USD Selling May Ease into Late Week Data
02/06/09 19:27
Hello Traders,
As a notice, Chris Lori CTA, will be speaking on "Psychology and Risk" at the Las Vegas Money Show Aug 4 at 10am. Chris will address the hard facts of FX trading, Funds Management, Psychology and Risk Management in hard nosed presentation.
The Fed said they would announce during the week of June 8 a list of US banks that have been approved to pay back TARP funds. Government officials said banks must first show the ability to raise money from private investors without FDIC guarantees as one of the conditions for being allowed to repay TARP funds. Several financial institutions have apparently heeded the government's guidance by announcing unexpected plans to sell equity. As expected, a major General Motors went into bankruptcy. However, behind-the-scenes negotiations regarding the terms have been taking place for sometime now and proceedings are expected to be completed relatively quickly. As such, this is not expected to have as great an impact on market sentiment as when worries first emerged. In other news, the upcoming June 16 BRIC summit is garnering more attention. The press reported that the Kremlin said they may discuss the idea of a supra-national world currency at the summit and this report comes on the back of a similar comment from a Brazilian official.
As a notice, Chris Lori CTA, will be speaking on "Psychology and Risk" at the Las Vegas Money Show Aug 4 at 10am. Chris will address the hard facts of FX trading, Funds Management, Psychology and Risk Management in hard nosed presentation.
The Fed said they would announce during the week of June 8 a list of US banks that have been approved to pay back TARP funds. Government officials said banks must first show the ability to raise money from private investors without FDIC guarantees as one of the conditions for being allowed to repay TARP funds. Several financial institutions have apparently heeded the government's guidance by announcing unexpected plans to sell equity. As expected, a major General Motors went into bankruptcy. However, behind-the-scenes negotiations regarding the terms have been taking place for sometime now and proceedings are expected to be completed relatively quickly. As such, this is not expected to have as great an impact on market sentiment as when worries first emerged. In other news, the upcoming June 16 BRIC summit is garnering more attention. The press reported that the Kremlin said they may discuss the idea of a supra-national world currency at the summit and this report comes on the back of a similar comment from a Brazilian official.
While the improved performance in US equities and corporate bonds has thus far not translated to dollar strength, we remain positive and think that the greenback is likely in its final stage of weakness. The UBS Equity Flow Monitor showed an increase in inflows into the US from the previous week even as Treasurys and the dollar remained under pressure. Valuations in US corporate bonds, for example, are at attractive levels and could entice investors to continue inflows into the US. We also note that while rising yields can reflect a risk premium as investment flows can only be attracted when compensating for rising risks, current yield levels have proven to be attractive to capital in the past. Hence to a certain extent the sell-off in Treasurys will be a stabiliser, rewarding domestic and international investors with a higher yield. We think EURUSD is in its last stage of its rally and consider current levels attractive to build shorts, targeting levels in the low 1.30s in the months to come. We may see USD shorts unwound into the late week periof of strong data flow.
Source: UBS, Bloomberg