Central Banks coordinating effort roars

On Aug 17^th, 2011 a single European bank borrowed US 500 million from a swap deal with ECB and the Fed Reserve. On Sep 14^th, two banks tapped the ECB for US dollar funding.

The above facility had not been used since Feb 2011 and is probably the latest indication that the EZ banking system is experiencing funding problems.

5 Central banks join forces to lend USD to EZ banks last night. Coupled with news on Wednesday from Germany-France and Greece, stock markets and the Euro roared! This is NOT a schedule event.

Prior to the joint intervention, Europe’s money market were showing signs of freezing up as they are experiencing the worst debt crisis in history! The joint intervention is to offer 3 months USD loans in 3 fixed rate operations to EZ commercial banks from October till December.

As you probably know, the US data (claims, Fed and Empire manufacturing) came in weak and below expectations. However, the above Central bank coordination over-shadowed the fundamentals.

The Europe debt problem is not fully solved. Greece is still in focus. My speculation is that the above is placed in order should Greece default.

I would advise that we trade cautiously into the next FOMC scheduled next week from Sep 20^th – 21^st.

Asian markets should look good till the week close on Friday and gains may probably spill onto Monday. After which the markets will crawl to a snail’s pace and trade very cautiously awaiting the FOMC announcement.