Where have I been?
Well I haven’t been around for a while. Actually I have been fully involved in the market just in a very different way then I have been in the past. Now I am more of a Liquidity Provider and a manager of Risk. I spend much less time analyzing the markets then I really want to. Hopefully this will be changing in the weeks to come. Until then I will try to add value by detailing what flows we are seeing. Check back for these updates.
Good Luck and Good Forex Trading.
Hungary…..Next?
Hungary seems to be taking lessons from President Obama, speaking when things would better be left unsaid!. Here is an article from Bloomberg News on Hungary’s debt situation.
Hungary’s economic situation is stable and recent comments about a possible default were “unfortunate,” the government said, pledging to stick to the budget deficit goal approved by the country’s creditors.
“Any comparison with countries that have much higher credit default swap ratings than Hungary is unfortunate,” State Secretary Mihaly Varga told reporters today in Budapest. “The comments that have been made about this issue are exaggerated and if they come from colleagues that’s unfortunate.”
I saw major Dollar buying against the Forint on Friday. All around 5:00pm London time. I certainly do not see people coming in to sell Dollars on the back of these comments. Not a chance! It looks to me that the markets are in for another wave of Emerging Market weakness.
Good Luck and Good Forex Trading
I see this ending in tears!
What was Obama Thinking?
I wonder if President Obama has learned anything this week? Speaking on Wednesday he said that the employment number on Friday was going to be a good number. This sent a market, shaky at best, rallying and had economists across the land revising forecasts higher. Goldman for one pushed their expectation to 600k and this was the number being talked about the most as we headed into Friday. We all know now that the actual number was quite disappointing. Private sector jobs were about 40k (expected 150-180k) and the actual number was 431k with the vast majority of these jobs being temporary census workers. Now I am not here to bash the President but is this what he calls a very good number? And if it is does he understand the weight his words carry? This number would have been received poorly without his comments, but with them the market was hit even harder.
I saw Hedge Funds entering “risk” positions on Wednesday and Thursday after hearing from the President. Did they do it because of the President? I cannot say but I did write an update for my group at work detailing what Obama said and stating “Obama must know the number as there is no way he would say something like that blindly.” HHHMMM I was wrong. The reaction in my office after the number was to try to find something good in the number. There really wasn’t anything. The subsequent selloff in risk and stocks had to be expected as with the summer approaching, high volatility and returns being pretty poor for most funds the natural reaction is to pull things in and regroup.
The Euro led the charge most of the week. A steady selling with little to no retrace ever. Even the French PM Fillon didn’t help when he said that he only sees good news with the Euro moving to parity. This makes sense to me. A weaker currency helped the U.S. and it should do the same for Europe. Do we hit parity, I do not know, but it would not surprise me. Except for a few calls for a retrace in the Euro I have been calling for 1.2000 (ish) by the end of summer. We have hit it and I do not think we are done. Parity might be an over shoot but that is what markets do. So Sub 1.000 would not surprise me. Momentum is certainly that way and it suits the recovery effort’s to have a weaker currency.
All in all perception is reality. Currently all news is being looked at in a negative light. Stocks will remain under pressure. Dollar rates will not move up and the Euro has further downside in it. Risk will continue to be taken off the table (we saw exiting of risk minutes after the employment number on Friday).
Politicians should realize the weight of their words. Maybe Fillon was trying to let the market know that a lower Euro was desirable to a recovery in Europe, but President Obama must realize that his words had a big negative effect on the markets on Friday. Those numbers were not good. Trying to spin them as good is part of the Presidents job but he should have waited till they were announced. Perception is Reality and talking positively in hindsight would have helped. The way it was played did not.
Good Luck and Good Forex Trading.
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