USD and the failure of the EUR throughout 2014 has been a long running and blatantly obvious story that has dominated the currency world. After nearly ascending the 1.40 mountain very early in the year, the EUR/USD has done nothing but taken a beating since, and



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USD/JPY - Shrinking Yen Expected to Weaken Further in 2015

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USD/JPY has steadied on Wednesday, after the yen gained about 100 points a day earlier. Later in the European session, USD/JPY is trading in the mid-119 range. On the release front, Japanese markets are closed on Wednesday and Thursday and there are no Japanese releases until next week. In the



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Gold Expected to Soften in 2015 as US Recovery Deepens

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Gold is stable on Wednesday, with a spot price of $1199.55 per ounce in the European session. In the US, today's key event is Unemployment Claims, which will be released ahead of its usual Thursday slot due to New Year's. We'll also get a look at Chicago PMI and Pending



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Markets Await a Potential Prosperous 2015 - Happy New Year!!!!

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ECB's Draghi reiterated view that lack of structural reforms was a risk for Euro area and that Monetary Union was still incomplete Greece President Papoulias formally dissolved Parliament to make way for January 25th elections Greece Fin Min Hardouvelis stated that its State financing would be covered until around March 20th without



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EUR/USD - Euro's Rough Ride Likely to Continue in 2015

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EUR/USD is listless on the final day of 2014, as the pair continues to trade in the mid-1.21 range. The euro finds itself at 2-year lows and has given up about 350 points in the past two weeks. Trade is light in the European session, as German markets are closed



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Last Trading Day of 2015

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After yesterday's volatile European and US session, FX markets are calmer today. US consumer confidence rose to 92.6 in December but below expectations of 93.9. US equity markets fell slightly on the news but perhaps more a function of end of year profit taking rather than real fundamental concern. European



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2015 FX Outlook - Diverging Central Bank Activities Continue to Support USDJPY

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Monetary policy divergence would be a key theme directing the movement of USDJPY in 2015. The pair has indeed rallied sharply since the BOJ surprisingly announced QE expansion on October 31. While improving economic outlook in the US has prompted the Fed to normalize the monetary policy, the BOJ might



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Foreign Exchange Market Commentary

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THE EURO closed slightly higher on Tuesday as it extends this year's rally. The midrange close sets the stage for a steady to lower opening when Wednesday's night session begins trading. Stochastics and the RSI are oversold but remain neutral to bearish signalling that sideways to lower prices are possible



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EUR/USD: Euro Trading on a Higher Footing this Morning

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For the 24 hours to 23:00 GMT, the EUR rose marginally against the USD and closed at 1.2157. In economic news, the ECB reported that M3 money supply rose 3.10% on an annual basis in November, higher than market expectations for a rise of 2.60%. M3 money supply had registered a



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GBP/USD: British Pound Extends its Gains in the Asian Session

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For the 24 hours to 23:00 GMT, the GBP rose 0.29% against the USD and closed at 1.5560. On the macro front, Nationwide reported that the seasonally adjusted UK house prices rose 0.20% on a monthly basis in December, compared to a rise of 0.30% in the prior month. Market anticipations



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USD/JPY: Yen Trading Higher, Amid a Thin Holiday Trading Session

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For the 24 hours to 23:00 GMT, the USD weakened 1.0% against the JPY and closed at 119.47, after consumer confidence in the US for December came in below expectations. In the Asian session, at GMT0400, the pair is trading at 119.46, with the USD trading tad lower from yesterday's close. The



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USD/CHF: Swiss Franc Converges with its MAs

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For the 24 hours to 23:00 GMT, the USD declined 0.07% against the CHF and closed at 0.9890. In the Asian session, at GMT0400, the pair is trading at 0.9887, with the USD trading marginally lower from yesterday’s close. The pair is expected to find support at 0.9862, and a fall through



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USD/CAD: Loonie Extends its Gains in the Asian Session

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For the 24 hours to 23:00 GMT, the USD declined 0.28% against the CAD to close at 1.1613. In the Asian session, at GMT0400, the pair is trading at 1.1604, with the USD trading 0.08% lower from yesterday’s close. The pair is expected to find support at 1.1575, and a fall through



