Vinces capital _ el valor de una buena decisión


The signals from the Eurozone bond market cannot be ignored especially as the weakness is happening despite the backdrop of ECB QE. Australian dollar trend 2016 ECB QE has helped bond markets to price in risk while at the same time avoiding abrupt moves and volatility. Stock market futures bloomberg Remember that these QE purchases will go down a notch from April when the ECB will be expanding its balance sheet by EUR60bn instead of EUR80bn per month.

If things do worsen for Eurozone bond markets then this may provide the ECB ammunition to expand QE. Malaysian ringgit to usd history Remember the ECB has an asymmetrical bias toward QE in that it will increase the “size and/or duration” of the programme should 1) the economic outlook becomes less favourable, or 2) if financial conditions become inconsistent with further progress toward a sustained adjustment of the path of inflation.

However, we think an increase in QE is unlikely given the German election and that any expansion of QE would only worsen the scarcity and collateral shortage issues as well as complicate its exit strategy (tapering debate). Convert aed to usd As long as the ECB feels that there are “legal and institutional constraints” to lifting the issue(r) limits, it is likely that QE tapering instead will happen in 2018.

The next best options for the ECB are to strategically conduct purchases and maybe adjust the composition of QE. Aud to usd graph On the former, the strategic use of QE purchases would help maximise the market impact of purchases, while on the latter the ECB can buy more government bonds and less of other assets. World stock market futures bloomberg The spread widening on France and Italy is understandable given concerns over the presidential election for the former and potential early elections/NPL issue on the latter. Binary code to english The ECB will not stand in the way of this adjustment as long as markets do not once again flirt with the idea of Eurozone breakup risks. Euro football scores Our preference is to play for Italy to underperform France and will look to play this via a 5yr France/Italy spread widening from the current spread of 96bps (using mids) stop at 80bps, and target of 180bps

The message that “monetary policy can respond, in either direction” will be repeated at the February BoE meeting on Thursday. Stock market futures 2014 We still expect the BoE to deliver more QE but much will depend upon UK/EU Brexit negotiations that are likely to begin once Article 50 is triggered.

With inflation likely to rebound sharply over the coming months, BoE’s Carney will once again reiterate the limits to the “extent to which above target inflation can be tolerated”. Financial futures market With market based measures of inflation elevated and GBP close to its lows, the risks are not only to the upside on inflation but also the potential for inflation expectations to become unanchored.

A rate hike would have been a real possibility given that the economy has surprised with its resilience since the Brexit referendum last year. Call option definition However, the BoE is cognisant that despite this resilience the economy is at risk from downside risks to consumption/investment. Ice futures europe trading hours An expectation that the risks related to growth will materialise is likely to prevent the BoE from tightening policy.

We continue to see GBP risks biased to the downside although the unit is oversold currently with a lot of negative news already priced. Call and put options explained Holding longer dated GBP vol via OTM puts remains both a portfolio defensive strategy as well as a view on further GBP weakness. Dollar pound exchange rate graph We continue to favour being long 1y or 2y OTM GBP puts to play for GBP weakness on difficulty in funding the UK’s c/a deficit as well as higher vol related to tough Brexit negotiations

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