Talking Points:
• Anticipation led the Euro to discount a bigger ECB stimulus upgrade than what was delivered, triggering a rally
• There are a number of themes and assets that are 'crowded' but popularity to not ensure reversal
• We look to the benchmarks for the well-established themes of monetary policy divergence and risk trends
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A popular market position does not inherently mean its trading potential has been fully sapped. Far from it. Trends develop for a reason - whether rational or emotional. And, fundamental encouragement or speculative exuberance can extend trends well beyond the bounds of a simple 'expensive' or 'cheap' label. Yet, when the toppling of a crowded trade catalyzes a fundamental imbalance; reversals can and do occur. We look to separate the conditions that can generate skepticism from those that are more likely to change the tide in this weekend Strategy Video. The focus of this evaluation is two of the most comprehensive themes in the financial system: divergent monetary policy and risk trends with discussions on the Euro, Dollar, Yen and equities.
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