FX Trading –
There was a little visit to China on the part of a major European delegation yesterday. According to the Financial Times this morning, Europe and China agreed to the following:
“…take comprehensive measures to enhance structural economic adjustments, avoid big swings in currency movements and make respective contributions to an orderly adjustment of global imbalances.”
A euro correction ensues right on cue…viola! It’s probably just coincidence.
After all, there is growing concern Euro-land growth won’t be what traders have expected. And that translates into a lower than expected yield differential favoring the euro, and pound (as the next move from the BOE we bet is down as UK capital markets are screaming for help.)
This is not to say the dollar yield will be improving anytime soon. But if expectations for a cut from the ECB gain some momentum, that would be a surprise. And surprise that changes expectations tends to motivate people to act. And acting people equals changing prices.
So, is this a correction or something more? We will get back to you on that in about a week or two. But, maybe we see a multi-day correction in the euro against the buck this time. That alone would be a surprise.
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Jack Crooks
Black Swan Capital
