0
0
Reality check on Euro Compass − Q2 2008
Fri, Apr 4 2008, 10:43 GMT
by HVB Group Global Markets Research
● ECB: Recent evidence plays in favor of the current ECB stance, and a rate cut is not in the agenda in the short term. We keep expecting the start of the monetary easing when weak GDP will regain the upper hand in the growth/inflation trade-off, probably around mid-year.
● Euro Rates: The repricing of ECB rate cut expectations has been the most important driver of the recent flattening on the European curve. The swap 2/10-year spread has reached low levels and the 2/5 is currently inverted. Odds are now in favour of a steepening.
● Inflation-linked: Two opposite forces are working on inflation expectations at the moment: recession fears and commodity/food price pressure. We present a strategy whose real return benefits from rising inflation without suffering much in case of inflation cooling.
● Relative value: Look at core vs. Germany: after the recent widening they have not yet retraced and offer interesting spread levels.
● G-10 FX Outlook: We expect the coming quarter will again be characterized by large swings on FX, and believe that starting to bet on a EUR-USD correction could prove profitable.
Published on Fri, Apr 4 2008, 10:46 GMT
HVB Group
| Bayerische Hypo- und Vereinsbank AG Am Tucherpark 16 80538 München
http://www.hvbgroup.com/ | hvbgroup@hvbgroup.com
Interested in forex trading? forex brokerage firms!
FXstreet.com will give you a 3 months membership as soon as minimum rebates have been generated (€150 for private trader/ €300 for corporate trader)
[Read Premium full description]
Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
©2008 "FXstreet.com. The Forex Market" All Rights Reserved.