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royalflush
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Tomorrows ECB Ratedecission + US Figures

April 2nd, 2014, 5:30 pm

Hi guys,what's your position tomorrow (April, 3rd 2014) in DAX, BUND, Silver and EURUSD? We all expect some decent volatility tomorrow, or? So how do you position yourself?Kind regards
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

April 2nd, 2014, 7:20 pm

Why do people expect decent volatility? Most, apart from the crazies at Goldman Sachs, expect no rate changes or other new funding measures. What more can we hear about what non-standard measures are in the toolbox that we haven't already heard? We know that the ECB worries about exporters and the high euro, but what new can Draghi say that he didn't say a few days ago?I am not an expert on the subtleties of that genius Draghi. But I think he will see his broadly balanced risks as having less risk to the downside. Like any central banker, he always expects inflation is right around the corner. But now he really really expects inflation is right around the corner. So perhaps he will be less worried about a high euro affecting a fragile recovery, and more thinking that it is transitory anyway.
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

April 2nd, 2014, 7:37 pm

Weidmann said something the other day about lower inflation being in food and energy, and they should only react if there are second-round effects. This is just one man's opinion. But it is also a reality, to the extent that energy is a complementary good. As its price drops, the price of other things should rise, not fall.If anything, the high EURJPY should be feeling the heat from imported car competition, where Hondas are substitutes for Volkswagens. But nobody is bitching about EURJPY being up some huge amount. Because Japanese import gas, not cars.So they seem to not be worried about a high euro so much from a deflation side, but from a health of exporter side. Right now they are probably less worried about the health of exporters in various economies, because the US seems to be doing good, everything seems to be coming along okay.The ECB is primarily worried about money markets and funding, and reduced inflation expectations. They seem to think money markets and funding are doing okay with stocks and corporate and national debt issuance doing great, and there is not much more they can do from their end. It is more an issue of adjustments in high-unemployment economies which adjustments they don't want to slow down, and demand for loans, and reforms from various governments upon whom they want to keep the pressure for reforms.And again, they think inflation expectations if anything are recovering from some doubt a few months back, and will be helped along by continued economic improvement.So perhaps reduced fear for the health of exporters, plus the knowledge they aren't going to do anything about it anyway, and they don't want to sound silly, will mean minimized emphasis on any displeasure with the level of the euro. Even as people try to ask questions to get them to state such a displeasure.
Last edited by farmer on April 1st, 2014, 10:00 pm, edited 1 time in total.
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

April 2nd, 2014, 7:57 pm

So I think Draghi will be all smiles. That will generally be hawkish, but whether that optimism will be positive for DAX and silver, or more likely negative because of less hope for QE, I do not wish to guess. Maybe the bunds will drop a small amount, and Spain and Italy bonds will go sideways.So far as EURUSD, I expect the euro to rise. But I expect this with a skew where an up move is not so much likely, as potentially large if it happens.I have held a position through at least 10 ECB meetings in the last year or two probably more. I have never really taken much opinion on what the ECB would do, but still made money perhaps 80% of the time. So you might hypothesize that the ECB meeting is just an occasion for things to happen that were going to happen anyway. If you also hypothesize that I am right, then EURUSD should go up. So Draghi will say some irrelevant thing, the euro will rise, and people will try to explain the second based on the first.It is definitely one of these deals where people are looking for the action on the speech, not on the rate decision. And I guess the fear is on the side of Draghi talking down the euro. But people don't take that stuff very seriously lately. So positioning ahead of NFP, or people taking whatever positioning they want to take, will probably happen after Draghi speaks, and be wrongly attributed to what he said.Deflation is not a problem, and this guy is not going to do jack.
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

April 3rd, 2014, 10:47 am

I wish I knew more about Goldman's call for a tiny rate cut. It seems so crazy, what are they thinking? I see the ECB as not liking to flail around and micromanage with tiny actions. They perceive the psychological damage is greater than any effect on lending, which effect would be near zero.I think the ECB would see a small cut as increasing deflationary expectations, by saying there is deflation and there is not much we can do about it. Where do I get that? Draghi always seems to keep a straight face.
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

April 3rd, 2014, 5:59 pm

I think Draghi was sort of bullied into agreeing that low inflation not caused by energy or a late Easter was a surprise. And then bullied into saying that he will have to do something if inflation keeps surprising to the downside. It is like the press worked themselves up into a lather by pressing their own deflation fears.On the one hand, he seemed to think cheap energy is great, far from talking down the euro. On the other hand, he came across as helpless in the face of deflation, on account of euro loans not being traded in auction markets where they can be affected by QE.But either there weren't any buyers waiting, or they decided to let it ride after that show. I still hold out hope there are EURUSD buyers waiting!So far as US payrolls tomorrow, I also don't expect much action. The jobs will probably be okay, in a way that you could fit into any trendline you want, up, down, or sideways. I think sideways is probably the correct one.
Last edited by farmer on April 2nd, 2014, 10:00 pm, edited 1 time in total.
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

