Snippets of the day - Mon 04 May 09

The rally just wouldn't quit.

Stocks have been rallying for the past 7 weeks and has surprised even the most bullish investors. Today, the Hang Seng and STI indexes surged more than 5%.

Tokyo is out until Wed for the Golden Week holidays, so forex liquidity is lesser, but that did not stop the Euro and Pound from climbing higher against the dollar on continued stock outperformance.

Both the EURUSD and EURJPY stopped short of somewhere near 100 pips higher from the open. AUDUSD surged to a 7 month high at near 0.74.

However, around GMT 0420 onwards, the rallies took a turn for the worse and eventually gave up all gains hours later as traders took profit. ECB member Weber's statement that the EZ banking system needs more 'cleaning up' and downgrading of EZ growth forecasts by the EC compounded sentiments.

But, I don't think now is the best time to jump right into the carry trades on this correction as we will see announcements from the stress test results, BOE and ECB this week.

Still too much uncertainty.

The ECB might surprise everyone by announcing more than expected QE measures, though I doubt that will happen. What is likely to happy though, are milder measures that include an expansion of the repo agreements etc.