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LuckyOne

Eur / Jpy Below 100 Again .......

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EUR / JPY is trading below 110 again.

If this is sustained for at least 24 hours, it could be a predictor of problems for markets.

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Can you explain why you think this?

EUR / JPY seems to be the best barometer of risk appetite. Its prominence probably comes from the days when the carry trade was all about borrowing JPY and investing in fixed income assets in EUR / NZD / AUD / USD etc. To-day the carry trade seems to be about borrowing short and investing in just about anything.

To my way of thinking, fixed income people are the smartest market participants who are quite agnostic about sustained directional moves and religious about changes in direction. Foreign exchange people have the quickest reactions to changes in flows. Equity people are the slowest, most bullishly biased people in the market.

Whenever market views change, I think that fixed income people lead the change. Foreign exchange people see the resultant flows and react quickly to it. Equity people often try to fight change because of their internal bullish bias.

There are so many data points in the fixed income market with many of them shrouded in mystery that the first chance that non-participants get the chance to observe changes in opinion is in the foreign exchange market with EUR / JPY being the best proxy for what is happening.

EUR / USD or JPY / USD are not as good a proxy as EUR / JPY because they include US specific aspects.

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Interestingly enough, Greece is making headlines again...

Global Sovereign Derisking As Greek 5 Year CDS Hits All Time Wide

It worked as indicator the last time round ;)

Greek%20CDS%206.24.jpg

Nice graph.

Is this what contained looks like?

How much longer for the stresses finally give way?

Edited by interestrateripoff

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Greek%20CDS%206.24.jpg

Nice graph.

Is this what contained looks like?

How much longer for the stresses finally give way?

Previously, whenever CDS started trading "upfront" rather than "running", it was a clear signal that a borrower was about to die.

The attempts to standardise CDSs to make netting easier have probably diluted this important signal.

As an aside, I know that many here dislike the entire notion of CDS. In cases like this where cash bonds have essentially stopped trading, the CDS market is the only available means to determine risk and value.

I can see why governments hate them as they are more liquid, open and "honest" than government bond markets which can be manipulated by the issuers' capacity to set rules.

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Previously, whenever CDS started trading "upfront" rather than "running", it was a clear signal that a borrower was about to die.

The attempts to standardise CDSs to make netting easier have probably diluted this important signal.

As an aside, I know that many here dislike the entire notion of CDS. In cases like this where cash bonds have essentially stopped trading, the CDS market is the only available means to determine risk and value.

I can see why governments hate them as they are more liquid, open and "honest" than government bond markets which can be manipulated by the issuers' capacity to set rules.

The German government should start selling CDSs on Greek sovereign debt since they're on the hook to bail them out anyway, it would seem a sensible way to get some of their money back!

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The German government should start selling CDSs on Greek sovereign debt since they're on the hook to bail them out anyway, it would seem a sensible way to get some of their money back!

Spot on. It would generate cash and diffuse the crisis by forcing spreads lower.

If more central bankers and government officials had market experience, they could make a lot of money for taxpayers.

If central bankers and government officials treated taxpayers more like shareholders and less like cash cows, taxpayers would be much better off.

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Sterling seems to be the beneficiary of Euro/US$ weakness:

1.49920

1.21683

The perception in the market seems to be that the UK is "well placed" to weather the storm that began in America but due to our sound fiscal polices our housing market will not go down.

http://news.bbc.co.uk/1/hi/business/10405543.stm

Pound reaches 19-month high against euro

Page last updated at 14:06 GMT, Thursday, 24 June 2010 15:06 UK

E-mail this to a friendPrintable version

POUND STERLING V EURO

Last updated: 24 Jun 2010, 15:50 UK

£1 buys change %

1.2170 +0.0018 +0.15

More data on this currency pair

The pound has hit a 19-month high as debt woes weigh down on the euro.

Sterling touched 1.2222 euros on Thursday, the highest it has been since the immediate aftermath of the financial crisis in November 2008.

Markets continue to worry about the European debt crisis, with the perceived risk of a default by Greece hitting an all-time high.

The pound was also boosted by disagreement at the Bank of England about whether to raise interest rates.

At the Bank's latest monetary policy committee meeting, Andrew Sentance broke with colleagues - including governor Mervyn King - to vote in favour of a rate rise.

This raised market expectations of future rate rises, making sterling a more attractive investment.

The pound has rallied nearly 20% since reaching a low of 1.02 euros in December 2008.

However, it still remains well below the 1.5 level that it traded around in the years prior to the 2007 credit crunch.

Market fear

Sterling's revival is mainly down to the euro's fall from grace, and it is notable that the pound has not enjoyed a similar rally against the US dollar.

