Thursday, February 07, 2013

ECB Carney Day

A quicky pre Carney

ECB day - TMM felt that the last ECB meeting was dominated by Dr Aghi's valedictory performance not unlike a returning Caesar entering Rome after defeating the Ursine tribes. All that was missing was the laurel wreath. SO where do we go from here? Data is indeed improving but as always markets are not about working out what will happen its about marrying what you expect to happen against what everyone else expects will happen and though TMM are comfortable that Europe is economically on the mend we do feel that EL Dottore and those piling straight back into Euro  may have over counted their chickens even before they have hatched. 

Carney Day - Similarly, but conversely re market positioning, ahead of Mr. Carney's testimony to the Treasury select committee. We wrote a post on our longer term thoughts on Carney last week but the hype is that he will give an outright dovish performance with some expecting him to go completely BoJ over policy. TMM can see him doing as little as possible to rock the boat as we are still four months off his official arrival and it would be foolhardy to lay the foundations for commitments that may well need to change before he takes up his post. Why paint yourself into a corner when you could have a free option instead.  

So marrying these two events we suppose we should really be short of EUR/GBP into them.

Oh, and TMM would like to congratulate Taiwan on two fronts. On successfully launching the trading of the Taiwan offshore remimbi and, more importantly, launching the best currency code since Argentina and its ARS. We welcome the arrival of the CNT.


vercingetorix said...

uh, hello? perhaps you have been throttled too much by your significant other. other than Germany, the eurocronyzone is NOT improving. get real or get out.

Leftback said...

EURUSD tumbled just about the time Dr Aghi said "fundamentals" and "downside". We are inclined to think that EURUSD and (perhaps) EURJPY have put in a top here. Now back to our regularly scheduled program:

Fairly typical grinding top in US markets for now. We have all suffered through these before. Let's see how many of the usual signs are there?

Credit spreads wider as equities churn? Check.
Stealthy move upwards in DX? Check.
Long only managers rotating into defensives? Check.
Sell side frothing at the mouth bullish? Check.
Retail investors fairly bullish? Check.
Media full of bond bubble stories? Check.
Media touting recovery as US econ data slips? Check.
Spec names bid to unfeasible valuations? Check.
Volatility still very low but off the lows? Check.
Punters looking for small dips, no correction? Check.

Given that lot, and the fact that an absolutely monster snowstorm is about to bury Gotham and its environs for the weekend, it seems only a matter of time before some punters start a bit of serious selling.

As of now, ALMOST nobody believes we can have more than a small dip (b/c of the Fed) so the odds are growing that we see a 4% correction to the 50dma (1450ish), or even to the 200dma (1400ish), because absolutely NOBODY sees a 7% correction coming. It does seem like a good time to be more defensively positioned.

Leftback said...

Draghi seems to be jawboning in a determined manner, with one eye on the exchange rate. DX making a run at 80 here. Regime change underway?

Not many people are set up for a break towards 81, and 82 would cause some intestinal discomfort. EM longs would be BRICking it, for sure (in honour of Jim O'Neill's retirement). We are short EEM for now.

Anonymous said...

Is the ARS CNT cross going to be called DP?

Saul Bollox said...

It's all going tits up, innit?

Leftback said...

A warning about US high yield bonds. Priced for absolute perfection, like no time since 2007... what could possibly go wrong?

High Yield Priced For Perfection

Anonymous said...

anon 2:54
or the gun?

Anonymous said...

C Says
Another week closes and we look forward to another close as Mervyn departs this year. Without wishing to over egg it Carney prmises to bring a much better skillset to the job.Moreover, without his predecessors dogmatic issues.

TMM were correct to vebture yesterday would be neutral,but make no mistake there were sufficient nuances to support the notion that Carney will not be found lacking on policy if further loosening is required. As far as markets go though they had already wrung the blood out of all of his prior remarks so what do you for the next 4/5 months?