Intraday Market Thoughts

US House of Rep Kills Plan B, Latest on EURUSD-Gold-Yields Trifecta

by Ashraf Laidi
Dec 21, 2012 0:20

Equity futures 2% sell off as US House of Representatives kills Plan B on taxing the rich and will not resume vote until after Christmas. Yet even if the Plan B passed the Republican-led Senate, it is unlikely to make it into the Senate and even if it, Pres Obama would veto it. And the only way to overturn a presidential Veto is 2/3 majority vote by both Chambers which is virtually impossobe. As we near the close of the year, we hear more of the same; major central banks willing to do what it takes to keep yields down, markets stable and risk currencies supported. We talked today about the falling gold/oil ratio, with the force weighing on gold being investors’ exiting from Gold/EUR position. Reports of Morgan Stanley’s pulling the plug off its underperforming gold funds have also dragged the metal down sharply. Next year, in order for gold to avoid a decline below $1570s, interest rates must remain low. Central Banks' shift away from price stability will only drive up yields if the macro-econonomic show marked improvement while policy makers make no notable hawkish steps. We will closely track the EUR/USD-Gold-Yields Trifecta in order to better grasp the catalysts as well as the dependent factors. This week’s Premium Trades include 2 shorts in gold and a Dual Trades in silver (long and short). For these detailed trades and their rationale, take a look at the latest version of Premium Insights “Euro Sticks to the Script”.


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