Wednesday, November 11, 2015

Trade Idea | Long Euro anyone?

Forget the Fed, forget the parity. Euro is more Yen than anything else. If on Friday we have a rating downgrade on Portugal, then ECB suddenly has almost euro 200b less room in current QE. That is NOT good for the expectation of an expansion. PSI 20 has done approx 16% correction from recent peak already, approx 6% in latest bout.

We have a few Fedspeaks scheduled this week, but next ECB is sufficiently away to be wary of anyone from there to talk down euro anytime soon. Minimal down side on a tactical long euro trade given the current level, and given the market is now perhaps pricing fully a Dec Fed hike.

The aggressive trade here is long euro. A more balanced one is convex long euro with cheapening achieved by long Portuguese equities.

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