Today's price action reflects the fragility of the US dollar.
There is no doubt that it is a crowded trade and whenever there is a crowded trade everything has to go perfectly to keep it going. Today featured a pair of economic data releases that were far from perfect. The S&P Global services PMI fell to its lowest level since April and the UMich consumer confidence survey was revised lower.
Meanwhile, the PMIs out of the eurozone and the UK were better than expected.
That has been enough to launch a 140-pip squeeze higher in cable to 1.2490. So far offers at 1.2500 are holding but it has been a big move that builds on last week's similar size pop.
GBPUSD daily
Another notable call today (although it defies the notion that this was an extremely unnatural trade) came from Larry Fink at Blackrock who said there is too much pessimism around Europe and it might be time to invest again.
Similarly, Christine Lagarde said this:
“If European leaders can get their act together and respond to this urgent threat, there is great potential for Europe to respond to the call,” she said.
That is certainly a tall order with the bureaucracy of Europe but it is an opportunity.
I believe the best place to invest in the developed world for the next decade is whichever country figures out how to build things up again. There is a growing consensus that the red tape is not unbearable but it is not easy to solve.
