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Monday, June 4

4th Jun - My Views: Risk goes "/\"

What I expect this week:
QE3 is becoming more probable and markets should start pricing that in. ECB is the key: an interest rate cut is almost fully priced in, while additional measures are beginning to be priced in. My guess is that the risky assets will be in demand ahead of the ECB meeting, and afterwards we will see a sell-off, also because of the then approaching weekend and all the event risks associated with that. "An Inverse V" or a "/\", if you will.

As the FED is more likely to act than the ECB, it could be a good idea to go long on EURUSD as well. The long EURUSD/short SPY trade suggested on ZeroHedge makes sense to me - esp. right before the ECB meeting

My original expectation was for Spain to send an official bailout request on Tuesday, but this could be postponed to next week, after the ECB’s meeting – this sounds logical – if the markets price in ECB’s help now, it should also ease the pressure on Spain. But if and when the ECB fails to deliver…

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