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European Wipeout Continues: EURUSD $1.24 And Falling, PLN And HUF Plunging, Carry Unwind Accelerates
As of early this morning, all of Europe is plunging, not just the euro but all non EMU currencies as well: the EURUSD was in the mid 1.24 range, the GBPUSD is about to breach 1.45, while the Polish Zloty and Hungarian Forint are tumbling. Guess who is up: Gold, surging by over 1.2%, and at $1,245 at last check. The LBMA attempt to contain gold has failed and the market is preparing for a second assault on the $1,250 big resistance, whose take out will next take gold to $1,500. And while Greece is striking again, now the European core is accelerating the squeeze of the periphery: Romania is slashing its government budgets by 25%, and its pensions by 15%, which has resulted in immediate protests. We expect to see many more signs that the Greek contagion is only now spilling over into the social sphere.
Here are the relevant currency heatmaps:
EUR:
GPB:
And the ongoing carry unwind:
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Euro at 2008 lows. It has to be seen to be believed. Expect something big.
I am going to put on some big shorts on US equities today. And my trip to Italy this summer is getting cheaper by the minute! More panic, please!
Something Big?
Maybe its France rather than Germany that Pulls the Euro Plug first.
http://www.guardian.co.uk/business/2010/may/14/nicolas-sarkozy-threatene...
http://www.elpais.com/articulo/espana/Zapatero/Sarkozy/amenazo/salirse/e...
I've always thought France to be the most likely to abandon the euro. They wouldn't do it, though, until they were able to get the Maginot Line back in place.
Vive le Franc!
I wasn't aware it moved. Or is it still facing west and they need to re-orient east? Keep you're eyes on Belgium.
what are the real ramifications of the frogs pulling out?
The usual: French Francs go back into service and is promptly devalued vs the Euro, the GBP and the USD, giving a welcome respite to French economy. Until everyone follows suit, which would a couple of seconds later.
Don't forget to pack you're flame-retardent PJs.
Humpty Dumpty King Dollar is here, yet when the private member owned Federal Reserve falls off the wall it may happen breathtakingly fast and then... all the Rothchilds horses and all JPM/GS/Warburg/Schroder/Shipley/Lazard men can not put King Dollar back together again.
Got physical gold/silver?
Will the ECB intervene - maybe at lunch time? On the otherhand if the ECB uses the swap line they would be working against themselves. To reduce Euro liquidity while increasing USD liquidity is what an intervention would mean. This would result in Euro bond yields going higher. So they can either have lower yields at the expense of the Euro or vice - versa. I doubt they will intervene in the currency for more than just a little fun at lunchtime.
I doubt the ECB wants to use their swap line to facilitate the carry trade and dollar short unwind. They need a weak currency right now.
They need to start a short squeeze in sovereign debt and CDS. They need it yesterday.
I don't think they can stop it. Let the tide run awhile longer and maybe they get a dead cat bounce but the writing is on the wall imo. [/cliches]
On August 15th, 1971 the bonfire of currencies started to smolder...
I believe France also has a long and illustrious history of sovereign default. They also were the epicenter of paper money with the JohnLaw episode in 1720.
A currency declining due to excess liquidity - is relatively easily cured. A currency declining due to structural fears is another matter altogether.
Agree & thats why its premature to write off the USD especially when it's making new 52 week highs each day.
Gold is crowing from the highest roost, the usd is a runny egg.
But is it real? It's just getting stronger because the others are getting weaker. It's still outrageously inflated. If the highs meant anything, I'd be able to go buy .. say, food.. for what? 20% less on average?
2 guys start out at 200lbs. Person B loses 50lbs. Person A now weighs more than Person B, but Person A hasn't changed his weight at all. Is person A heavier because he gained weight? /rhetorical.
Big full green candle close up over 1%
This works out beautifully for the US. the main competitor the Euro is in a serious decline due to structural,existential concerns. Benny will be more than happy to try to weaken the Dollar with excess liquidity.
So US bond yields stay low. Europe does'nt have that luxury.
In a world with escess debt - the country that can maintain low interest rates wins. Countries whose bond yields are forced up - default.