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AUD/USD: Australian Private Sector Credit Advanced above Expectations in November

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LME Copper prices marginally declined or $2.0/MT to 6330.0/MT. Aluminium prices rose 0.41% or $7.5/MT to 1835.0/MT. In the Asian session, at GMT0400, the pair is trading at 0.8203, with the AUD trading 0.26% higher from yesterday's close, after data released early this morning indicated that private sector credit



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AUD/USD: Australian Private Sector Credit Advanced above Expectations in November

11:11 PM No Comments

LME Copper prices marginally declined or $2.0/MT to 6330.0/MT. Aluminium prices rose 0.41% or $7.5/MT to 1835.0/MT. In the Asian session, at GMT0400, the pair is trading at 0.8203, with the AUD trading 0.26% higher from yesterday's close, after data released early this morning indicated that private sector credit



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Gold: Yellow Metal Extends its Gains in the Asian Session

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For the 24 hours to 23:00 GMT, Gold rose 1.39% against the USD and closed at 1199.90, as a broad decline in global equity markets and the greenback enhanced the demand outlook of the yellow metal. The US Mint reported that purchase of American Eagle gold coins fell 39% to 524,500



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Silver: White Metal Trading above its MAs

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For the 24 hours to 23:00 GMT, Silver rose 2.62% against the USD and closed at 16.24. The US Mint indicated that the purchase of silver coins rose to a record high of 44 million ounces this year. In the Asian session at 4:00GMT, silver is trading at USD 16.24 per ounce,



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Crude Oil: US Crude Oil Inventories Continue to Rise, API

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For the 24 hours to 23:00 GMT, Crude Oil rose 0.35% against the USD and closed at 53.82, after official data revealed that oil output from Libya had declined below 300,000 barrels a day, the lowest level since May due to the recent militant attacks on the country’s oil export



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China HSBC Final Manufacturing PMI Confirms First Contraction in 7 Months

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Trading conditions are particularly light in the final session of 2014. In Japan, Nikkei225 was already closed for holidays after registering its 3rd consecutive year of gains, while Korea was also closed and Australia was out early. A press report out of Japan speculated the govt issuance of JGBs in



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The Unpredictable Future And Winning Liberty

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Submitted by Richard Ebeling via Epic Times ,

As a new year begins, it is easy to consider that the prospects for freedom in America and in many other parts of the world to seem dim. After all, government continues to grow bigger and more intrusive, along with tax burdens that siphon off vast amounts of private wealth.

Extrapolating these trends out for the foreseeable future, it would seem that the chances for winning liberty are highly unlikely. There is only one problem with this pessimistic forecast: the future is unpredictable and apparent trends do change.

Many years ago the famous philosopher of science Karl Popper pointed out, “If there is such a thing as growing human knowledge, then we cannot anticipate today what we shall only know tomorrow.” What does this mean?

When I was in high school in the 1960s, I came across an issue ofPopular Science magazine published in the early 1950s that was devoted to predicting what life would be like for the average American family in the 1970s. It had a picture of a wife and child standing on an apartment building roof waving good-bye to dad as he went off to work—in his one-seat mini-helicopter!

As best as I can recall, the authors talked about such things as color televisions, various new household appliances, robots that would do much of our household work, and the use of jet planes for commercial travel. What was not mentioned, however, was the personal computer or the revolution in communication, knowledge, and work that it has brought about. When that issue of Popular Science was published, one essential element of the computer revolution had not yet been invented: the microchip.

We Cannot Predict Tomorrow’s Knowledge Today

Those authors could not imagine a worldwide technological revolution before the component that made it all possible was created by man. Our inescapably imperfect knowledge means we can never predict our own future. If we could predict tomorrow’s knowledge and its potentials, then we would already know everything today—and we would know we knew it!

This applies to social, political, and economic trends as well. Most people in 1900 expected the twentieth century to be an epoch of growing international peace and harmony. In 1911, the British free trader and peace advocate, Norman Angell (who won the Nobel Peace Prize in 1933), argued in The Great Illusion that war had become so costly in terms of financial expense and wasteful destruction that it would be irrational for the “Great Powers” of Europe or America to be drawn down that path any longer.

