Meanwhile, over in the Old World, the Merkel-Sarkozy tete-a-tete resulted in disappointment amid perceptions that the couple was more interested in protecting the respective interests of Germany and France and less preoccupied with what the market believes is a situation begging for a concrete set of solutions.
The two leaders took aim at the financial services’ sector and proposed the taxation of financial transactions along the lines of what is known as the “Tobin Tax.” What was not proposed in the wake of the bilateral meeting was the augmentation of Europe’s version of TARP or the creation of a collective Eurobond.
Thus, the markets were once again left with little more to resort to than to continue to fret and load up on a few more truckloads of Swiss franc banknotes. The action came on the heels of not only the end of the Franco-German meeting but also following the Swiss National Bank’s stopping just short of announcing a specific peg between its currency and the euro.
Market observers still believe that the SNB will continue to try to stem the unwelcome gains in the country’s currency but, for the moment, such observers (and currency traders) will just have to live with the cryptic: “We will, if necessary, take further measures against the strength of the franc.” Franc-ly, my dear, someone gives a…you-know-what, but apparently the “nuclear option” of a euro-franc peg is seen as a very last resort tactic – for now.
Another central bank – that of China – may be looking to expand the list of investment options for the nation’s currency. Vice Premier Li outlined a fairly lengthy list of potential places where the yuan may eventually flow. Gold was conspicuously absent from the list. The items that made the cut were things such as expansion of the services sector in Hong Kong (actually, HK in general was the primary focus of Mr. Li’s agenda items) and a flagship gas pipeline to be built, ending in…Hong Kong.
Also in the news this morning was the fact that the MPC over in the UK adopted a rather dovish stance and now has market observers believing that rate hikes in Britain might be somewhat further down the road than anticipated (or desirable, for that matter). Continuing on that “theme,” St. Louis Fed President Bullard found it important enough to come out and say late yesterday that the Fed – despite common perception – is not signaling anything that is being called “QE3.” Mr. Bullard said that he (too) would have dissented from the “extension of low rates” language that was utilized in the latest meeting of the FOMC, but added that “a new round of bond purchases does not follow naturally from the 2013 “pledge.”