Comments reiterating the US strong dollar policy for the first time in many moons combined with comments from the ECB’s Gonzalez-Paramo that a Greek restructuring could hit markets harder than the Lehman tsunami. With Greek 2-year government bonds yielding a shocking 24%, the market already is signalling a restructuring is all but certain.
The market can stay irrational longer than you or I can remain solvent, but I think we are not far from the point where we get a major correction in EUR/USD.
The Fed is about to shut down the printing press, ECB rate hike expectations have been trimmed (market has only 75 bp more of tightening in the pipeline over the next year) and inflation has been hedged to a fare the well via long metals, oil and dollar shorts. The surprise is that gravity reasserts itself…
As ever, timing is everything. If we get a move back below the 1.4500/25 region in the next few days, I think Mr. Market will be telling us he is tired…