But, instead, in 1914, there began the First World War, that went on for four years, took the lives of at least 20 million soldiers, and cost (in 2014 dollars) over $3 trillion. And the relatively classical liberal and free market world that prevailed before the “Great War,” was shattered.

The twentieth century, as a whole, was the bloodiest and most destructive in modern history due to the rise of political and economic collectivism, in the forms of socialism, communism, fascism, Nazism and the interventionist-welfare state. The conflicts that collectivism brought in its wake have cost possibly 250 million lives over the last one hundred years. No one anticipated this turn of events in 1900.

The Unpredictability of Future Political-Economic Trends

When I was an undergraduate in the late 1960s the book assigned in my first economics class was the seventh edition of Paul Samuelson’s Economics (1967), the leading Keynesian-oriented textbook at the time.

There was a graph that tracked U.S. and Soviet Gross National Product (GNP) from 1945 to 1965. Samuelson then projected American and Soviet GNP through the rest of the century. He anticipated that possibly by the early 1980s, but certainly by 2000, Soviet GNP would be equal to or even greater than that of the United States. Notice his implicit prediction that there would be a Soviet Union in 2000, which in fact disappeared from the map of the world in December 1991.

Which of us really expected to see the end of the U.S.S.R. in our lifetimes, without either a nuclear cataclysm or a devastating and bloody civil war? In the mid-1980s the often perceptive French social critic Jean-François Revel published How Democracies Perish, in which he expressed his fear that the loss of moral and ideological commitment to freedom by intellectuals and many other people in the West meant that the global triumph of communism under Soviet leadership was a strong possibility. Instead it was Soviet communism that disappeared from the map of the globe.

Who in January 1990 anticipated that Saddam Hussein would invade Kuwait in August of that year, setting in motion a chain of events that resulted in two American invasions and a ten-year occupation of Iraq?

Who in 2000 would have anticipated that Bill Clinton’s eight years in office would seem, in retrospect, an era of restrained government compared to the explosion in government spending and intervention during the George W. Bush and Barack Obama administrations?

Historical Chronology Does Not Mean Future Causality

And who today knows what the whole twenty-first century holds for us? Let me suggest that the answer is: nobody.

As the late Robert Nisbet, one of America’s great social thinkers, once pointed out, “How easy it is, as we look back over the past – that is, of course, the ‘past’ that has been selected for us by historians and social scientists – to see in it trends and tendencies that appear to possess the iron necessity and clear directionality of growth in a plant or organism . . . But the relation between the past, present, and future is chronological, not causal.”

The decades of relative global peace and market-based prosperity that preceded 1914 did not mean that war and destruction were impossible for the rest of the twentieth century. The ascendancy of Soviet communism, Italian fascism, and German Nazism in 1920s, 1930s and 1940s did not mean that freedom and democracy had reached their end, though the books and articles of some of the most insightful advocates of individual liberty and limited government in the years between the two World Wars carried the despair and fear that totalitarianism was the inescapable wave of the future.

The persistent and current growth in government intervention and the welfare state does not mean that a return to the classical-liberal ideas of individual liberty, free markets, and limited government is a pipe dream of the past.

Human Events are the Result of Human Action

Human events are the result of human action. Our actions are an outgrowth of our ideas and our will and willingness to try to implement them. The stranglehold of Big Government will persist only for as long as we allow it, for as long as we accept the arguments of our ideological opponents that the interventionist welfare state is “inevitable” and “irreversible.”

That is, the present trend will continue only for as long as we accept that the chronologically observed increase in government power over the last decades is somehow causally determined and inescapable in the stream of human affairs.

This could have been equally said about human slavery. Few institutions were so imbedded in the human circumstance throughout recorded history as the ownership of some men by others. Surely it was a pipe dream to suggest that all men should be free and equal before the law.

Yet in the eighteenth and nineteenth centuries a new political ideal was born – that declared that all men are created equal and endowed with certain unalienable individual rights to life, liberty and honestly acquired property, which no other mortals could take away. So slavery, which Aristotle considered to be the natural condition of some men, was brought to an end before the close of the nineteenth century through the power of ideas and human purpose.

