More Risk Aversion Likely in the Coming Months
13/05/10 23:11
More risk aversion is likely to unfold throughout the
summer months. In my view, equities have rallied on
lower volume. The fund managers simply do not have
the pre crisis leverage available. The banks have
tightened lending across the board to protect
themselves. If we are to compare equity prices to pre
crisis levels, the volume does not support current
prices under which the foundation would be weak and
vulnerable to spikes in volatility. Any fear
injections into the market will cause a significant
fall. We welcome this to build more longs in our
AUDJPY strategies covered in Pro Traders Club.
We mentioned in Pro Traders Club to sell AUDCAD at
exactly .9450 before taken in on the spike. Canadian
dollar longs could perform well versus a short
Australian dollar position as the Canadian dollar
held more favourably amid the recent turmoil. The
Canadian dollar benefits more from positive US data,
is less susceptible to China-related developments and
the BoC could hike while the RBA pauses.
We are now waiting for a risk averse event to take us into some AUDJPY longs. We have positions waiting should another fast moving event occur. For AUDUSD we may have more time to build forex positions.
We have found it to be very expensive to host a conference in Sydney and are doing our best to keep cost's low. It is double our costs to the US events. You Australians now live in an elitist country :)
Chris Lori
CTA
FX Fund Manager
G10 FX
USD: Trade deficit less than expected
Equities closed up over 1% as the dollar strengthened moderately during the session. Oil is $75.49 after a bearish DoE report and gold is $1236.30 at the time of writing. EURUSD traded 1.2606-1.2739 and USDJPY 92.45-93.30.
The trade deficit widened to $40.4B in March. The deficit was slightly less than what BEA analysts assumed in their initial estimate of Q1 real GDP, by enough to add 0.1 percentage point (a.r.) to growth. Along with revisions to other data, Q1 GDP is on track to be raised to a 3.3% pace from the initial 3.2%. Meanwhile, St. Louis Fed President Bullard struck a fairly optimistic tone on the economic outlook. He pointed out that "We have had five positive employment reports in the past six months, which is evidence that labor market conditions are slowly improving," and noted that he expects the trend to continue. However, he added that the situation surrounding the Greek crisis adds some risk to the outlook.
We expect the dollar to remain in demand, in particular versus the EUR and JPY. Fed Chairman Bernanke, Vice Chariman Kohn and regional presidents Fisher and Kocherlakota are scheduled to speak.
EUR: Trichet says no QE
The EUR found some initial support as Spain announced deep cuts to public spending in a bid to reassure markets that the country's long-term fiscal health is not in doubt. Some of the measures announced include deep civil service jobs and pensions cuts, and the savings should total EUR15bln. But then EURUSD drifted lower as investors remained uncertain on the sustainability of the changes. ECB President Trichet said there is no change in the ECB's monetary policy and that price stability is still the mandate. He re-affirmed that bond purchases won't lead to inflation and said the ECB is not engaging in QE.
We are now waiting for a risk averse event to take us into some AUDJPY longs. We have positions waiting should another fast moving event occur. For AUDUSD we may have more time to build forex positions.
We have found it to be very expensive to host a conference in Sydney and are doing our best to keep cost's low. It is double our costs to the US events. You Australians now live in an elitist country :)
Chris Lori
CTA
FX Fund Manager
G10 FX
USD: Trade deficit less than expected
Equities closed up over 1% as the dollar strengthened moderately during the session. Oil is $75.49 after a bearish DoE report and gold is $1236.30 at the time of writing. EURUSD traded 1.2606-1.2739 and USDJPY 92.45-93.30.
The trade deficit widened to $40.4B in March. The deficit was slightly less than what BEA analysts assumed in their initial estimate of Q1 real GDP, by enough to add 0.1 percentage point (a.r.) to growth. Along with revisions to other data, Q1 GDP is on track to be raised to a 3.3% pace from the initial 3.2%. Meanwhile, St. Louis Fed President Bullard struck a fairly optimistic tone on the economic outlook. He pointed out that "We have had five positive employment reports in the past six months, which is evidence that labor market conditions are slowly improving," and noted that he expects the trend to continue. However, he added that the situation surrounding the Greek crisis adds some risk to the outlook.
We expect the dollar to remain in demand, in particular versus the EUR and JPY. Fed Chairman Bernanke, Vice Chariman Kohn and regional presidents Fisher and Kocherlakota are scheduled to speak.
EUR: Trichet says no QE
The EUR found some initial support as Spain announced deep cuts to public spending in a bid to reassure markets that the country's long-term fiscal health is not in doubt. Some of the measures announced include deep civil service jobs and pensions cuts, and the savings should total EUR15bln. But then EURUSD drifted lower as investors remained uncertain on the sustainability of the changes. ECB President Trichet said there is no change in the ECB's monetary policy and that price stability is still the mandate. He re-affirmed that bond purchases won't lead to inflation and said the ECB is not engaging in QE.