EUR

Yeah Sir.. anyway good to hear macrosam's views as one can often trend trade macrofund's views for really good pips:-)

jacek :) they already have ..
they need to get a room at the library :)

All correct from theory of money. Especially QE acts deflationary and ECB has apparently been founded on political contracts assuming a kind of gold standard ( Maastricht stability criteria etc.) . Further , eventually there will be one and only one world currency not neccessarily implemented on notes and coins. It could just be "information" .No good prospects for fx traders. No good prospect for "capitalism", either.
Nevertheless for the time being, the fixed exchange convertible regime is actually traded.
That is currency is money and hence an asset to own and hold.
Thus the question is how is the conversion , that is the price of a currency in terms of another currency determined. Basically, the present value is determined by expectations of value in the future. This is kind of a hyperset logically and a function which has itself as argument mathematically, the latter more usable and known as "chaotic".
But in practice I think it is just value at risk and hence depending on boundary conditions.
While apparently a set of differential equations exists, the focus is on determining boundary conditions..

QE is not printing money per se, rather it is a redefinition of the term structure of government liabilities. Functionally QE is no different than what the Fed does for Fed Funds targeting with the exception that QE involves longer maturity securities and does not involve non-discretionary purchasing (due to the explicitly stated $600bn amount + balance sheet reinvestment from MBS securities winding down). Fed Funds targeting involves indiscriminatory buying/selling where QE, presumably due to political concerns, involves a discriminatory amount. Otherwise, QE and Fed Funds targeting is functionally the same procedure, just involving different maturities.

What QE does do is the following: 1) it essentially negates US Treasury issuance from the Treasury, net on net resulting in a comparable effect as if the Treasury never issued those securities (eventually bought by the Fed), and 2) it decreases coupon interest income that the private sector otherwise would have received (from the vertical component). The "profits" the Fed distributes back to the Treasury that are reported on an annual basis is no more than the net coupon interest income that otherwise would have gone into the private sector.

As a result, rather than being inflationary (QE is no more than an asset swap involving funds and securities that are confined to the inter-banking system rather than the incorrectly reported "flood of US Dollars"), QE is deflationary because it reduces US Treasury supply (less supply can drive a lower rate environment) and it removes coupon interest income that otherwise would have gone to the private sector.

The financial markets, including Ashraf, have completely misinterpreted the operational reality of QE even though QE has been performed a number of times in history (US Fed Chairman Marriner Eccles essentially executed QE in 1948 after Pearl Harbor, and Japan). QE is not a flood of US Dollars; it is not resulting in a surplus of US Dollars. Rather it is reducing coupon interest income that otherwise would have been paid to the private sector AND it is reducing available US Treasury supply.

Comparable target posted for TBonds at 126'185 and been bouncing off dat level last 7 trading days with an attempt to break today making high at 127'01 and closing back at 126'19. Monday will tell, with any further upside targeting 128'29 next.

Proverbial nightmare updating my charts after vacation :-(