*Governments behind the curve
Governments in general should spend some time and effort sharpening up on their macro advisory. It will be crucial in this environment. So far my impression politicians in general have very limited understanding of the global impact various decisions and policies have. Til then, there should be more efforts put into coordination of policies and measures taken. Easier said than done - I know.
However, at this stage, credible and coordinated policy responses with substance would be something the markets would listen to and gain trust and confidence in. At least temporarily. Without it, we could be continuing this downward spiral.
The handling of the Latvia situation is an illustration of this.
-Nationalistic pride driven by the Euro incentive.
-A Swedish government willing to spend taxpayer money for a shortterm postponement of the "inevitable" devaluation and massive Swedish Bank creditlosses.
-IMF accepting this despite the extensive experience they have from several similar cases over the last 20 years.
-The stoploss on the Baltics should be taken now in order to limit further suffering of the people there as well as minimizing the economic damage.
*SEK to weaken further
Although SEK has already weakened substantially it will likely have more to go. The market reaction on the Latvian downgrade to BB+ by S&P seems to indicate that the market was surprised by it. They shouldnt have been. Not with CDS spreads way above 900.
-Swedish banks will have to write down asset exposure before long, hitting capitalratios , forcing them to shrink balancesheets, reducing lending home and abroad.
-With Swedish banks making a substantial part of their revenue in the Baltics, this will not be the case going forward, further reducing the ability to lend.
-The exports to the Baltics have imploded and will not recover til they devalue.
Hence, I will be looking for a break of 9.00 in Usd/Sek, with the next target 9.50.
In Nok/Sek I will be looking for a break of 1.30 with the next target 1.40.
Note, this in the absense of any devaluation. A devaluation should initially push Sek even weaker as banks would have to write off very chunky creditlosses upfront. Most likely bigger that what analysts are currently expecting.
*LVL "optionality"
Long Eur/Lvl fwd is currently a non expensive way of getting optionality via the underlying. Pricing is non deterring. The Eur/Lvl 3mth Fwd - Swedbank correlation remains in play.
*Gold to weaken?
Looks like the massive speculative long positions in Gold are about to weaken. This could lead to a substantial flush out. I am short Gold.
As ususal, good luck
The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.
Trading 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 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 trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.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 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.
Subscribe to:
Post Comments (Atom)
Posts
No comments:
Post a Comment