Thursday, January 21, 2016

MEPS: EU Steel Prices Close To Bottoming Out


EUR/USD bullish if it works out for them and they can get their increases to stick. Other reports from MEPS indicate there is still price pressure over there coming from the Asian EUR zombie's dumping.

EUR/USD exhibiting some relative support in the face of new lows in oil price in USD terms as oil becomes less influential to the exhibited exchange rate (terms of trade) as the price is further reduced.  New lows in oil not causing new lows in EUR/USD so something else must be getting some price support.

Could be indicating the start of a reversal in this pair as we proceed into 2016 here where the big reversal of productive contribution replacing monopoly rent in the global economy continues to take shape.  We have to keep an eye on this commodity price.



4 comments:

NeilW said...

So do we reckon the rouble slide is less dollars being converted to roubles from the oil market?



Matt Franko said...

Looks like the CB is involved there Neil...

But yes if there are entities there that are trying to obtain USD balances it looks like the CB is holding them up for more Roubles in order for the CB to part with their USD balances... CB there doesnt want to "lose money!" or it could just be member banks doing this I guess also...

So you have more roubles per USD so rouble goes down when banks are doing this to each other... central or otherwise...

Oil is going down in USD terms so any entity there that is financing inventories of oil in USDs has a major problem as their asset value is collapsing in USD terms... so they would need to replenish regulatory balances of USDs and all they have to offer are rouble balances in exchange... so whoever they approach is going to demand MORE rouble balances in order to part with their USD balances so more roubles per USD means the currency goes DOWN vs. USD and thus the exchange rate moves to indicate the new composite terms of trade between your currency zones.... I'm assuming system wide regulatory capital balances stay about the same during this transition period....

Roger Erickson said...

Good points, Matt.

You're beginning to sound exactly like Warren Mosler! :)

Matt Franko said...

Yes Roger we all know we're not "out of money!"...