04 July 2012

Risk On/Off Differentiation

  • QE expected from ECB/BOE. Choice of instrument for Risk On/Off proxy important now.
  • QE = asset prices rally eg S&P, commodities.
  • EUR + GBP should soften. Fortunate that my Risk Off positions only in short EUR/USD and short GBP/USD.
  • Accompanying charts = EUR/USD (down) and S&P500 (up) reflects clearly this different proxies' behaviour.
  • If ECB+BOE disappoint, then my positions will suffer.
  • If they deliver, probably see more strength in asset markets but I want to fade these. For now, cannot blindly sell if you believe in Risk Off.

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