Disliked{quote} The reports are generally honest opinion of research analysts which in this age are not allowed to talk the bank's books. all banks are very careful now least regulator accuse them of publishing false reports knowingly. Research groups are generally separated from trading side. These research reports are bank's way to generating trading business from clients - when clients like the reports (trade idea as well as the reasoning, they are likely to trade with the banks). big clients get research from everyone so if they start liking work of...Ignored
These are forward looking markets. Banks give advice on all knowable information in markets currently, but they can't help when something new that changes participant thinking pops up. Their reports face just as much event risk and uncertainty as our trades do.
As an example, it was Citi or Credit Suisse that called for a EUR/USD short around the beginning of last week pre-FOMC. Their advice was based on the macro differentials and was perfectly sound (US Fed getting close to a rate hike because the data has been very supportive of the economy as of late vs. Eurozone interest rates being super low and ECB quantitative easing), but we all know that's not what happened. How were they supposed to know that the Fed Meeting Minutes would be on the dovish side creating risk-off sentiment where traders look to get out of overcrowded trades? With the EUR being used heavily as a funding currency, as shorts exited their positions and supply gave way it had a nice rally up.
The banks give solid advice based on what they know now. In the recommendation up, EUR/USD is bound to go down eventually unless the macro situation completely changes (which looks very unlikely at this point in time). The problem is the timing. In a forward looking market, news/data must come out supporting any view so that the order flow will be biased to that side and price will move that way.
Banks get nothing out of lying in their reports. Remember, since banks mainly make money from charging the spread they make money whether we go long or short; compared to the bulk of their trading rarely are their trades speculative. The risk of lying would not be worth it.