Global Macro Trading Journal

The ECB just expanded its balance sheet by 20% this morning. Anybody who isn't selling every rally in the euro just isn't paying attention.
 
Do you mean because of a european QE ? I'm not convinced, if this gives the market more trust in the eurozone it could keep the euro stronger.

Btw, any idea why teh USD became so strong after the announcement of QE2 ?
 
Quote from ralph00:

The ECB just expanded its balance sheet by 20% this morning. Anybody who isn't selling every rally in the euro just isn't paying attention.
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If you don't want to take exposure to risk (via USD), against which pair would you sell Euro ....maybe against AUD ?? Infact, EURAUD is below 1.30. Seems like a very attractive trade. However, a short EURAUD position is negatively correlated to risk-off. If we have a big risk-off in the markets, then EURAUD will shoot to 1.35/1.4 before you decide to cover it.

So, against which pair would you short Euro, if you want to neutralize yourself against risk-on/risk-off.....Not saying you should not sell it against dollar, but just asking to see if there is another good option.
 
The ECB balance sheet BEFORE today's LTRO

gateway.aspx


I believe the raw numbers point to a balance sheet increasing by an 83% annualized rate over the past 3 months, and now we can add today to that.

Brussels can call it what they like, but QE is underway in Europe. What it means for stocks I don't know as heroin addicts need bigger and bigger jolts. QE2 was less effective at pumping assets than QE1. QE3 may do worse than QE2. I don't know. Markets always change.

The only certainty is the ECB is now pursuing a policy of devaluation. Risk on/risk off as it pertains to EURUSD is either dying or already dead. I don't know what the best currency to buy vs. the euro is. For the moment, I'll stick to the dollar. AUD has its own issues vis a vis China.
 
Quote from gmst:

If you don't want to take exposure to risk (via USD), against which pair would you sell Euro ....maybe against AUD ?? Infact, EURAUD is below 1.30. Seems like a very attractive trade. However, a short EURAUD position is negatively correlated to risk-off. If we have a big risk-off in the markets, then EURAUD will shoot to 1.35/1.4 before you decide to cover it.

So, against which pair would you short Euro, if you want to neutralize yourself against risk-on/risk-off.....Not saying you should not sell it against dollar, but just asking to see if there is another good option.
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Lending programs are only QE to the extend that they go unsterilized or if they signal future unexpected loosening of monetary policy. I'm not quite sure this is the case here
 
Again, bureaucrats will argue over semantics. The ECB has been and today continues to expand its balance sheet (i.e., expanded the supply of euros) far beyond what is necessary to keep its overnight lending rate at 1%. Call it whatever you like.
 
Quote from ralph00:


Brussels can call it what they like, but QE is underway in Europe. What it means for stocks I don't know as heroin addicts need bigger and bigger jolts. QE2 was less effective at pumping assets than QE1. QE3 may do worse than QE2. I don't know. Markets always change.

The only certainty is the ECB is now pursuing a policy of devaluation. Risk on/risk off as it pertains to EURUSD is either dying or already dead. I don't know what the best currency to buy vs. the euro is. For the moment, I'll stick to the dollar.
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Yes, it is disguised QE in Europe, and surely they resisted doing it for long, but ultimately have to do it.

Correlation of Euro with riskon/off has surely decreased over the last week. Your thesis that it will keep decreasing overtime makes sense to me. As of now I am also short Euro against dollar only, though I have started looking at the pros and cons of taking the Euro short against Aud.
 
Quote from gmst:

Yes, it is disguised QE in Europe, and surely they resisted doing it for long, but ultimately have to do it.
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They should soon launch measures to drain liquidity(Maybe they have already, Martin?)I find it hard to believe that they would allow reserves in the system to go up by €500b or so

QE + AntiQE = No QE

From the way Mario speaks I find it hard to join the 'ECB will give in' camp anytime soon. The level of the stock market required for that seems quite a bit lower
 
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