Global Macro Trading Journal

Discussion in 'Journals' started by Daal, Feb 25, 2011.

  1. Daal

    Daal

    I'm short against the CHF JPY and USD in order of size respectively
     
    #491     May 26, 2011
  2. Regarding the Euro, to me the question is how much is this already priced in. Surely the market cannot be shocked if Greece, Portugal, and Ireland default. If Spain looks like it might default, then yes that would be much more damaging, but I'm not sure that's what you're betting on.
     
    #492     May 26, 2011
  3. If I were you, Daal, I'd wait for the outcome of the ECB meeting. I think they'll hike, regardless of the Greek tragedy. However, the mkt has been pricing out hikes, because people are starting to think the ECB is likely to blink. If they don't (which is what I expect), EUR's likely to have a nice pop. And the higher it goes, the further it's got to fall.
     
    #493     May 26, 2011
  4. Daal

    Daal

    I'm using Rogoff as a guide here his data indicates the currency is supposed to fall a lot
     
    #494     May 26, 2011
  5. I'm not saying it won't happen, but why would a default of Greece and the resulting chaos to EU banks cause the euro to decline any more than Lehman caused the dollar to decline. There could be massive demand for euros in the wake of default.
     
    #495     May 26, 2011
  6. The situation is very different. Nobody believed that Lehman could threaten the viability of USD as a ccy and there was demand for USD because non-US domiciled banks had all these dodgy USD assets to fund. Both of the above are not true for the EUR.
     
    #496     May 26, 2011
  7. Daal

    Daal

    The pig turmoil probably wasn't affecting the EUR much given that capital was fleeing the pigs to go to germany or france. But if Greece defaults and that hits the german/french banks then the option is not so great anymore
     
    #497     May 26, 2011
  8. But the Rogoff examples did not cover anything like the EU. The EU is not a nation state, it does not have any debt, and so on. Greece does not have its own currency, so it is not comparable to an emerging market nation with its own currency (e.g. Argentina, Russia etc).

    The Rogoff examples would apply if Greece exited the Euro, this would then be equivalent to something like Argentina or Russia abandoning their dollar pegs before their eventual defaults. However it is far from certain that Greece will exit the Euro, there are alternatives like simply defaulting while staying in, getting bailed out by other EU nation-states, pursuing radical austerity etc.
     
    #498     May 31, 2011
  9. If one country can exit the Euro, the market will think others can too (Ireland, Portugal, even Spain maybe). The dollar is the established world reserve currency, there is no prospect at all of it breaking up or ceasing to exist, the Euro is barely a decade old, it might not be around in 5 or 10 years.

    Anyway, no need for theory, we've already seen on at least two occasions (H1 2010, and the last few weeks) that PIGS default fears cause Euro selloffs vs USD, CHF, and other flight to safety plays.
     
    #499     May 31, 2011
  10. Daal

    Daal

    Rogoff is a smart man, he is aware of the differences. He was calling for the euro to massively underperform this year on bloomberg. I'm assuming his data got him to believe on that
     
    #500     Jun 1, 2011