In the 1700s, mercantilism – the eighteenth-century version of central planning – was considered both necessary and desirable for national prosperity. Even Adam Smith, in the Wealth of Nations(1776), believed that its hold over men’s minds and actions was too powerful to ever permit the triumph of free trade. Yet in one lifetime following Adam Smith’s death in 1790, freedom of trade and enterprise was established in Great Britain and the United States, and then slowly but surely through much of the rest of the world.

This was all made possible because of the rise and partial triumph of a political philosophy of individual rights that argued for the banishment of violence and oppression in the relationships among men.

Liberty’s Winning Ideas are Out There

We cannot imagine, today, how freedom will successfully prevail over our current paternalistic governments, any more than many people could imagine in 1940 a world without German Nazism and Soviet communism, or FDR’s New Deal. But that does not mean it’s impossible.

Precisely because the future is unknown, we may be confident that trends can and will change, just as they have in the past. We cannot fully know today what arguments friends of freedom will imagine and successfully articulate tomorrow to end government control of our lives. But those arguments are out there, waiting to be better formulated and presented, just as earlier friends of freedom succeeded in making the cases against slavery and mercantilism.

In 1951, Austrian economist Ludwig von Mises pointed out, “Now trends of [social] evolution can change, and hitherto they almost always have changed. But they changed only because they met firm opposition. The prevailing trend toward what Hilaire Belloc called the servile state will certainly not be reversed if nobody has the courage to attack its underlying dogmas.”

There is one thing, therefore, that we can predict: patience, persistence, and belief in the power of ideas and a well articulated defense of individual rights and free markets will provide the best chance we have to achieve the free society many of us so much desire.

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Daily Technical Analysis

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The EURUSD was indecisive yesterday. The bias remains bearish in nearest term testing 1.2100 or lower. Immediate resistance remains around 1.2215. A clear break above that area could lead price to neutral zone in nearest term testing 1.2300 but any upside pullback now is normal and should be seen as



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A Quiet Day in Asia is Interrupted by Chinese PMI Numbers

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It's was a very quite final Asia session for 2014 for currencies, apart from some manufacturing data out of China. In the early parts of the session the major currency pairs flatlined with markets shut throughout Asia and very low trading volumes. We can see spikes of volatility in this



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GBPUSD: Hitting Back, but for How Long?

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In this iconic scene from the sixth movie in the Rocky franchise is actually a speech from Rocky to his son in an attempt to help him persevere in the face of perceived obstacles, but I'm going to stretch the parlance to aim it directly at the British Pound Sterling.



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USD/CAD: Can USD Keep Its Mojo?

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Global equity markets are mostly down on the day as a variety of factors including Greece, Oil, and holiday driven low liquidity have contributed to the red figures, giving the market a feeling as if its mojo has been stolen. While the drop is predictably frustrating for the perma-bulls on



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USD/CAD: Can USD Keep Its Mojo?

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Global equity markets are mostly down on the day as a variety of factors including Greece, Oil, and holiday driven low liquidity have contributed to the red figures, giving the market a feeling as if its mojo has been stolen. While the drop is predictably frustrating for the perma-bulls on



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European Deflation Battle Success Hinges on Unity in 2015

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The euro lost 9.65% of its value versus the U.S. dollar in 2014. The American economy's growing momentum coupled with the growth-sapping effect of European deflation has driven the EUR/USD to a two-year low (1.2260). To find a lower quote, we need to go back to the summer of 2012



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GBP/USD - Pound Higher as US Consumer Confidence Misses Forecast

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GBP/USD has posted gains on Tuesday, as the pair trades in the mid-1.55 range in the North American session. After a slow start to the week, there were releases from the UK and US on Tuesday. In the UK, Nationwide HPI edged lower to 0.2%. Over in the US, CB



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USD/CAD - Slight Losses as US Consumer Confidence Misses Estimate

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The Canadian dollar has posted slight gains on Tuesday, as USD/CAD trades slightly above the 1.16 line in the North American session. On the release front, there are no Canadian releases. In the US, today's highlight was CB Consumer Confidence. The indicator improved to 92.6 points, shy of the estimate



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US Consumer Confidence Increased in December

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The Conference Board's measure of US consumer confidence rose by 1.6 points to 92.6 in December 2014, partially retracing a revised 3.1 point decline in November (to 91.0, previously reported as 88.7) but leaving the latest level short of October's cycle high (94.1). Market expectations had been for a slightly



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Things To Do In 2015 When You’re Not Yet Dead

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Submitted by Raul Ilargi Meijer via The Automatic Earth blog ,

America has managed to construct an entirely one-dimensional political system. There’s no discernible difference left between left and right, other than in spin language pre-cooked for the sole purpose of faking the concept of elections. There’s very right and ultra right. America is living proof that once money is allowed into politics, the accumulation of it, and of the power it can buy, will and eventually must fully control a democratic system, which in the process, of necessity, suffocates and dies a painful death.

