Random thoughts:
- Despite yesterdays rally and an impressive showing by the financials, the UK and the precipitous decline of the Pound Sterling is the main story. Jim Rogers said yesterday, “The UK is finished. It has nothing left to sell.” He was obviously referring to Gordon Brown’s controversial decision to sell UK’s gold when he was the Chancellor of Exchequer.
- Speaking of gold, the price of gold is setting new records in all major currencies except the US dollar. Click here for a chart of gold in British Pound.
- We all had our own moments and illusions about our capacity to handle adversity and at times bite more than we can chew and choke on it. So did Ireland. When world markets cracked big time in September, Ireland guaranteed all the deposits in Irish Banks. Money gushed into Irish banks. Some experts said that Ireland’s bank guarantees could be the model for the world. In an ironic sense, they were and still are. Later most governments pretty much did what Irish started. Today, Irish bank stocks are pretty much trash. UK and US, which followed Irish model, are also getting there.
- CDS spreads on UK and US debt, iTraxx Europe Crossover index are a bit tighter (better) today than yesterday. But still at elevated levels.
- A nice quote I read this morning (don’t know who said it):
- “A weak currency arises from a weak economy, which in
turn is the result of a weak government”
- “A weak currency arises from a weak economy, which in
One good day and the perma bulls forget everything that is going on in the UK. There is plenty of pain on the way.
Great post!
FX Movers and Shakers – Thursday, January 22, 2009
Trading Strategy – Volatility not Value. The FX markets sold GBP, NOK and SEK – moving away from the longer term value plays that have dominated much of the thinking about how to trade currencies in 2009. RUB and others in EM also had a rough time this morning and the general mood in FX doesn’t match the move up in equities – suggesting that the volatility of trading currencies is beginning to separate itself from the correlations to equities and commodities. Witness the Gold and oil rallies and the drops in AUD and CAD. EUR/JPY is well above the lows of yesterday but well off the bounce highs – building a 112-117 range consolidation play. As we wait for the data today – jobless claims, home sales – expect the focus on the day to be whether this trading market has shifted gears into a trending one. The threat of intervention is insufficient to turn anything around – so the moves in GBP/JPY are clear. The risk of the day may be that the game of chicken with central bankers is now started as JPY 87 and EUR/CHF 1.48 and GBP 1.36 – they all stick out as levels to watch today for more verbal discussions about value vs. volatility.
Main Movers –
GBP off 1.4% to 1.3755 – The G7 talk wasn’t sufficient to prevent the GBP from breaking back down. 1.3620-1.3980 range watch
AUD off 0.8% to .6570 – The renewed talk of RBA cuts, more doubts from China, and the confusion over cross JPY
CAD off 0.5% to 1.26 – The C$ catching up to AUD and maybe worth watching as it looks vulnerable to 1.2850 and 1.30 retest
JPY up 0.7% to 88.90 – The data on exports, Reuters Tankan, BOJ buying CP, nothing was cheery – so money continues to come home.
LONDON MORNING ROUNDUP – Thursday, January 22, 2009
HIGHLIGHTS
FT:: Geithner pledges ‘dramatic’ action.
Reuters:: G7 will discuss sterling’s fall -G7 source.
WSJ:: Forex Is A Monetary Policy Option For Swiss – SNB Hildebrand
U.K. CBI Quarterly Industrial Trends Total Orders -48.
Euroland November Industrial New Orders -4.50% m/m and -26.20% y/y – higher than expected.
SUMMARY
The bounce in US equities last night continued into the LDN morning with both Asian and US equities up across the board. Risky assets have rallied as a result with X-JPY up between 1-1.6%….. Flow wise we bought a good bit of USDJPY for japanese names over night but this morning we have been better buyers of JPY as levergaged names have looked to fade the bounce. Elsewhere Korea 4Q08 GDP came out much worse than expected at -5.6% qoq and -3.4% yoy (compared to economists’ expectation of -2.1% qoq and -0.3% yoy) but market reaction was rather muted as actual market players were bracing for a very weak number. This afternoon we have numbers out of the US and Canada, with Canada reporting Retail sales and leading indicators while the US release Housing starts and Initial jobless claims both at 1.30pm. Good luck
CURRENCIES
EUR/USD 1.2944 – 1.3083 Last: 1.3002
USD/JPY 88.62 – 89.55 Last: 88.79
EUR/JPY 114.93 – 116.80 Last: 115.44
GBP/USD 1.3747 – 1.4025 Last: 1.3747
EUR/GBP 0.93185 – 0.94598 Last: 0.9458
USD/CHF 1.1510 – 1.1597 Last: 1.1569
EUR/CHF 1.4980 – 1.5108 Last: 1.5042
AUD/USD 0.6522 – 0.6641 Last: 0.6560
USD/CAD 1.2537 – 1.2641 Last: 1.2593
NZD/USD 0.5240 – 0.5348 Last: 0.5275
So where do we go today folks? That was an incredibly bullish bar put in by all maror indicies. (Which made me feel sick!) ;-P
Great post. Thank you. Forget value. Trust the charts. Schweitzer?
Great post. Thanks.