G3 Recap 3-8-11

Main Items:

  • US NFIB Small Business Optimism improved to 94.5 in Feb vs 95 expected and 94.1 previously.
  • Several OPEC members are joining Saudi Arabia in raising output – Reuters. Kuwait, UAE and Nigeria were planning to ramp up their production by 300k bpd. When combined with the increase in Saudi production, this is expected to make up the shortfall from falling Libyan crude exports.
  • Reuters reported China cancelled increases of required reserves previously imposed on several banks

Overseas Data:

  • UK RICS house price balance improved to -26 in Feb as expected vs -31 previously.
  • Australia NAB Business Confidence improved to 14 in Feb vs 4 previously
  • Japan Eco Watcher Outlook Survey was unchanged at 47.2 in Feb
  • Reuters reported China cancelled increases of required reserves previously imposed on several banks


  • I’ve been bullish (and too early; i.e. wrong) on EURCHF based on the cheapness of the cross, the uptick in relative growth, and an apathetic view on the PIGS. The last factor has by far been the most significant for price action over the past year, but PIGS CDS seem to be withstanding this recent bout of risk aversion, along with the ECB hike fairly well:

    This may mean that the cheapness and relative growth expectations may start to come into play:

    EURCHF seems fairly priced vs the CDS basket, so it may make sense to just go long outright. Bullish intermediate term risk reversals may also be attractive.

  • Interesting chart from Barclay’s


3 thoughts on “G3 Recap 3-8-11

  1. looks like copper broken through 1y trend line.

    with oil putting pressure on growth expectations and concomitant reaction from EM further inflation related tightening bias, that makes sense. i guess CTAs may be unloading a QE2 trade that has done very well and now has a number of risks associated with it.

    guys at macroman have some interesting points on china today and a new 5 year plan that focuses less on nominal growth and more on real growth and its distribution could also make copper top heavy longer term. am not on top of the supply situation, but further copper stock piling by chinese may be at risk.

    1. Thanks Bert. Good point about CTA’s, but I’m not as sure about the effect of the new 5yr plan. I respect the guys at MM, but I feel like it’s too long term to have as much of an impact.
      I’m not sure what the guys at MM have about copper supply, but since copper mines takes years and years to set up, I’m assuming that they are referring to copper stocks in exchange warehouses. If so, I’m not sure how much to read into it as the data can be choppy. My 2c anyway…

      1. think their take was on commodities in general and lead specifically.

        rbnz does 50bp … guess there was no reason to disappoint.

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