What once was a proud American democracy has been turned into a circus that rolls into town every four years, filled with clowns that pretend to fight each other with over the top grotesque contraptions, but sleep in the same bed once the show is over and the audience has gone home.

In Europe that process has not yet been completed, but with the inception of the EU it is well on its way. It is a predictable process, in that the concentration of power, and of money, is irreversible as long as it’s allowed to continue its course, and the system succeeds in making people believe they still have a say in their own lives. As long as that belief is in place, it’s just an ongoing – relatively – slow corrosion that sets in and then takes its time, but never stops.

Control of the media is an obvious key element of this process, and surprisingly easy to obtain; you’d be inclined to think people would fight harder for their access to real life information. They don’t. As I said two days ago in 2014: The Year Propaganda Came Of Age , that’s what the Ukraine situation has taught me. It’s shown me how far ahead we are, not just stateside, but all over Europe as well, in living up to George Orwell’s visions. As far as I’m concerned, if Eric Blair had named his book 2014, he’d have been dead on. 2014 was the year, much more than 1984. But I don’t blame him: how was he supposed to oversee that in 1948?

Ukraine was the epitomy : no questions asked, just neverending tons of innuendo written and spoken, and a case for which to date no proof has been provided has been firmly decided in the public mind. No due process, no innocent until proven guilty, not proper defense. Everybody has the right to a lawyer, but not in international politics. Or, apparently, in the eyes of western media and citizens.

Only today, Angela Merkel once again said something to the extent that Putin must get the Donbass ‘rebels’ to stop the fighting, while she knows full well they can’t and won’t, because they risk being ethnically cleansed if they would. 4500 of them were already killed by what was supposed to be their own government.

But the German people, like all other European peoples, swallow this nonsense whole. The only counterweight comes from German businesses that lose too much money in the sanctions that make no proper sense. And if the pressure from that side gets strong enough she’ll cave in, slowly, provided she can avoid losing face. That might be the biggest risk to US regime change plans in the new year.

And those plans deserve and need to be thwarted. As do the Troika schemes to throw Europe’s Mediterrenean region ever deeper into misery, austerity and ultimately debt slavery. The EU is a one dimensional one way street into a deep dark night, construction of which is overseen by people who work for their own personal interests, not that of their people. A nice idea gone terribly astray. Let’s make sure we finish it off in 2015, and give the Greeks and Italians back their honor and their dignity. And let’s keep our own dignity in the process.

As for the US, I got to tell you, I don’t know. Obama has been a miserable failure, perhaps because he was just trying to save his skin all along, or because he was like this all along, but he sure never brought much change. Or belief. Waiting in the wings we got Hillary Clinton and Jeb Bush, but they’re the exact same person. They’ll sell their grandmas for cheap if they think it’ll help them along.

America needs people who believe in something other than money or power, but anyone who’d try would be swept off the Christmas table with the other food scraps in no time, and be devoured by the dogs. I got some flack for saying on my Facebook page that the Ron Paul Institute published the propaganda article I mentioned before, but girl, Ron Paul is all you have left, like him or not.

Dr. Paul is the only one I know in America who has raised his voice against the US involvement in Ukraine, the only one in the entire west even, other than those of us in the blogosphere, or the alternative media if you will. And that’s insane. That’s utterly insane. We should not allow for our voices to be silenced the way they are, not just like Ron Paul, but worse than him. We don’t deserve to be marginalized anymore than Dr. Paul does; we’re smarter than the lot of them.

