Latest Stolper Fiasco: Goldman Stopped Out On Long EURHUF, 2.86% Loss In One Month

Curious how to trade those Goldman recommendations, such as today's uberbullish "strategic" call seeing nothing but blue skies all the way through 2015? Here is a quick reminder courtesy of your friendly FX wizard, Goldman's Tom Stolper.

Trade Update: Close Long EUR/HUF Recommendation after stop is hit

 

On April 18 we recommended going long EUR/HUF. Our view has been that higher US yields would hurt a number of EM currencies (including the HUF). We also thought that ongoing monetary easing in Hungary would further compress interest rate differentials, leading to a gradual weakening in the currency. Although both macro drivers materialized, the HUF strengthened, contrary to our expectation.

 

We clearly underestimated the degree of risk premium for weaker economic outcomes already embedded in the currency. In the short life of the recommendation, a number of positive catalysts have emerged, including a strong GDP print and a smooth outcome in the ongoing budget negotiations with the EU.

 

Our broader fundamental view has not changed, but having just hit our recommended stop of 290, we recommend closing the position with a potential 2.86% loss (including negative carry of about 32bp in total).

If there is still any confusion: do what Goldman does (i.e., trade against its client), not what Goldman says.