Banks and their regulators: The road ahead

Ira Kawaller Derivatives Litigation Services, LLC

Along with the heightened sensitivity about the health of the banking sector, business media have reflected a heretofore under-appreciated recognition of the importance of interest rate risk management in banking. Recent reporting and editorializing leaves the impression, however, that we wouldn’t be facing this onslaught of failures and rescues if only these troubled institutions had managed their risks better. There’s a certain truth to that, but it’s not quite that simple.

Like all commercial enterprises, banks operate in a world of uncertainty; but for banks, the realm of interest rate uncertainty is paramount. Banks function both as borrowers and lenders at the same time. They borrow largely from their depositors, to whom they pay interest; and they lend to individuals and companies by initiating and buying loans or other securities, thereby earning interest. Thus, they bear interest rate sensitivity on both their assets and their liabilities.

Read the full article

Author

Ira Kawaller

Derivatives Litigation Services, LLC

Ira Kawaller is the principal and founder of Derivatives Litigation Services.

EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates

Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold: Volatility persists in commodity space

After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.

Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms

US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.