I guess that is what I think those of us who haven’t died yet should set out to do in 2015. Do what we’ve been doing, and do more of it. As Andy Warhol said: the only thing that counts is work. Big dreams or goals go only so far. They mean little if you don’t put in the work. And for this ‘alternative press’ we have going, from Zero Hedge all the way down to the Automatic Earth, with all the great people in between and around it, what matters is the work. No letting up; we have the same responsibility the illegal press had in Amsterdam and Paris in the 1940s – even if we can’t stand in the shadows of their courage -: to make sure people get information that does not stem from the matrix.

An article in the Guardian today said that 2014 was The Year The Internet Came Of Age. I think I’ll stick with my 2014: The Year Propaganda Came Of Age , but the combination of the two leads to interesting questions. Like: what role has the internet played in the rise of the propaganda that led to almost none of our so-called higher-educated people asking any questions about what really happened in Ukraine, or about so many other situations the ever more concentrated powers that rule us are involved in.

First of all, obviously, the financial world. Hardly anybody may understand what that is doing to us, to the world we live in, to the people we love and those who don’t know but we should still be holding out for (those underground press guys in WWII were risking their lives for people they didn’t know). Between us, we do understand a whole lot of what’s happening. We have no choice – or at least I don’t – but to keep going at it every single day and get it out there, and hope that a few more people every day will pick up on it. Not to make money for themselves – that’s the very disease that got us where we are -, but to be more human, and to try and lead a way forward. For now the internet allows us to do that. Let’s make the best of it while we can.

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Saudi Facing Largest Deficit In Its History

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Submitted by Andy Tully via OilPrice.com ,

The nearly 50 percent plunge in the price of oil during the past six months is expected to leave oil-rich Saudi Arabia with its first budget deficit since 2011 and the largest in its history.

The budget, announced on Dec. 25, will include spending during fiscal 2015 of $229.3 billion, higher than in 2014, despite revenues estimated at only $190.7 billion, lower than in the current fiscal year. That would leave a deficit of $38.6 billion.

Oil prices have been dropping since June because of a market glut, caused in part because of prodigious oil extraction in the United States from shale formations.

As a result of this glut, OPEC was urged to cut production levels at its Nov. 27 meeting in Vienna in an effort to shore up prices, but wealthy members of the cartel, led by Saudi Arabia, decided to keep production at its nearly two-year-old level of 30 million barrels a day.

Saudi Oil Minister Ali al-Naimi has since explained that the OPEC strategy was to reclaim market share. Fracking has made the United States, once the cartel’s largest customer, nearly self-sufficient in oil. But fracking is expensive, and many believe it can’t be profitable if the price of oil falls much below its current level of around $60 per barrel.

Oil is the principal, if not the only, resource in Saudi Arabia, so it’s clear that the price of oil has a strong influence on how the country’s annual budget is drawn up. Different analyses, however, provide different answers to how Riyadh has forecast the commodity’s value. Four of these reports say the Saudi budget is predicated on oil averaging $55 to $63 per barrel in 2015.

One, from the Saudi investment bank Jadwa Investment, said the budget shows that the kingdom expects its oil exports to average $56 per barrel in 2015. Monica Malik, the chief economist at Abu Dhabi Commercial Bank, agrees, putting Saudi oil expectations at $55 per barrel.

The National Commercial Bank, the largest financial institution in Saudi Arabia, said the Finance Ministry expects a price of $61 per barrel. And Emad Mostaque, an oil strategist at Ecstrat, which consults for emerging markets, said the kingdom expected a price of $63 per barrel.

One particularly knowledgeable analyst is John Sfakianakis, the former chief economic adviser to the Saudi Finance Ministry. He told the London-based Arabic-language newspaper Asharq Al-Awsat that the budget is predicated on oil prices that are appreciably higher, averaging about $75 per barrel in 2015 while keeping production steady at 7 million barrels per day.

“What happened is a surprise to some extent, for amid this huge decline in the price of oil, the majority of people believed that the Saudi budget would base its projected revenues on $60 per barrel,” Sfakianakis said.

“When Saudi Arabia bases its projected oil revenues for next year on $75 per barrel, it is sending a strong message to the market that it expects oil prices to rebound next year,” Sfakianakis said.