Here comes the lunchtime intervention. I guess traders in London and Paris actually take a break for lunch?!!!
Suspect the Euro hammering will continue once NY gets in. NY traders dont break for lunch. Lunch is for losers ( Gekko?).
This calls for some quantitative easing.
I called it perfect last night 1.2575 pump, then down to 1.24
Damn I'm good!
What is happening is that "...For an extended period...." Language will be removed/altered in June, therefore we see the USD "carry-trade" unwinding right now.
Hence the Banks in US and Global alike has again persuaded Ben B to setup FX swap so that the big guys can get back to USD quickly. Forget about € dissolving it is just a trash story. It will never happened, and if it happened, well then it will drag the USD with it. No one wants that.
And when this €/$ pair correction is over, China will buy Euro debt big time.
China buys US debt to get an access to the world market of commodities.
The Euro is an entry point to nothing, not even the EU inner market.
Why would China buy EU?
Do you know what trade is? Contemplate that for a while and then come back....
What is trade? No, I dont know. Never been able to figure out an answer to this one.
I have an idea but it requires more validation.
In what way knowning what trade is influences the point that China will buy EU debt?
US-China import: $296Bn
US-China export: $70Bn
EU-China import: $270Bn
EU - China export: $98Bn
And the EU area growing both in number of EU member states and trade. China need to balance their trade surplus with EU as well as with the US. Thats why.
This is not even close relatively to were it should be today. Maybe thats the worry and why we see all these outrages call of the demise of the € from the Anglo world?
China won't buy nothing. They have their own problems. Their surplus (or what's left of it) will go towards fighting their own depression, not buying up ridiculous Spanish or French debt.
The EU will do anything to avoid breakup. Countless bureaucrats in Brussel and the the ECB itself depend on the existance of the Euro. There is no one to stop either institution.
You have countless of bureaucrats in Washington and Whitehall as well...that doesn't mean the USD project nor the Pund project will dissolve into California Pesos or Welsh Pund.
YEAH ! lets see that, but i agree Euroburocrats are like Russians when Hungary wanted to free itself from communism in 1956. They came and were willing to slaughter everyone who is against communism. Euroburocrats in Brussel would do anything and everything it takes to keep the casino rolling.
Also most countries still have plenty of folks who would not want to leave euro doesn matter the consequences just like in communism the local collaborators.
http://imaginarymuseum-archive.org/H56/LapingHungary1956.p103.jpg
The euro would bounce up sharply if one or more of the PIIGS is ejected and re-issues local currency. The euro will fall fast if Germany, Finland, Luxembourg etc pull out.
Practically speaking - the former scenario is more likely. 80/20 odds. ZH poll suggestion here...
What? Goldman said to buy zlotys!! now what do I do?
you buy zlotys fool, zloty in exact translation means "goldies"
and that's why goldman would suggest a buy of "goldies"
get it ?
THE SINKING OF THE EURO:
http://williambanzai7.blogspot.com/2010/05/sinking-of-euro.html
I love it. Where can I get more of these maps in the future?
What was the value of EUR USD on Jan1 1999 (the day the euro started)?
What is the 10yr average EUR USD rate?
What is the average of absolute maximum deviation from that number during any given year over the past 10?
Now look at how far would it have to go to get to one average maximum deviation below the current 10-year average?
If people have that number, why do they get so excited over a little froth?
All things considered, if the euro drops back to parity with the dollar (and that is not unprecedented - it went a similar distance the other direction several years ago, and anyone long the dollar in mid 1998 got a lesson too), who wins and who loses? The PIIGS become low-cost producers within Europe, HNWIs in PIIGS witness the power of home-country asset deflation firsthand, German becomes low-cost producer for high-value-add exports among global industrial powers, Germany sees higher growth than people currently expect, Europeans travel less ( except for the Irish who export tech workers once again), French unions work 40 hours a week, and 'les cheminots' work past 50.
Oh, and I forgot, Britain gets its anti-euro panties in a twist again because the pound won't be weak enough again.
Well... maybe I was exaggerating on les cheminots...