The Residential Real Estate Post-Crash Index-Moderated Message Board

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Strategies & Market Trends : The Residential Real Estate Post-Crash Index-Moderated

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From: Mike Johnston	1/31/2012 10:04:28 AM
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1.12 On The EURUSD Coming? Submitted by Tyler Durden on 01/31/2012 - 09:57 Back on January 16, Zero Hedge, once again just a "little bit" ahead of the general press posted an article titled: " A Shocking €1 Trillion LTRO On Deck? CLSA Explains Why Massive Quanto-Easing By The ECB May Be Coming Next Month." Today, the market has finally awoken to this probability following an FT article which comes to precisely this conclusion (not to mention an FTD article which throws around a €1.5 trillion number, which at this rate will soon hit the CS whisper number of €10 trillion). Of course, better late than never. But what does that mean? Reverting back to our trust key correlation of 2012, namely the comparison of the Fed and ECB balance sheet, it would mean that absent a propotional Fed response, the fair value of the EURUSD would collapse to a shocking 1.12 as the ECB's balance sheet following this LTRO would grow from €2.7 trillion to €3.7 trillion. This can be seen on the attached chart.

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