This is some essential reading from the FT’s Alphaville. They spoke with hedge fund manager Andrew Law of Caxton Associates, who is one of the best macro traders out there and the former head of fixed income trading at Goldman Sachs.
He doesn’t spell out FX forecasts but he talks about continued disappointing growth in the US, no taper, Japanese stocks continuing to gain and no problems in UK housing. He is bearish on the US dollar and modestly bullish on the euro.
We are not going to get overly excited about it but Europe is looking better – there has been a big investment drawdown and it is now having a bounce from the bottom of that. We view the global economies as less correlated than they were in 2011 and 2012. The ECB’s actions last summer to reduce systemic risk have allowed markets and economies to begin to act independently of each other.
The marketplace has spent the last 4 years trying to sell the Euro and not quite understanding why it hasn’t collapse to the teens… maybe now people will have their moment [being long].
It will be fascinating to see how the ECB responds if the Euro/dollar exchange rate comes up through 1.40. I think that is probably going to be the least line of resistance in FX. The ECB is not going to be too pleased. … maybe they will lower the refi rate. I imagine they will talk publicly about it.
Andrew Law
I think I see ForexLive on one of those screens
