This page has been archived and commenting is disabled.
Drop In Euribor And EUR Libor Causes Sharp Drop In Euro As Funding-FX Correlation Persists
As expected, the tight correlation between European interbank funding rates and the EURUSD FX rate continues: today, we have seen the first inflection point in both 3M Euribor and 3M EUR Libor, as both have dropped marginally lower, the first from 0.899 to 0.896, the second from 0.83344% to 0.8325%: this is the first decline since July 14. And, not surprisingly, today we see a big pullback in the EURUSD complex. Never too far behind with its own attempt at an explanation, here is Goldman, which after calling for 1.15 in the EURUSD flipflopped yet once again, and is now selling the other side of its 1.35 target to clients.
From Goldman's Jon Pierce
We have dropped sharply this morning from the 1.3094 to 1.2981 low so far .
The drivers ? :
1. stating the obvious but we have come a long way 1.1876 -->1.3107 , As John Noyce (GS sec) pointed out yesterady we had met his initial target and were confronting significant fib resistance at 1.3125
2. A lot of people ( including some internal analysis) have been looking for a large month end dollar sell fix later today , but some models are suggesting that dollar selling should be primarily against the aud,cad and gbp rather than the eur . It feels like players got long the eur early in anticipation of the fix and have been cutting in the past hour.
3. Euribor rallying and peripheral spreads widening out after several tightening sessions.
4. We have heard talk of notable real money selling in the market today , though only seen relatively small selling but did have a series of sell stops triggered .
5. Risk a touch on the back foot with S+P - 5 .
6. Its Friday ! Always a good day to nail the consensus position and dampen a few weekends .
From here : still tend to like the overall backdrop , but suspect it will be tougher to make fresh upside progress and could be more rangebound. Starting to average into a long from 1.2950 downwards feels like reasonable risk/reward to me .
- 3404 reads
- Printer-friendly version
- Send to friend
- advertisements -


Start to short Euro, Bitchez
Exactly! Would be the perfect setup for SPX 865 as well.
Im a fucking idiot. Is this good or bad? Will it affect my Iphone 4 Antenna?
You need to buy an IPad to find out.
Usually TD latches on to ever climbing Euribor as a sign that the world is about to end. Now it's going down it's a sign that the world is going to end via some secondary connection to EuroFX.
But then I'm a fucking idiot as well.
Just be safe in the knowledge that the mainstream media fills the news with puppies and daffodils whilst the horror of this place will have you tearing the flesh from your own face.
The truth, as ever, is somewhere between the two extremes.
Right... double bottom at 1.298 and eurusd now at 1.306 and climbing in less than 2 hours.
Watch the Swiss ... they have plenty of euros to sell ... lots and lots.
Prolly going with the dollar as buying back CHF doesn't make them good on the export side of the ledger.
Expect more shenanigans as the month of August proceeds.
But if you can play the FX game, good luck.
We're all speculators now.
ok ...i know its confirmed that the dollar and EURO are doomed....but can some smart FX guy tell me whats gonna be the imapct of this debt implosion on other currencies like the INDIAN rupee???
"Time to go short" one said... now again?!
GBPUSD upside continues, since daily and weekly charts remain bullish.
http://stockmarket618.wordpress.com/about
So, the interest rate on 3-month dollars deposited in euro banks is only 1/2 the rate for 3-month euros deposited with the same banks. Since bank credit risk does not appear to be the reason for the rate differential (also looking at OIS, CDS premiums, gold), is perceived, continued euro weakness the reason for the divergence, or is 3 month-euirbor too high..3-month eurodollar too low?