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by Ashraf Laidi
Posted: May 20, 2009 20:02
Comments: 87
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This thread was started in response to the Article:

Dollar Slashed as Fed Goes Shopping

Fed's latest bond buybacks triggers fresh dollar damage, while VIX downside does not spell out the end of equity selling.
 
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Ashraf Laidi
London, UK
Posts: 0
16 years ago
May 22, 2009 14:43
aviat, these are very long questions which require long answers and cannot do that right now, feel fre to go to ECB and Fed websites and even google the comparisons. Eurozone banks have their share of problems indeed. but the consumer fabric is not as eroded in the US where the upside room for unemployment is higher than in US and the use of credit in US is higher and its spillover effects are broader and deeper.

Ashraf
aviat72
New York , United States
Posted Anonymously
16 years ago
May 22, 2009 12:58
Ashraf:

Thanks for your target on the US-Euro.

(1) If I read you correctly, you believe that the Euro is not at a risk of losing its anti-Dollar status, and the commodity currencies are unlikely to replace the Euro as the primary vehicle for speculation against the USD. I presume the size of the underlying economies is a key factor in determining the role of the currency in the market.

(2) Do you have any opinion on the crisis in Eastern Europe and the risk it poses to the Western European banking system, and hence the Euro. There are some articles out there comparing the US banks to the European banks, which paint a much worse picture for the European banking system, given the amount of leverage Basel-II allows. http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2009/03/02/europe-on-the-ropes.aspx


(3) When it comes to ECB vs. Fed could you point me to some resource which compares their respective roles and powers?

I have read some articles on how the ECB can not buy government bonds from member countries (QE-Euro style). Further, no single sovereign authority and divergent stake-holder needs constrain its reach, and the ability to act. It does make it more independent of political pressures as you noted (and which might turn out to be good), but also limits it power to act.
Ashraf Laidi
London, UK
Posts: 0
16 years ago
May 22, 2009 12:23
Aviat, we could reach toward 1.43, but now starting to expect new highs for eurusd around Q4. ECB does have enough independence...in fact more than the Fed.

Anonymous, yes possible. but sterling rally has been quite broad.

Ashraf
Posted Anonymously
16 years ago
May 22, 2009 12:10
moves for sterling could on some days be linked to large buy orders for purchase of uk real estate or other uk purchases not limited to trader pressures.
aviat72
New York, United States
Posts: 12
16 years ago
May 22, 2009 11:11
Ashraf:

Do you think the Euro's anti-Dollar role will last for too long or will the commodities currencies become the true anti-Dollar? Do you have any targets on the Euro before this rally retraces?

During this crisis the ECB has always behind the curve. It is likely whatever the US Fed does, the ECB will have to follow. Ironically, the fact that ECB does not have the sovereign freedom of the Fed might make it less likely to cause damage. However that also might lead to a much longer and severe recession/depression in the Euro zone.
Carlco
bristol, UK
Posts: 151
16 years ago
May 22, 2009 9:59
hey ashraf , just read your post after my other post! lol we are on the same thought's amazing!
Ashraf Laidi
London, UK
Posts: 0
16 years ago
May 22, 2009 9:25
Slaiman, the fact that the dollar fails to recover during falling equities means a possible breakdown in the relationship, or just that equities will have to FALL MUCH MORE for dollar to see some sort of stability. And here's the thing: Even if say equities CONSOLIDATE (sideways) instead of EITHER falling or RISING would also be BAD for dollar. Let us see..

Ashraf
slaiman7
Lebanon
Posts: 31
16 years ago
May 22, 2009 8:12
I am not sure if I heard you well during your interview today, but did you say that the fact the USD weakened instead of strengthening along with falling equities, the last few days, was a signal of markets recovery?

Sleiman
Ashraf Laidi
London, UK
Posts: 0
16 years ago
May 22, 2009 7:24
Sleiman, yes yesterday had many pros scratching their heads to get a full understanding about what happened. We could explain broad EUR strengtgh due to fact that ECB may NOT embark in heavy quantitative easing as UK and US. But the fact that GBP rose against even Aussie and Kiwi could be realization that S&P would NOT downgrade the RATING of the US but only the outlook. Aslo we had STRONGER THAN EXPECTED retail sales from the UK 3 minutes after the S&P news. Watch GDP today from UK. As i said today on TV, i would not sell USD vs GBP.

Ashraf
slaiman7
Lebanon
Posts: 31
16 years ago
May 22, 2009 4:39
Thursday was obviously a of confusion in markets from stocks to currencies to commodities. We saw the GBP lose heavily and then recover all its losses. The USD fell due to the same reasons that made GBP drop, however it did not recover. The EUR was very strong on day of risk aversion.

Doesn't all this show how disoriented the markets are, and perhaps ominous of major things to happen??!!!

What do you think Ashraf?


Sleiman
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