April 3rd, 2014, 9:09 pm

I guess I should be glad. They had Draghi crying like a little boy that he didn't expect such low inflation, and he doesn't know how to structure a private debt QE for Europe, and Christine LaGarde should go bother someone else. And the euro is still above 1.37. It was a fine line to walk, to not sound like he is in denial about low inflation.The euro is strong, it is the dollar which is not weak, the dollar is all in fashion. The dollar has every reason to be in fashion. And yet there is something wrong, the dollar is way below where you would think people could push it. The dollar ship is coming in to port, and yet I still think these dollar bulls could miss the dock and land in the water half way out to sea.
Last edited by farmer on April 2nd, 2014, 10:00 pm, edited 1 time in total.
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

April 7th, 2014, 12:35 pm

The press turned that ECB meeting into a QE story which it wasn't, and this is being unwound today. It seems like the media everywhere are biased in favor of QE.In the US, they either assume that collapse is the natural state of the economy, or they like the idea that Bush collapsed the economy, and so they blindly repeat that Bernanke is a hero for preventing certain collapse. In Europe, they seem to think QE is a way to save the downtrodden from the evil German empire.It is sad, because QE does the opposite of save the downtrodden. Land, labor, and capital, the classic inputs to production, are complementary goods. Like hotdogs and buns, when the price of one rises, the other falls. When they make land and capital easier for large firms to acquire - businesses which are generally have high fixed costs and therefore cannot grow quickly - land and capital goods become more expensive for smaller growth firms to acquire, and the price of labor drops.Another way of looking at is, is labor and services are variable costs in the medium term, where land and capital are fixed costs. When you stimulate the acquisition of land and capital goods, cornering the market does not quickly lead to the production of new supply. The demand for labor is equal to the supply of these complementary goods, so the demand for labor does not rise in the short term. In fact, the demand for labor drops, as control of the complementary goods land and capital shifts toward capital-intensive businesses, or businesses which have a relatively low productivity of capital.
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

May 8th, 2014, 10:24 am

I don't know how people don't expect the ECB to cut rates. Draghi basically said three things will cause him to cut rates,1) no rebound in April inflation,2) short-term rates above the policy rate,and more recently3) a high euro.April inflation did not rebound.EONIA has been high.EURUSD just under 1.3950 at time of meeting.On top of that, Germany's "hard data" been weaker (whereas the "soft data" or PMI's have been pretty good) and there has been some chill from Ukraine.There is no time for QE or ABS or whatever at this meeting. I don't know about that stopping "sterilization" or new LTRO or whatever. So what else can they do? They have to cut rates slightly, just to make a statement against the Euro. They stopped trying to talk down EURUSD a few weeks ago, but I didn't hear any mention that cheap imported energy is suddenly great. So I think they must have a plan to actually take action.I understand what people are thinking. The ECB does not want to cut rates, they think the economy is doing okay, and so on. But if they didn't want to cut rates, they should not have given guidance that they would cut rates in response to mediocre April inflation and a high euro. Maybe it is another case of a central bank that can't imagine being surprised, they were so sure April inflation would be higher. But now they have to do what they said they would do. I cannot bet against them doing what they said they would do.
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

May 8th, 2014, 10:45 am

People expected the BOJ to act when they said they wouldn't, and now expect ECB not to when they said they would. In both cases it is thinking the economy has a specific effect on the central bank thinking. I have lost money making such assumptions.
 
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farmer
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Tomorrows ECB Ratedecission + US Figures

May 8th, 2014, 11:00 am

Oh well, I was wrong and I lost three pips. 1 pip considering I took off long USDJPY to make the trade, and got long USDJPY again 2 pips lower.I would have made money if my program hadn't malfunctioned (for no reason I can figure out). So like any gambler, I want that 1 pip back.I was bothered by the fact everyone in the yen seemed to be thinking the same thing I was thinking. And bothered by EURUSD not popping more. And convinced that Draghi is actually bullish on the economy. So I got long euros and made my pip back, and then some.
Last edited by farmer on May 7th, 2014, 10:00 pm, edited 1 time in total.
 
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farmer
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Joined: December 16th, 2002, 7:09 am

Tomorrows ECB Ratedecission + US Figures

May 8th, 2014, 12:13 pm

And long EURUSD again a touch off the low. Most gamblers only double up when they lose. I double up no matter what.
Last edited by farmer on May 7th, 2014, 10:00 pm, edited 1 time in total.
 
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farmer
Posts: 13479
Joined: December 16th, 2002, 7:09 am

Tomorrows ECB Ratedecission + US Figures

May 8th, 2014, 12:31 pm

Whatever Draghi just said about acting next month, will be forgotten by the market long before June. Agreed? And with good reason: Whatever they do in June will be driven by data between now and June.Anyway, they got exactly what they wanted and expected to hear out of Draghi. If EURUSD was worth 1.3943 in anticipation of this, it is worth 1.4043 now.
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