A nice piece from Kit Juckes at Société Générale:

Why there is so little volatility in any asset class, and why is the Euro so stubbornly strong?

  • Low interest rates, low interest rate expectation and central bank liquidity sloshing around the system are, forcing yield-desperate investors to sell vol and buy carry
  • … there is nothing to alarm the FOMC, or the markets
  • And since volatility spikes correlate with a strong dollar, low volatility is ‘bad’ for the dollar and by association, must be at the margin helpful for its main counterpart, the Euro.

This part gave me a smile (written for Monday morning in London):

  • My baby model reckons EUR/USD should be at 1.36450 this morning, which isn’t helping the cause for excitement.

As for ideas:

  • We like being short EUR vs. NOK, GBP, PLN and TRY.
  • We like longs in NOK/SEK and AUD/NZD here.