So as we start to hear about and see what looks like coming QE from the ECB and a FED exit from the same, I thought we would talk about sentiment. It is now fairly certain we will see QE from the ECB in short order. I’m not going in to the long term implications here,just thoughts on the effect on trading short term. The removal of the Swiss cap as well as the peg being removed from the Krone certainly add to the mix. This would typically being euro negative with regards to rates.
Making it even more likely from a classical economics standpoint is the exit from quantitative easing by the Fed. In classic sense this would be dollar positive and euro negative. I believe we will likely see that in some fashion. Still, there is a BIG yet,if or possibly hanging on the end of my statement. The US economy awhile looking stronger still has arguable areas that are scary. Longer term issues of debt and lastingl ill effects of QE. Potential commercial property issues. Each of these is hanging out in the wind.
Those things being in play means hot money,fast money or whatever you like to call it will move in ways that aren’t always classical. This is where , at least to me, we see consumer and investor sentiment become a more useful metric. Watching them both as data and anecdotal gleaned from observation can help you spot a change that is coming. Money flow effects currency, and trends can be predictive of money flow. Again we are looking for moves that are quick and against classical theory as in US rates higher than Europe but the euro suddenly decides to become much stronger. A possible cause of this scenario would be sentiment showing stateside slowing due to the disappearance of low rates. Just one possibility
I believe we will see stronger dollar versus the euro,but I do not believe it will come in the classic reaction. Quick and violent chop is likely. Great money can be made from that if you pay attention. A far wiser and better trader than myself, Todd Harrison has often said that perception is reality in the market. Very true. Be disciplined. Be aware. Be nimble.
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#ECB #sentiment #quantatative easing #fx
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