London Workshop Schedule:

Jan 21, 9-5pm: Chris Lori
Jan 22, 9-5pm: Chris Lori
Jan 22, 6-10pm Steve Winiarski
Jan 23, 8-1030am: Chris Lori
Jan 23, 1045am - 530pm: Ashraf Laidi

Workshop Includes:

1. Complete FX Course
2. Inside the Banks - Interest rates and rate spreads
3. Live Workshop with Chris Lori, Ashraf Laidi and Steve Winarski
4. 2 Months Chris Lori's Pro Traders Club
5. 300 page manual with images and detailed explanation of all workshop teachings and more
6. Incl Lunch

It would be an oversight not to attend this event at such a reasonable cost. Traders lose thousands in trading, yet refuse to accept proper education.

Eurozone Fighting Sovereign Risk.

Risk appetite weakened initially on Friday in the aftermath of a surprise 50 bp hike to China's reserve ratio. Although the dollar advanced against the AUD and NZD, the euro managed to hold onto its recent gains. Friday's batch of US economic data was mixed, which contributed to a volatile session. As a result of the data, some economists see no reason to change their Q4 GDP forecast, and continue to expect a +3.5% annualized pace. Fed Governor Tarullo said he sees no reason to either increase or decrease the size of the Fed's $600 bn program of asset purchases. Boston Fed President Rosengren seemed to agree saying "there will be a time when these aggressive actions need to be reversed, but first we need to get the economy on a much more solid footing". Richmond Fed President Lacker, an FOMC voter this year, said he was "very concerned" that trouble in the municipal bond markets could cause "broader distress". Tarullo added that the Fed will look closely at the exposure of banks to municipal bonds. Treasury Secretary Geithner called on China to allow the yuan to appreciate more rapidly, noting that this would help to contain Chinese inflation. The US is on holiday today, and there are no US data releases scheduled.

We see two principle drivers behind the euro's recent surge: a realization that Eurozone authorities will do whatever it takes to defend the euro, and expectations that the ECB could become hawkish, as it did Thursday. UBS see's another two clear upside risks for the next few weeks and months to, say, 1.40-1.50: if Eurozone authorities actually deliver some credible measures to address the debt crisis, and if the ECB becomes more hawkish and starts to hike well before the Fed. I don't necessarily agree with this view and suggest the even Belgium could emerge as an 'at risk' region which will support Eurozone's call to question.
Fitch cut Greece's sovereign debt rating to BB+, outlook negative, from BBB-, citing its "heavy public debt burden" which renders "fiscal solvency highly vulnerable to adverse shocks". All three of the main ratings agencies now rate the sovereign as sub-investment grade. Greek Finance Minister Papaconstantinou repeated that Greece will not restructure its debt. Slovak Finance Minister Miklos repeated his opposition to the Greece rescue package which was activated in May, saying that "debt restructuring would be a better solution for Greece". We feel current levels are a selling opportunity at 1.3600 and below, but we remain caution on risk sentiment.

ECB President Trichet urged European governments to make "enormous efforts to bring down their debt". He said that Ireland and Greece must respect the programs they committed to. He repeated his view that a credible strong dollar is in the world's interest, which is typical political lip service.

Finance Minister Noda said that Prime Minister Kan has ordered him to watch FX markets carefully and to cooperate with the BoJ. He said he is ready to act decisively on FX if needed. We should hope that the Finance Minister watches the FX markets carefully, as it is his job to do so. In Pro Traders Club, we have been long USDJPY tranching from 82.00 to 80.50 late 2010 and taking on short term trades in the interim.

Newly-appointed Minister for the Economy and Fiscal Policy, Yosano, said that Japan could lose international trust, and long term rates could rise, if bond issuance continues to exceed revenues. Yosano went on to say that it is inappropriate for cabinet ministers to comment on the yen's level, and that Japan should not rely excessively on BoJ monetary easing to end deflation. Please see the bank report posted in the free members area for a JPY analysis.

Prime Minister Harper said that his government remains concerned about the growth in household debt. The Bank of Canada is due to announce its policy decision on Tuesday, and the consensus expects no change to the policy rate. We anticipate a debt squeeze on housing and a slowing of the sector, which will drag on the economy and the dollar. This movement may take some time to show in the market.

SNB Chairman Hildebrand said that FX policy is still unchanged at the SNB, despite valuation losses incurred as a result of currency movements. He also agreed with earlier assessments that Swiss franc strength would negatively affect growth, echoing the conclusions of a currency summit in Switzerland on Friday.

SNB Vice-Chairman Jordan said it is the job of the SNB to ensure price stability and that it "will do everything in its power to fight deflation or inflation".

We bought USDCHF at current price and EURCHF at 1.2485 (now up 380 pips) in Pro Traders Club as a trade. We believe the US economy is picking up speed which will support the dollar, a view that is best expressed against the Swiss franc given that the market seems to be especially long the currency.

Source: UBS, Chris Lori, Reuters

Tags: Risk