IIFT Daily Note with Peter Brown

Italy 7.10%

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Italian bond yields firmly over 7%. This means any bounce in the Euro is a sell opportunity. We need to start thinking of some medium term targets for the currency. 1.20 is obvious but I feel we may see 1.18 over the next month or so. The rate of increase in bond yields, the number of auctions and the threat of a French downgrade will all pressure the Euro. The ECB is the only line of defence and their actions are clearly ‘money printing’ so further weakening the currency.

On the S&P we have non-farm payrolls today. Should be a good number. The topside  rally will be limited by the Euro. However after two years of these contracts following each other we may get a break in the correlation.

3 Comments

cgregan@gmail.com

January 6, 2012

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Hey Peter

Decoupling of Euro from risk on/off trade….. Discuss…………

Eamonn

January 9, 2012

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Hi Peter/ Tommy

EUR/HUF is on a serious downtrend having moved over 800 pts in a couple of days and its economic outlook very negative. Pending IMF funding. Would you agree this is a good Sell now ? What levels ? Or am I miissing something re this trade with weakening Euro etc ?
I appreciate any quick comments..
Regards and thanks,
Eamonn

Peter Brown

January 9, 2012

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HI Col,
I am not saying we decouple completely, but last year we were very Risk on Risk off, and all products obeted. This year I feel the US market is starting to recover so bad news in Europe won,t automatically cause a sell off on the S&P. Indeed I expect at times they will go in opposite directions, a pattern we have not seen for years. We might even see dollar strenght with stock market strenght! I expect the Euro situation if controlled to be isolated from the recovery in the US.
Just an observation going into a new year. But will lead me to a change in trading plan.

Peter