Friday, November 05, 2010
Why oh why did they allow red wine to go on general sale before they found an antidote.
Dr Market Q.E. E.C.B. BoJ. BoE. RBA. has sat a few tough exams this week but its not yet over. Today it's going to sit its NFPs. A breeze compared to Wednesday's ordeal and we kick off with expectations of a "better than expected" expected, expected loop. In true Gone With the Wind style, "Frankly my dear I don’t give a damn" but we are guessing that there is a fair asymmetry of risk with them much more likely to stimulate USD buying rather than selling. And that is only if one other function doesn’t beat it to it...
Because today... TARA!!! (trumpet noise, not a play on the name of the house in Gone with the Wind) someone has noticed the Euro peripherals. We have had this brewing for some time yet nearly everyone has dismissed the theme as "no-one cares anymore". Funny thing is you don’t care as long as the price hasn’t moved. But as soon as the price starts to move and you need to blame something you suddenly do care and, bosh, you all jump together. Yet the story hasn’t changed, just the price.
So back to those prices, Irish CDS new highs (ok, there is debate as to whether CDS is actually a good measure of anything "real" or not) and FRA/EONIA is "all bid, no lid". Euro FX-crosses have taken a beating (thank you, EUR/CHF, you are a welcome green number on the P/L), our old fave the MIB index is not going up and the IBEX is positively negative with its trend line truly bust. And in gossip-land we even have the old favourite rumour of "a Spanish bank with liquidity problems" being dug out of last May's dusty notes and being recycled, though we think this unlikely as the ECB appears to have taken on the mantle of "lender of last resort but don’t tell anyone we are doing it" and the latest talk is that it was confusion with a FunRun the bank was organising. As we type, the first punchy call "*UBS ADVISES INVESTORS TO BET EURO WILL WEAKEN TO 1.29 FRANCS". We note they are invoking the old Ex-US investment bank rule of "Never combine a price target and time frame in the same forecast". A classic "Get out of Jail free".
G20 looks like its going to be a bundle of laughs. With headlines such as "*SCHAEUBLE COMPARES QE2 WITH CHINESE CURRENCY POLICY" you really have to wonder if its worth revisiting our "Nineteen-Eighty-Four" theory.
We hate to say it but the USD may meander on QE fallout vs Euro-woe, however, you would have to think that both functions are god for gold... Sorry "good" for Gold... The god Gold. In fact, we were wondering yesterday what God's number plate on his little car (a Honda Pious we assume) would be. And we started looking through the reg plates available on the UK sites. Though GOD 1 was unavailable, having been bought by Gordon Brown we assume, we did find a useful set of XAU numbers available. The best being G20 XAU, which can currently be purchased here for £310. Unfortunately we haven't got time to trawl for all suitable market plates available so we invite you to use that site to come up with suggestions matching available plates and who you would give them to.
Happy NFP day...