...been AWOL studying for Bar Exam. Entered short EUR/USD at 1.2465 (ouch at current levels) a couple days ago. Depending on the polls, SYRIZA looks set to win, even though the market looks priced to a ND win but unsure as to whether/what a coalition would look like under ND.
The last Public Issue poll in Greece shows SYRIZA as the likely winner; Public Issue's polls have indicated this for the last 3 weeks. Other polls, however, show SYRIZA and ND in a statistical dead heat, with ~ 10% of those polled identifying as undecided. The Public Issue polls adjust their poll figures (where the other polls do not) by asking an additional question, roughly, whether they lean right or left. Those undecided identify themselves 50% as left-leaning and 30% as right leaning.
To me, making the call before the results are in is a gamble, but I think 1) I'm right in the call; and 2) the potential downside to the trade is dwarfed by the potential upside.
The last Public Issue poll in Greece shows SYRIZA as the likely winner; Public Issue's polls have indicated this for the last 3 weeks. Other polls, however, show SYRIZA and ND in a statistical dead heat, with ~ 10% of those polled identifying as undecided. The Public Issue polls adjust their poll figures (where the other polls do not) by asking an additional question, roughly, whether they lean right or left. Those undecided identify themselves 50% as left-leaning and 30% as right leaning.
To me, making the call before the results are in is a gamble, but I think 1) I'm right in the call; and 2) the potential downside to the trade is dwarfed by the potential upside.
Update: a SYRIZA victory won't have its full effect until Wednesday when, IMHO, the Fed will fail to deliver the large asset purchases or LTRO-style program the market is hoping for/betting on. My view is based on how I view the Fed's mindset: Bernanke has sounded much more hawkish lately (diminishing effect of subsequent QE's might have the consequence of the market not believing the Fed has any bullets), the possible inflationary effects (particularly oil), the political consequences (Republicans threatening to change/alter the Fed and its mandate, and therefore power), and finally, the lack of any real impetus to change the current economic forecast of "moderate growth across regions," which doesn't need a monetary stimulus.
ReplyDeleteOuch indeed. ND forming a government was already priced in, so there wasn't too large a spike in EUR/USD. What is surprising is how much it has held up post-FOMC announcing no QE3. Short covering? I think so. I (almost) doubled down at 1.27, bringing the average to 1.2550. There's alot of economic news from Europe tonight, including French and Spanish bond auctions. If they come in better than expected, I will likely be closing my position, at a sizeable loss.
ReplyDeleteHolding on...while the market is treading water on the assumption that policy-makers are going to come up with *something* this weekend. Given Merkel's comments about no J&S euro debt in her life, I'm betting not...i.e., I'm keeping my EUR/USD short for now.
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