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Wednesday Update… Swiss franc and Gold tell the story

July 27, 2011 Daily Comment No Comments

When the Swiss franc and gold are hitting new highs against the US Dollar then you know all is still not well in the world. USD/SFR has broken 80.00 and gold hit a new high at $ 1625. Most of it is to do with the continued impasse in the US as budget negotiations continue but get no closer to conclusion.
A survey of leading economists does not expect the US to lose its AAA rating but as we know a consensus of economists means nothing in terms of right or wrong views. US treasuries seem to think the same as do equities leaving one to believe that a default and downgrade in the US would indeed be a massive shock to markets despite all the chatter.
EUR/USD has found itself capped just above 1.4500 after a small dip yesterday down to 1.4450. On balance I still favor more upside but the pair could suffer on any knee jerk bounce in the US dollar following some good news.So I would stick to small buys on dips and see if we can make a little more progress on the upside.
Elsewhere the Ausie dollar is firing on all cylinders again following inflation data the currency has hit a near 30 year high against the US Dollar of 1.1060. Sterling got away with yesterdays GDP data of just 0.2% as perhaps worse was expected.Sterling remains vulnerable though and any real Euro strength will see it left behind .
German Finance Minister Schaeuble commented it would be wrong to think the Euro zone crisis could be permanently solved by a one-off summit. Its true but did he need to say it? It could be that very many German politicians are uncomfortable with events and fear a backlash from voters. The public after all are supposed to decide in the long run although Euro politicians would prefer people just accepted that they
know best. Lots of fun and games to come down the road at elections all over Europe.

Wednesday Update… Calm before the Storm?

July 20, 2011 Daily Comment No Comments

With equities on a bounce and gold and the Swiss Franc off their highs currency markets seem to have settled down ahead of tomorrows EU summit. Indeed EUR/USD seems to have nailed itself to 1.4150.
However, I see no real signs of any huge expectation that anything substantial will emerge. Thus far the whole saga of EU debt has been one of reactive not proactive measures and that does not look like changing.In that regard I am tempted to sell any rally in EUR/USD unless something new is thrown on the table although US budget negotiations would probably need to show more positive signs to support that view. The crucial thing to watch is not peripheral bond yields but Spain and Italy. Their markets remain very close to crisis levels and should they become even more elevated then the fire may really be out of control.
All in all then traders seem to be backing away from any large risk taking which seems sensible. Check out this article in UK´s Daily Telegraph on Germany saving or not the Euro.I would love to know what contingency plans might exist for a Euro breakup. I would be staggered if they did not exist somewhere or at the very least have not been discussed in some inner circle. Someone should hack a few phones before we all get custard pie in our faces.