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Technical Outlook: NZDUSD, USDJPY and NZDJPY

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On Tuesday, the NZDUSD broke above its near-term descending trend-line and the 50-day SMA to trigger the up-move towards 23.6% Fibonacci Retracement of its July December decline, also encompassing another descending trend-line stretched from late September towards November highs, near 0.7880 0.7890 resistance zone. Should the pair, closes



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Technical Update - EURUSD, GBPUSD, USDCHF and AUDUSD

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After failing to hold an important support near 1.2200 round figure mark, comprising of 61.8% Fib. expansion level and an ascending trend-line support extending from May 2005 through low touched in July 2012, the pair on Tuesday dropped to 1.2120 intermediate support area, marking July 2012 daily closing low. Although



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USD/JPY - Yen Rebounds, Moves Below 120

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USD/JPY has posted strong gains on Tuesday, as USD/JPY is trading in the mid-119 range late in the North American session. On the release front, it's another quiet day, with no Japanese releases. In the US, today's highlight is US CB Consumer Confidence. The markets are expecting a strong improvement



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USDJPY's Dip Could Extend, but Long-Term Uptrend Still Healthy

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While the aforementioned fundamental reasons for the drop are likely temporary and the longer-term trend remains bullish, there may still be room for a deeper pullback in USDJPY over the course of this week. The unit put in a clear double top at 120.75, and though rates have already reached



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What Are The Implications Of A Negative Swiss Deposit Rate For Gold?

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In what could be described as a rather stunning move, the Swiss National Bank (SNB) has decided to cut the interest rate on sight deposits at the SNB into negative territory. This move was necessary to defend the currency against renewed speculative positions which pushed the EUR/CHF exchange rate down again, thus increasing the pressure on the Swiss economy. As the volatility on the financial markets moved up, market participants were once again running towards the Swiss Franc as it’s still considered to be one of the few ‘safe haven’ currencies out there.

Source

The president of the SNB is also pointing a finger to the Russian Ruble crisis as the flight of capital and liquidity from that country is moving towards either the former USSR-member states or Switzerland. The total amount of the capital flight out of Russia this year will very likely top $150B and as you can imagine, even if only 10-15% of that amount would have been used to purchase Swiss Francs, the influence on the exchange rates of the CHF will be enormous. And indeed, in the past few weeks there definitely was some upward pressure on the CHF which resulted in the central bank having difficulties to defend the proposed EUR/CHF exchange rate of 1.20.

With this move to put the interest rate for sight deposits below zero, the SNB once again shows its determination to defend the exchange rate using every strategy in the playbook. The negative interest rate should act as a deterrent for people considering to purchase Swiss Francs as a safe haven investment as it makes the currency less appealing. This will obviously have huge implications for the CHF, the US Dollar and gold.

SNB President Jordan. Source

The main question which need to be answered (but cannot be answered) is how effective this deterrent is. Will a negative sight deposit ratio of -0.25% be sufficient to scare off investors looking for a safe haven? Maybe. But let’s assume it does work, and investors are looking for different safe havens than the Swiss Franc.

The first currency coming to mind is obviously the US Dollar. The economy is booming again (despite some dubious numbers and the current crash of the energy-related sectors), and the Federal Reserve will very likely increase the benchmark interest rate in 2015. This should make the currency quite appealing to investors and could strengthen the US Dollar even further. However, gold could also enjoy a boost as it’s definitely still is a safe haven for capital. Despite the recent slump in the gold price, it still is one of the (if not the) preferred assets to hold in case one wants to safeguard its capital.

This is also the position of major bank HSBC which tends to agree with out thesis as one of their analysts also indicated that putting the brake on the CHF might benefit the demand for gold. We think this is definitely the case for the capital flight of rich Russian citizens. Their country has continuously been buying gold through its central bank and this is obviously something which they keep in mind when deciding what to convert their worthless Rubles in.

The next few weeks and months will be interesting, as people and companies which are withdrawing their money from Russia really don’t have that many choices to choose from, and we expect that gold could start shining again.

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Spain CPI Data Highlights the Continuation of the Dis-inflation Trend

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The EUR/USD initially drifted lower amid the brewing Greek political crisis that could fuel fears for the wider Euro Zone. The situation in Greece highlighted the view that the crisis in EMU was far from over. The EUR/USD was off fresh 2 year lows of 1.2124 as the European morning



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