Tag: lior alkalay

Mario Draghi Must Act Now

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


The coming weeks could be pivotal ones for the Euro. This time, it isn’t because of a threat to its existence or a member state’s bankruptcy. No, this time, it will be because of the actions of Mario Draghi and the European Central Bank. The ECB chief has the power to ignite the momentum desperately needed to awaken the Eurozone from its economic stupor. Simply put, Mario Draghi must push the Euro below 1 Dollar.

The Eurozone Lately

When we examine the latest trends in the Eurozone, we do see some positive signs. Exports have recovered, and industrial production has increased, as well. On the consumer front, retail sales have also been accelerating nicely. On top of that, the Eurozone’s GDP growth rate has been inching up, albeit at a very moderate pace. Continue reading "Mario Draghi Must Act Now" →

Asian Financial Crisis: Now and Then

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Are we set for a rerun of the 1997 Asian Financial crisis? Well, as Mark Twain said once, history does not repeat itself but it rhymes. The current turmoil does strikingly resemble that of the original 1997 Asian financial crisis. However, unlike the 1997 crisis, today’s circumstances are quite different.

Asian Financial Crisis of 1997

What initiated the Asian financial crisis back in the 90s? Well, it was the culmination of many things. Primarily, though it was the inability of Asian and other emerging economies to finance themselves. This was generally due to large current account deficits which led emerging markets to accumulate foreign debt. Eventually, they become dependent on foreign creditors.

When investors’ appetite for emerging market debt waned, those Asian economies had difficulty financing themselves. And let’s not forget Russia, which, coupled with its own circumstances, was pushed to default. Continue reading "Asian Financial Crisis: Now and Then" →

Are All Yen Bets Off?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


Is the short bet on the Yen over? Well, maybe not when it comes to trade vs. the Dollar. But as far as other weaker currencies, that's a different story. As it relates to the Euro, then indeed, the long bet on the EUR/JPY might be over. And here's the reason why.

Inflation might be coming back

That's a rather straightforward statement, but the Bank of Japan believes that inflation is inching higher. And while it's not as clear-cut a case a, let's say in the US, still there is a basis for it. When calculating Japan's inflation, excluding volatile prices such as food and energy, inflation gained 0.6%. Now, while that's still low, it's a move in the positive direction.

Moreover, a quick look at the inflation figures per segments and you can see most segments have experienced price increases. That is a mildly hawkish sign. It must be pointed out that the BOJ is about to change the way it measures core inflation. Going forward, the BOJ will publish core inflation figures, calculated both with and without energy prices. However, the BOJ will focus on core inflation excluding energy prices. Previously, by including them, it distorted the inflation figures into the downside. Continue reading "Are All Yen Bets Off?" →

Fed Rate Decision: Buy the Dollar on the Dips

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


The Fed rate decision is approaching quickly. Will the Fed choose to ignore the headline inflation figure and China's woes and decide to press on with a rate hike this month? No one really knows what they'll decide. One might conclude then, that if the Fed rate decision is a guessing game, so is the Dollar, right? Wrong! In fact, the Fed rate decision could be one of the best times to pile on to the Dollar and buy it cheap.

Fed Rate Hike Not Priced In

With all that talk of a Fed rate hike it might seem that a Fed rate hike is now priced in. But that's not the case. As the data from the CME Fed Fund futures prices, the market sees only a 25% chance for the Fed to raise rates this September. And that could explain why the Dollar Index took a dip over the past weeks.

CME Group FEDWatch

But here's where it gets really interesting. When we move forward on the calendar and examine the probability of a rate hike by December, the likelihood jumps to 59%. If we continue to move on into March 2016, that probability jumps to 77%. That means markets are almost certain that the Fed will raise rates at least once in the coming two quarters. Continue reading "Fed Rate Decision: Buy the Dollar on the Dips" →

Has China Lost Control?

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor - Forex


This morning's newswires are filled with stories of yet another dramatic intervention by China in the Yuan exchange rate. This time, though, it's in favor of the Yuan. That news, more than any, has investors alarmed as it seems to suggest that China has lost control. To that, I say how can you lose something you never had?

China Never Had Full Control

China and its financial authorities, namely the Peoples Bank of China, are viewed as the effective forces controlling the Chinese money market. That means not just the currency but also the financial markets and inflation. Hence, the state of alarm currently dominating markets makes sense. But the fact is that China never really had the control that investors believed it had. Because simultaneously controlling monetary policy and the currency is like "trying to hold the stick at both ends;" it's just not possible. Continue reading "Has China Lost Control?" →