Citi Sounds A Warning: "The Misread Of The Fed May Also Worry Investors That They Have Misread Draghi"

Tyler Durden's picture

The FX market remains the most anxious post-FOMC with USD strength across the board but we note that JPY crosses (e.g. EURJPY) are largely in line with equity's movements for now. Citi's FX Strategist, Steven Englander, is a little more concerned in his post-FOMC view that while "it is possible that there will be a revisionist view of the statement that puts a more positive interpretation on it", he adds that "investors may also be pulling back a bit from  ECB expectations on the view that coordinated easing is out of the picture (keeping in mind that such coordinated easing is far from common).  The misread of the fed may also worry investors that they have misread Draghi" which we explicitly said NOT to expect without Germany's buy-in - which remains absent for now.


Citi: Something But Not Enough

The Fed clearly disappointed by not going as far as investors had hoped in promising ease around the corner. They downgraded the economic outlook: “economic activity has decelerated somewhat” vs “the economy has been expanding moderately”; “Growth in employment has been slow” vs “growth in employment has slowed” ; “will closely monitor incoming information on economic and financial developments and will provide additional accommodation” vs “ is prepared to take further action”.  It looks like there is a signal that private payrolls below 100k is not acceptable; less clear how high employment growth can be before it becomes tolerable.


While the statement is clearly more dovish than its predecessor and more explicit on the easing bias, it is not as dovish as we and the market expected. In particular there was no shifting of the expected duration of zero rates to mid-2015 and the nod to a September move is more conditional and less open than many would have expected. Today’s currency reaction is stronger than what would have been expected based on recent relations with the S&P (i.e. if you run a regression of EUR, GBP or AUD changes on the S&P change, EUR and AUD have moved a bit more than would have been expected – this is not true for CAD, NOK or SEK). So there may be a bit of recovery if the S&P holds it’s ground.


It is possible that there will be a revisionist view of the statement that puts a more positive interpretation on it, and that shift will be prodded by any weakness in incoming data. The FX market time horizon will likely be shortened with softness in any data being interpreted as pointing to a September move, so we could have erratic trading for a few weeks.


Investors may also be pulling back a bit from  ECB expectations on the view that coordinated easing is out of the picture (keeping in mind that such coordinated easing is far from common).  The misread of the fed may also worry investors that they have misread Draghi. That said, we still see the EUR as having considerable upside if there is a concrete indication of immediate or forthcoming SMP buying, and considerable downside if the ECB Statement is as disappointing as the Fed Statement, because FX investors are more invested in the ECB policy move than in the Fed’s right now.

Source: Citi

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GMan_'s picture

So Geithner went to Europe for nothing. Waste of motherf... tax dollars.

0z's picture

How can stolen goods be wasted? Is not the most important fact simply that they are stolen goods?

OpenThePodBayDoorHAL's picture

No happy ending for Bennie...maybe he's turning Japanese?

SilverTree's picture

What happens when everyone is on the same side of a small boat?

Jlmadyson's picture

Man oh man you cannot make this stuff up.

Rigged like a motherfreaker.

SheepDog-One's picture

'Mis-read Draghi'? WTF I thought the Draghi drag-up was totaly refuted Saturday.

ThunderingTurd's picture

+10,000.  That doesn't seem to matter as it wasn't during 'market' hours.

SheepDog-One's picture

I guess that must be it....drag up markets 5% on market hours rumor....totaly refute it Saturday, and it just magically stays. Weekend magic.

Renewable Life's picture

What are people comparing the Fed action, with what that enempt idiot at the ECB is doing???? One can print money into infinity and the other has to call Germany before he takes a crap?  There are so many things standing in the way of the ECB doing anything other then running their big mouths all day long during the olympic games!  They still haven't had their "lehman moment", which anyone who knows anything about human nature and "fear factor politics" knows, MUST happen before they get drastic action!!!

My money is on a Greek default coupled with a military conflict with Iran, nicely timed to occur after ther wrap up of a historically successful European Olympic games, between Aug 20-25!!! JMO  That will give Mittens time to return from his powerhouse "foreign policy fact finding" mission, not to be confused with a quick "mission" to El Salvador or Peru for the purpose of saving souls!! And Obama's can still get some nice vacation time in between aug 5th-18th, maybe a round of golf and some time with girls, before all hell breaks lose!!!!!

Dan Conway's picture

If you are right about Iran, your start date is too soon for the nobel peace prize winner to attack Iran.  The half-life of his "actions" is about 2 weeks but let's say this is a BFD so let's say obummer will get a 4 week boost in the polls so that means he can't do anything with Iran until mid Oct. 

But IMHO, I don't foresee him doing anything with Iran.  It turns out he rejected the Osama hit a couple of times before he approved that and that was a no brainer (except to him and valerie jarrett).  He has never done anything this big during his tenure and besides his administration will make the Iran problem worse.  Are flag waving americans going to vote for this clown because he launches a couple of cruise missles while he takes their gun rights away?  Remember Libya, lots of bombs and no results?  Iran would require a significant military intervention and this country is tired of war - especially one that will not have congressional approval.  People were tired of war/Bush/Iraq in 08 so why would war be popular in 12?  To win a few neocons but lose the anti-war crowd?  The only war Jimmy Carter II cares about is the class war.  That is where he will attack becuase it will be good for future nobels prizes, honorary doctorates, and high dollar speaking engagements (ironic?). 

