|
| |
 | |
|
|
Currency Trading Information Channel |
 |
|
|
| |
|
| |
|
|
Currency Trading Information Channel |
|
|
|
|
|
Crisis of Confidence in the EUThe European Union (EU) constitution was dealt a double blow, first by a French "no" vote on 29-May and then by a follow on "no" from the Netherlands on 01-Jun. To add insult to injury, one low level Italian diplomat quickly called for a referendum in Italy to decide if a return to the lira was warranted. Additionally, Prime Minister Tony Blair, who took over leadership of the EU on 01-Jul, indefinitely postponed the British referendum on the EU constitution. This news along with plenty of speculation about the repercussions dominated the international headlines for much of the month of June. Not surprisingly, all the hubbub about the EU had a direct impact on the FX market. The euro fell to a new seven month low following the French referendum, reaching a low of 1.2371 and the "single currency" has been under pressure ever since. Probes below the 1.2000 level were seen ahead of 30-Jun, suggesting additional near term downside potential toward 1.1756 and beyond. Since the inception of the euro in 1999 central banks, especially those in Asia and the Middle East were seen diversifying out of dollars into the euro. They were not only looking to scale back their substantial dollar holdings in the face of a declining market, but they also sought the higher returns available in the eurozone. However, returns on eurozone deposits slipped below those in the United States in December and the FED's string of rate hikes bodes well for those differentials to further widen. Combine the better returns in the US and a generally more favorable dollar outlook with the specter of continued political turmoil within the EU and it seems there is little incentive to hold euros at this point. Truth be told, the EU was facing some rather significant hurdles long before the double "noes" derailed confidence. Many of these hurdles are associated with expansion. Discontent on the part of established club members with the admission of central European countries in May-04 and general hostilities about the proposed admittance of Turkey played significant roles in the recent referendums. In addition, diverging economic performance, productivity growth, inflation and fiscal performance among member nations are all fodder for further turmoil. Worthy of particular note is the broad based economic malaise in Italy. Italian consumer product manufacturers are losing their battle with Asia and consequently the trade balance is moving into the red. Unemployment is up, as is the budget deficit. Being part of the euro, and therefore having a relatively high exchange rate, essentially thwarts any effort to compete with Asia on price. Without its own currency, Italy is unable to devalue out of its non-competitive position. Hence, the aforementioned comments by Italian Minister Maroni. Countries such as Portugal and Greece are also in rather dismal economic health. The budget deficit of the former has already reached 7% of GDP. Many have noted that the EU constitution may be dead, but it's not buried yet. I'm not so sure that I would agree as approval of all 25 member counties is needed for ratification. The initial thought was that any dissent was likely to come from newer or smaller EU countries and that a little economic arm twisting by the likes of France and the Netherlands might encourage them to reconsider. Unquestionably the long standing skepticism of the Brits was going to be an issue. However, rejection of the constitution by two of the founding members of the EU certainly throws a wrench in the works. I don't believe that we need to worry about the European Monetary Union (EMU) breaking up any time soon. In other words, the euro will continue to be actively traded on the global spot market. A Reuters poll early in June suggested there is only a 5% chance of an EMU collapse within the next 15 years. However, around the same time the German weekly magazine Stern reported that the failure of the EMU was discussed at a meeting attended by German Finance Minister Hans Eichel and Bundesbank President Axel Weber. Having said that, I don't think there is any question that there is a greater risk premium attached to the euro than there was a month ago. In the months ahead, look for continued political wrangling within the EU. Further bad news is likely to be forthcoming, which should help keep the euro under pressure, creating trading opportunities not only against the dollar, but in the cross rates as well. Peter Grant is VP of Operations for CFS Capital Management (http://www.cfscap.com), an alternative investment firm in Lakewood, Colorado. This article is an excerpt from our monthly newsletter 'The Alternative' which can be read online at http://www.cfscap.com/news.htm. Emails may be sent to [email protected]
 MORE RESOURCES updated Wed. March / 03 / 2021Which Are the Basic Forex Trading Styles? NameCoinNews What is the Interbank Market? Investment U Forex Trading – How Do I begin? - NuWireInvestor NuWire Investor Moscow Exchange Reports Stable FX Volumes at $325 Billion Finance Magnates FDCTech Accepts Payment in Bitcoin (BTC) as Market Acceptance of Digital Currency as a Medium of Exchange Grows Rapidly Yahoo Finance U.S Dollar Correlates with Market Risk Appetite Yahoo Finance The Currency-Market Snoozefest Might Not Last The Wall Street Journal Forex Trading Mixed Financial Tribune How to Trade Commodity Currencies in Forex Trading Moneyshow.com 2 crypto currency trading platforms shut down by New York Attorney General WWTI - InformNNY.com Comprehending Forex Trading Signals Live Bitcoin News 3 Simple Forex Trading Strategies Mighty Gadget How safe is forex trading in Kenya? Capital FM Kenya How to Start Home-Based Business with Forex? The African Exponent How to use fractal trading strategy ForexLive ECB's Weidmann: 2021 German inflation seen somewhat higher than December forecast of 1.8% Forex Crunch EUR/USD Forex Signal: Looking Bearish DailyForex.com How to increase consistency in making money doing Forex Trading Australian Times Gold Price Analysis: Rising real yields raise the prospect of a serious XAU/USD fall – Credit Suisse Forex Crunch Global Foreign Exchange Software Market Top Players 2026: eMoneyexchangesoft, Thomson Reuters FX Trading, AFEXDirect, Banking Circle Real-time FX, Biz4x etc. The Bisouv Network Swedish PM Lofven condemns knife attack in Vetlanda Yahoo Finance Customer First: Mitigating currency risk within the turbulent travel industry World First Foreign Currency Exchange EU’s Breton: Aim to increase covid vaccine production capacity to 2-3B oses per year by end-2021 Forex Crunch USD/INR Established A New Trading Range Between 72.80 To 73.80 With A Weaker Bias Investing.com India Befimmo SA: Transparency declaration Yahoo Finance UK's Sunak: Will do whatever it takes to support British people and businesses through crisis Forex Crunch Central bank, police officials warn against investment in forex trading floors http://en.vietnamplus.vn/ What Is Forex Trading? Forbes Trading Forex For Living – is it for real? TechFinancials The 6 Best Online Forex Trading Classes of 2021 Investopedia Forex Brokers: Are They a Scam? | Investing | US News U.S News & World Report Money Forex Market: Unlocking Opportunities for Investors Visual Capitalist A Forex Trading Guide For Beginners | Sponsored | state-journal.com State-Journal.com Next Forex Trading Terms You Need to Know Before Trading North Forty News Making Money By Forex Trading The FINANCIAL Best online brokers for forex trading in March 2021 Bankrate.com Facts You Need To Know About Forex Trading Forbes India Why are forex signals important? AZ Big Media Everything To Know About Getting Into Forex Trading GQ Australia How to Trade Forex? - A Guide to Forex Trading in 2021 DailyForex.com A guide to forex trading instruments - Boca Raton's Most Reliable News Source The Boca Raton Tribune What You Should Know About Forex Trading Signals - Robotics and Automation News Robotics and Automation News is Forex Trading a Good Way to Make Money Online ? Love Belfast Forex vs. Cryptocurrency Trading, Explained Cointelegraph
|
