The 8 CEOs of AmericaÃ¢â‚¬â„¢s largest banks faced harsh questioning by Congress regarding the use of TARP funds. Questions about their respective salaries and bonuses for 2008 were part of a long list that also demanded if the Banks had started lending to the public. Vikram Pandit declared that his salary for 2009 will be $1 until Citi recovers. Three Bank CEOs argued that they have increased lending ($340B loans in the 4th Q of 2008).
The Economic Stimulus plans has reached an agreement by negotiators at a price tag of $789 Billion of combined government spending and tax cuts. President Obama has mentioned that without a stimulus bill the US faces an economic catastrophe. Now the bill could be approved by the end of the week at the PresidentÃ¢â‚¬â„¢s desk on Monday. Right on his self imposed deadline of February 16th.
The US$ is stronger in the O/N trading session. Currently it is higher against 10 of the 16 most actively traded currencies, in a Ã¢â‚¬ËœwhippyÃ¢â‚¬â„¢ trading range.
The US$ currently is higher against the EUR 0.33%, GBP 1.22%, CHF 0.23% and lower against JPY 0.43% The USD strengthened after the flat reception the Bank plan by Tim Geithner received on Tuesday as investors returned to their risk aversion strategies and looked for a safe haven in the USD. Optimism that the Stimulus plan might be approved this Friday has spurred investors to seek refuge in the USD as its government seems to be moving forward with mechanism to improve the economy.
The commodity currencies are lower this morning, CAD 0.16% and AUD 0.81%. The perceived lack of a real plan to rescue the US Financial system turned optimism into risk aversion. There is also speculation that the Governor of the BOC will cut rates again in March 3rd, the current Canadian benchmark rate is 1.00%.
The AUD (0.6476) has fell even after Australian employment data was better than expected as the Australian stimulus plan was defeated in the Senate. Full time employed people jumped by 1200 beating the analysts forecast. RBA Governor Stevens commented that right now the problems are not too much cross border capital flows and risk taking, but rather too little of both.
Crude is lower O/N ($35.36 down -1.61c). Oil fell to a four week low after the report from the IEA cut world crude demand by 980,00 barrels to 84.7 million in 2009. Supply rose again (by 4.7 million barrels) to further bring down the price of the black stuff. Oil has retreated sharply from historic highs of $150 a barrel last summer. OPEC members announced a production cut in order to boost the price of crude above its current levels, which they claim are not enough to invest in new supply.
Gold ($943) appreciated after breaking the $900 level, after the metal has been perceived as a safe haven. The fall of the USD against the EUR boosted the appeal of the metal as an alternative investment.
The Nikkei closed at 7,705 down 240. The DAX index in Europe was at 4,422 down 107; the FTSE (UK) currently is 4,182 down 51. The early call for the open of key US indices is lower. The 10-year Treasury yields fell by 2bp (2.79%). Bond prices have dropped in expectation for the plans to sell an accumulated $67 Billion in three year, 10 year and 30 year notes this week. Several factors point to a recovery of bond prices.
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