Edited by Realistbear

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Sterling seems to be the beneficiary of Euro/US$ weakness:

1.49920

1.21683

The perception in the market seems to be that the UK is "well placed" to weather the storm that began in America but due to our sound fiscal polices our housing market will not go down.

Sterling dropped from around 2.02 before this mess started to 1.5 or by 26%

The Euro dropped from around 1.58 before this mess started to 1.22 or by 23%.

I think that the market is telling us that the EUR is well and truly buggered and that the GBP is slightly more buggered than that.

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Sterling dropped from around 2.02 before this mess started to 1.5 or by 26%

The Euro dropped from around 1.58 before this mess started to 1.22 or by 23%.

I think that the market is telling us that the EUR is well and truly buggered and that the GBP is slightly more buggered than that.

That's how I see it but the pound is proving resilient to further weakness and has risen from 1.42-44 range to almost 1.50 over the last few days following t'budget.

Sterling hit 2.11 at the peak 3 years or so ago. I was all in $ at that time having returned from living in the US. I knew it would have to crash as Brown's delusion was never going to last.

IMO, Sterling is safe all the time the Euro remains intact. If the crisis blows up again it is our number 2 export market and that will make a difference to perception. At the moment the perception is that "its contained" as Spain did not blow out like Greece.

For now, continued "good news" for further HPI is keeping the sellers at bay. First sign of a HPC and sterling goes down with it. IMO, we could see around 1.31 to the $ if BNP Paribas are right in their predictions early this year.

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That's how I see it but the pound is proving resilient to further weakness and has risen from 1.42-44 range to almost 1.50 over the last few days following t'budget.

Sterling hit 2.11 at the peak 3 years or so ago. I was all in $ at that time having returned from living in the US. I knew it would have to crash as Brown's delusion was never going to last.

IMO, Sterling is safe all the time the Euro remains intact. If the crisis blows up again it is our number 2 export market and that will make a difference to perception. At the moment the perception is that "its contained" as Spain did not blow out like Greece.

For now, continued "good news" for further HPI is keeping the sellers at bay. First sign of a HPC and sterling goes down with it. IMO, we could see around 1.31 to the $ if BNP Paribas are right in their predictions early this year.

I really don't know what will happen next. At similar percentage falls when measured from the pre-crunch days, I now expect the GBP and the EUR to be more highly correlated than they were as things in the EZ now appear to be as bad as they are in the UK. Until relatively recently, things in the EZ were considered to be less bad than in the UK which is why the GBP / EUR cross was being touted by some as reaching parity.

I still think that this is now a "EZ is just as bad as the UK" story rather than a "UK is getting better" story.

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I really don't know what will happen next. At similar percentage falls when measured from the pre-crunch days, I now expect the GBP and the EUR to be more highly correlated than they were as things in the EZ now appear to be as bad as they are in the UK. Until relatively recently, things in the EZ were considered to be less bad than in the UK which is why the GBP / EUR cross was being touted by some as reaching parity.

I still think that this is now a "EZ is just as bad as the UK" story rather than a "UK is getting better" story.

1 GBP =

$1.49980

Euro 1.21149

Delayed fall out perhaps. Or as one article said a few weeks back--for now the spotlight is on Europe. It will then shift to the UK and lastly onto the US. The spotlight must still be shining brightly on Europe as our currency and bonds are sailing along as if we did not have a care in the world.

IN the meantime the word on the street seems to be that the threat of higher IR are bolstering the pound.* This is senseless as the market moves with HPI and higher IR will lay the housing market to waste as so many are on the brink. A full blown housing crash will send the pound down with it as we are so dependent on that sector for "growth."

It is irrational. The whole market is behaving erratically like someone on here said with the best analogy ever posted on HPC.co.uk:

Our economy is like a bicycle with a dodgy front wheel. As you cycle along you begin to wobble a bit, then you begin veering from the left to the right and then the wheel suddenly comes off and you end up thrown over the handlebars.

*http://uk.finance.yahoo.com/news/pound-rises-as-mpc-member-votes-to-raise-interest-rate-tele-e2630a41b8d3.html?x=0

Pound rises as MPC member votes to raise interest rate

Angela "Angie" Monaghan, 16:45, Thursday 24 June 2010

Sterling rose more than a cent against both the dollar and the euro after it emerged that a member of the Bank of England's Monetary Policy Committee voted for an interest rate rise at its June meeting.

Sterling closed in London trading at $1.4898 and 1.2171 when minutes of the meeting showed Andrew Sentance voted for a quarter of a percentage point rise in the Bank rate to 0.75pc .

Edited by Realistbear

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  • 145 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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