Mexico raises rates 25bp unexpectedly.
Mexico yesterday raised interest rates 25bp in a move that surprised the markets. This occurred after some very good inflation numbers which came out on Wednesday. In the statement it was sited that “Central bank directors consider it desirable to reinforce monetary policy in a preventive manner,” the bank said in its statement. Out of 16 economist polled before the announcement ALL 16 said that the CB would keep rates at 7.00%. I along with most of the rest of the market was looking for the rate to stay unchanged.
As I have written about in the past I am not good at predicting where a market will run to but rather I stay with a position until it no longer feels good. This position NO LONGER FEELS GOOD. I began exiting as soon as prices appeared in the market. I am currently at just under 50% of my original position and I will be out of the balance (hopefully) by close of buisness Monday. This is a “Sea Change”. They claim to be “preemptive” but do they know something we do not? I have rarely in all my years of trading seen a change in interest rate policy followed a reversal at the next meeting. At best rates stay at this level, more likely another rate increase is in the cards for Q3 of this year. At times like this i like to cut most to all of my existing positions. Take a fresh look. Am I missing something? I am not overly concerned by the loss incurred on Friday (although sizable), as this was a totally unexpected move. They happen, you lose money, and you move on. But now where from here. I think it is best to get a “fresh” look at the markets and as such I began cutting whatever positions I could.
The only positions I am left with are:
Long Usd/Korea
Long Usd/China
Short 50% of original position in Mexico rates (I will be exiting on Monday)
Short Usd/Argy
Short Argy Rates (If I get the opportunity I will exit the spot risk in this)
That is it. Small stuff, small 01 risk. Hopefully I get a chance to exit all my position’s on Monday at reasonable levels. The markets may be changing “Stagflation” in the States ?? Maybe. I want to be on the sidelines to reasses.
Good Luck and Good Forex Trading.
Buying Euro’s
I just went long Euro’s at 1.3623. I am looking for the break to new highs with an eventual test of 1.4000. Weak numbers and general apathy about the markets will support this view I think.
Good Luck and Good Forex Trading.
Buying Euro’s
I just went long Euro’s at 1.3623. I am looking for the break to new highs with an eventual test of 1.4000. Weak numbers and general apathy about the markets will support this view I think.
Good Luck and Good Forex Trading.
China spreads widen but currency weakens.
With all the talk of an over heating economy in China and the need for the currency to appreciate all I see is opportunity for the contrarian in this currency pair.
For the last few months (4-7 months) I have been watching this currency pair and have been sitting long dollars. With the widening of the spreads (as interest rates in China have continued higher) the currency has not strengthened accordingly. Actually it has strongly lagged. I see no change in this pace for the near term and as such I remain long dollars. The spreads can widen all they want but if the currency does not appriciate accordingly there is tremendous opportunity to be long dollars. Even if the pace increases it has to outpace the spread before you start to lose money. The more cautious amongst us can use this (at the very least) as a funding currency.
As for the Euro. It looks to me like we are in a mini retrace before we make a move to all time new highs (before testing 1.4000 ??). I am currently square this currency pair, but will be looking to get long again shortly. I will keep you posted.
Good Luck and Good Trading.
Emerbing Markets continue to grind along.
It is becoming clear to me that the market does not expect a change in rates in the U.S. for a minimum of 3-4 months. Interest rate futures trade in a range, the dollar continues to weaken and high yielders continue to gain ground.
Today there was some definite complaining coming from the Eastern European block. In Hungary the CB warned that a strong currency was not in the country’s best interest and in Czech Republic the CB warned of interest rate rises. I have not turned my back on these trades (long EM currencies) but I am definitly on my toes. Alot of talk cannot be good, because where there is smoke there is fire. I am maintaning my positions for now but will not sit through to much pain as these markets have come a long way.
I also cut my long Euro/Usd position this morning. The market closed basically at my cut level. We have very little economic information till next week and I think that there may be some profit taking as the weeks comes to a close.
Good Luck and Good Forex trading.
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