Tuesday, May 18, 2010
Last weekend we saw the press hit the nitro-boost on the Europhobic stories:
- Sunday Times: "Euro heads for parity with dollar".
- FT: Germans lead gold rush frenzy - Greece considering legal action against US banks (for shorting CDS etc).
- Merkel: "Bailout has bought only time, not a solution".
And though it is not in the class of the ultimate Tabloidometer, the Economist, last week's Newsweek front cover was a Euro splash:
And despite all of this the Euro rallied yesterday. And it did so of its own accord as well. Even against its normal high beta risk buddy the Aussie Dollar. But then, the AUD itself is looking sick on many cross measures, with the worries of a China slowdown, the RBA in the 8th innings of its hiking cycle and the Henry tax making life difficult if you dig for a living. And of course, most of the good news is in the price. Lets sprinkle in a couple of other ingredients to the cauldron - a ZEW that was nowhere near as bad as the market had started guessing just before its release based on the Sentix correlations. A Doji on the SPX. Soothsayer technicals, daily and weekly, in EUR/USD. Record IMM shorts in the EUR, as well as seemingly everybody in every type of investor class, using the Single Currency as a hedge (and as we all know, if you want a hedge, go to a garden centre). The ECB's USD 84-day Open-Market Operation only attracting $1bn of demand (hold on a minute, wasn't there supposed to be a liquidity crisis?!). And finally, the most worrying indicator of all is that European officials have gone eerily quiet. Either they have finally learnt that "Silence is Golden" or they have some cunning plan. Hopefully more cunning than Baldrick's Bullet...
The other alternative is that of course they have absolutely no plan whatsoever and they have run away. Which is what the Knights may have to do if the Euro Rabbit turns out to be a killer.
If, however, the Knights have their way and slip past the rabbit we may have a new version of OMD's anthem "Enola Gay" to sing...
Mister Trichet , you should have stayed at home yesterday.
A-ha words can't describe, the feeling and the way you lied.
These games you play, they're gonna end it more than tears someday,
A-ha Mister Trichet , it shouldn't ever have to end this way.
It's 12:45, and that's the time that you've always tried.
We got your message on the radio , things abnormal and extending the loan.
Mister Trichet , is Europe proud of ECB today?
A-ha these cuts you give, they never ever gonna fade away,
Mister Trichet , it shouldn't ever have to end this way,
A-ha Mister Trichet, Euro fades in our dreams away?
It's 1.30, and that's the time you will deny QE .
We got your message on the radio, things abnormal , there's some way to go.
Mister Trichet , is Europe proud of ECB today ?
A-ha Liquidity, it ain't ever ever gonna drain away………………………………
(London times apply)