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Risk-EURUSD Decouples (Again) - Citi Explains Why
Even as futures cruise happily along well in positive territory, the EURUSD has once again decoupled from risk (funny how that always happens when the EURUSD is sliding, rarely if ever when it is surging on short covering). What is the reason for this latest schism? According to Citi's Steven Englander it has all to do with Europe once again aligning itself with Obama, and against China, which the market has recently been viewing as a white knight for Europe (contrary to repeated evidence otherwise). As a reminder, China made it very clear last September that it will (somehow) save Europe, if however Europe no longer pursues trade actions against it. Well, Europe just announced it would join the US in the WTO case against China on rare earth metals. Sure enough, China is about to pull the carpet from under Europe all over again. End result: EURUSD under 1.3100 and sliding.
From Citi:
All indications overnight are for a renewed flirtation with asset markets for risk-on. Equity futures are up, high-beta currencies are up, oil and commodities currencies are up. So why is the EUR down?
We conjecture that the reason may lie less in the euro zone debt crisis than in the euro zone joining the US in its WTO rare earth case against China. China has hinted that it would be more forthcoming on providing aid to the euro zone to deal with the sovereign crisis if the Europeans made political and trade concessions. The Europeans have made clear their interest in having the Chinese provide aid and support for their bailout plans. From a markets perspective, joining the rare earth’s case makes it less likely that China will be upping its participation in the bailout any time soon. Hence the backing up of spreads and the euro’s weakness on a day that otherwise should be an up day for the euro.
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Is this "conjecture", or "speculation"?
Could it more simply be that parts of Europe are in and other parts are heading towards a recession and the US is growing its economy?
Perhaps investors are finally realizing, now that the first round of CDS triggering on the debt of a European sovereign has become a reality, that the Euro is doomed.
Hey Bevis stop calling it your white knight
Sun Tzu just took a shot to the ribs...
I have news for Citi, China produces a trade deficit, and the PBOC CNY fix is slipping, they won't need any more horse manure EZ and US papers, or CCY.
"Hence the backing up of spreads and the euro’s weakness on a day that otherwise should be an up day for the euro."
Um, you know nothing is fixed right?
The EURUSD chart is ugly:
http://chart.ly/27nf8uo
You sell us Europe for cheap or China no play. All your assets is belong to us.
Of course that only gets you deeper in the hole, once the inflow of paper ends you get an outflow of rent and your current account deficit becomes even less sustainable.
Selling your agriculture businesses just to be able to buy cheap trinkets from China for another year is an incredibly bad deal.
China fix our rittle led wagon....they sell tresuries...US...all of 'em....
Now who have rast raff?
Once again, what is the worst possible position to take? Obama takes it.
China only holds 8% of all USTs. Not good if they sell...........but not Armagedeon.
i doubt if too many are holding their breath for china to support the EU clown car show and bankster.banana.bonanza
china will support the EUR, tho, and has just announced they have floated their "money" upwards long enuf, tyvm, BiCheZ!
the WT0,000,000,000 thingy will be settled diplomatically by lawyers and accountants working for pirates one would hope
nothing has changed much, economically; where green shoots are involved, people are from missouri; the shorts are getting less long L0L
if people have moved to the sidelines, they're gonna kill each other ruching to get back in, today? maybe enuf to "bid up" the key index stocks and show some good cyclical rotation, too, would be my random guess... if anything more than the overnight upward drift, really
let the leviathans eat each other at this point; this is totally ridiculous
if they're tooBigToFail, who cares? perhaps the illusion that there is anything left of these "markets" is the projection of this very question in its traditional, rather than its moral aspect, the latter of which underpins fascism itself
Looks like SPY and the Euro "reconnected" at 7:40 am today