This fool is going to lose regardless what happens between now and then.  He failed and enough people know it.

Jake88's picture

hopium is a powerful hallucinogenic

TheSilverJournal's picture

The "misread" is the whole point. The Fed and ECB set the markets up to crash on purpose over the next few weeks, so they will then be begged to swoop in and save the day with LSAPs and Eurobonds.

This is the last deflationary scare.

fonzannoon's picture

I don't know silverJ the media is pushing too hard that Bernake meant this and Bernanke meant that today. Now they are saying he may come in Friday if it warrants it. If they really wanted the makets to crash they would have dropped the hint to the financial media to help them talk it down. They would be all over the place now claiming surprise and disappointment.

Dr. Engali's picture

What is all this talk of investors? If by " investors" you mean ...people who gamble against the robots in the big casino in the sky ,always expecting a positve return and no downside....then we are on the same page.

kito's picture

well doc, youre just about out of luck.....let me know if you want to throw the white flag now or the day after elections.....................sorry, but it has been really obvious that any type of lsap wouldnt come....ben is not the mindless printing machine that you make him out to be....he loves his dollar.......................

LongBalls's picture

How many times must people be told. They are keeping this thing together with verbal puke to keep the algos kicking in and investors trying to front run QE rumor with speculation. This until they get the new world government and it's system architecture in place. Once that is complete and the military is in place then the war will be allowed to happen in the middle east followed by a quick market collapse.

War is coming. The Muslim community will never agree to global governance. They do not believe in usury and will not share religious views outside Islam. By in large that is. Rumors of QE and bailouts are proving to be as good as actual QE and bailouts. All the while the investment banks are crushing people trying to front run something they know is not coming.

We are in the middle of a solvency issue. Not a liquidity issue.

Banker's ALWAYS play both sides of the game.

SheepDog-One's picture

OK so we'll just keep 'monitoring the data' like THAT means a fukin thing anymore!

Ineverslice's picture

"Everyone's buying...?"

"Then sell, sell!"

Now I now why Tiger's eat their young.

FB bleeding like a stuck pig.


Savyindallas's picture

good   -I hate that Zuckerberg prick-little worm

Buzzworthy's picture

Are there any "investors" in the market any more?  Looks more to me like bullshit algos and inexperienced traders trying to turn a profit so they can keep their jobs.  Every "investor" I know is on the sidelines waiting for this shit to come crashing down.

Hype Alert's picture

Shits real, this market's a joke.  The quote below if from 2009 when Goldman had some of their code lifted.  I guess only Goldman/The Fed know what's a fair way to manipulate the market.  They are doing a wonderful job of it today.  If you're not out, get out.  If they can keep this up today, at will, they can take it down whenever they want.  Wealth isn't under someone else's control like this.

“The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” Facciponti said, according to a recording of the hearing made public yesterday.

Meesohaawnee's picture

whats it 70% of all trades algos? theres no "investors" out there anymore. Its so rigged they dont even hide it. Just a propaganda tool that would make Hitler giggle . Thats what its come down to

Neethgie's picture

Trading is fairly simple at the moment, the hardest part is simply forgetting how to trade by logic.

all you need to do is work out market = happy or market = sad, then buy/sell a shitload of anything.

the hard part is you know its retarded, but thats the new market we are in.


failing that you can always short fb

Piranhanoia's picture

stock market welfare, food market warfare

zebrasquid's picture

Sooner of later the market, the real market(if there is any left) will figure out that Ben and Mario and TImmy are the Keystone Cops starring in a horror movie.



SmoothCoolSmoke's picture

Dhraggi gonna dump a big greasy turd in the punchbowl tomorrow.

Sun and Moon's picture

The sell-side analysts were trying to pressure the Fed into doing something by getting high expectations for QE priced into the markets. Any misreading of the Fed was deliberate on their part. There is nothing at all to indicate that the Fed is going to do more QE unless the economy and markets take a significant turn for the worse.

On the other hand, I think that people are understanding Draghi correctly. But there is the strong possibility that he is not being realistic or truthful.

LooseLee's picture

Sell-side analysts are worse than used car salespeople. Any MORON who listens to them is a bonafide IDIOT. Anyone here recognize themselves?

kito's picture
Citi Sounds A Warning..................


the warning should be to stop the blood supply for these bank analyst leeches....

i still dont understand why tyler gives space to these vacuous vermin banking usual, they were WRONG about qe3.........they have always been WRONG and yet tyler continues to headline them as if they have any credibility. they have NONE....WASTE of space......

malikai's picture

Contraindicators. The Stolperizor's calls are almost perfect CIs.

kito's picture

yes, but tyler posts them as if they are if they matter....they dont matter....they are an abomination........

RSloane's picture

They know who reads and posts on their board. I think Teh Tylers fully expect us to throw virtual heads of cabbage at half the thread titles, and of course to personally rile you up.

headadoor's picture

We didn't misread. Bernanke is following his 1933 plan - throw money out thru the back door, treasury bond purchases by the fed, then steal our gold then reprice up then devalue the dollar so we can manufacture at a profit. He's an academic remember and this is his KISS method.

LooseLee's picture

No way! You can't fool an equity bulltard fool with mere word-speak. Or, can you?