This morning’s RBS Global Strategy newsletter is lucky enough to give us words of wisdom from Andy Chaytor.
If you’ll recall from December of 2009, Chaytor predicted a risk crash in 2010 and more stimulus in the U.S.
Today Chaytor is giving us his two-cents on the Greece:
Following the Greek bailout at the weekend I think many of us have been struck by just how calm markets have been beyond the initial Monday morning reaction. It’s almost spooky. It seems like the market, at least the Greek government bond market, is waiting for the scheme to actually be activated in which case you are more confident in saying it is a big positive, as long as you’re talking about sub- 3y debt! But too many questions remain, such as how the Greek economy will cope with the austerity measures in place (based on recent PMI data, very badly) and what, if anything will need to be done with other periphery countries in due course. So, the issue is on the back burner, rather than fully solved.
And of course, with Greece’s problems solved, anyone who was shorting the Euro is now in a frantic frenzy in an effort to cover:
As someone who was looking for a Greek resolution to kick-start a short-covering rally in EUR/USD, it hasbeen a disappointing few days. It seems that those stopping out of shorts in the EUR were balanced bythose putting on fresh shorts on a view that the most important thing is not that the deal strengthens Greece but that it weakens core Europe. I have a lot of sympathy with that view in the long run, but still believe that positions are too extreme to sell-off until we have had a decent clear out of this overwhelming consensus call. I’m holding on to a EUR/USD long view for a move higher, but my conviction of reaching 1.45 is much lower now; I’d settle for getting close to 1.40 and then reappraising the view.
When it comes to US Treasuries, Andy is now bullish and cautions that the S&P 500 maintaining the 1200 level and above is key to watch for:
My change of view on Treasuries, turning bullish on Monday, has turned out a little better, and the grind lower in 10y yields can continue towards 3.55% I think, but it might take a while. Much will depend on what the S&P does when it gets to 1220, but the trouble in breaking 1200 decisively, as well as the steep decline in volumes recently, add to my conviction that 1220 is going to be a very tough area to break and we will get a correction from somewhere close to this level.
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