How Low Will the Euro Go? L-W Strategists Weigh in
By Kristina Zurla Landgraf • Jun 11th, 2010 • Category: Trader ViewpointsOnce the currency of choice among moguls and supermodels, the euro is no longer in vogue. The debt crisis in the Eurozone pushed the euro to a four-year low versus the U.S. dollar, and it’s hard to find many market participants who feel the prospects for the eurozone and its single currency look bright—including our Lind Plus Senior Market Strategists.
According to a poll of our Lind Plus Senior Market Strategists in both the U.S. and Canada, 70 percent are bearish on the euro’s near-term prospects, and 50 percent are bearish on its longer-term prospects. Opinions were mixed as to whether it would hit parity with the U.S. dollar; some said it could happen in six months or less, while others felt the euro would find support before hitting that psychological level.
The euro fell below $1.20 on June 7, but supportive comments from the head of China’s pension fund that the currency will ultimately survive helped pull it off its lows. However, others felt differently about the euro’s prospects.
Chicago-based Lind Plus Senior Market Strategist Jim Comiskey is in the extreme bearish camp. “I think we’re witnessing the beginning of the end of the European Union,” he said.
He’s not alone in his opinion. According to a survey this month of 25 leading economists conducted by the Telegraph U.K., 17 either did not think the euro was likely to survive five years in its current form, or were not certain about its future.
The Commodity Futures Trading Commission’s Commitments of Traders Report on May 11, 2010, showed speculative bets against the euro hit an all-time high of $18 billion. Speculative shorts remain just below that peak in more recent data. While the CFTC reports data on futures contracts, which are just a small slice of the mammoth foreign exchange market, it offers a sense of just how negative traders have been.
Goldman Sachs Group Inc. recently reversed a bullish forecast on the euro, now expecting it will fall to a seven- year low of $1.15 amid concerns about sovereign debt and political uncertainty.
Investors have been fretting that the trouble in Euroland is going to spread, creating a global double-dip recession. These concerns resulted in a bearish May for the stock market, highlighted by the “flash crash” on May 6, when the Dow Jones Industrial Average slid as much as 998.5 points during the session.
Lind Plus Strategists had vastly different opinions about the possibility of a double-dip recession. Odds given ranged from less than 5 percent to 70 percent that it would occur.
Toronto-based Lind Plus Market Strategist Drew Shaw said the current European debt problems are probably just “the tip of the iceberg.”
“I expect there to be a significant pullback once all of the sovereign debt worries are exposed. The markets are very volatile and investors are scared,” he said.
Stock market investors are likely pinning their hopes on a continued economic recovery in other regions, including the U.S. and Canada, to avert a global downturn. Canada’s banking system, and economy, have been particularly solid, prompting the nation’s central bank to increase interest rates at its June policy meeting for the first time in three years.
Most Lind Plus Market Strategists expected Canada would continue to tighten interest rates at a faster pace than the U.S., as early as the next policy meeting in July. The U.S. Federal Reserve was expected to keep its benchmark short-term interest rate steady at near zero until 2011.
Kristina Zurla Landgraf is content manager at Lind-Waldock and can be reached at klandgraf@lind-waldock.com.
Futures trading involves substantial risk of loss and is not suitable for all investors.
The Euro will hit parity with US Dollar and sooner than expected, my bets are on December January. There are closely related transactions many fraudulent related to Ireland’s banking failures. Some of these go back several year and have connections with Zurich Financial Services its Banks and its AIG and AIGFP subsidiaries.
The then Bailout of Parent Company Zurich Financial Services by the American government effectively limited the contagion spreading to Europe. Now Europe´s experiment with a one Euro fits all, including dead duck participant’s like Greece, Ireland, Spain, Portugal, Italy, and now Ireland’s.
Appears so similar to the American experience that questions must be asked about the Mortgage and Bonds debts held by Banks with interconnections between ZFS its holding companies and subsidiary banks.
Further investigations related to its insurance empire should reveal that it is over-exposed and a threat to the stability of the European Union. The EU trillion+ Euro warchest will not go very far compared to the American bailout experience. This just delayed the hit on Europe and the Euro.
Ireland is just the start, paying an unsustainable rolling dept will not help. Austria has baulked payment, Germany may follow, then France, who will argue “why assist, the dept laden beneficiary’s the benefits are dept.
And no amount of printing valueless Euro`s will solve the Eurozones appetite for unpayable dept.
Recent comments by politicians broadcasted today stated that politicians are fully committed to the Euro and that the general public are unaware of their commitment.
It appears according to their view, we are all stupid and we are unaware the Banks are insolvent, that we dont know the Politicians are corrupt and that they have been in the pay of the Banks and Insurers and Financial Institutions for years.
That the IMF, ECB, BIS, UN, World Bank etc has imposed- forced dept on nations and kept them poor deliberately, so that the corrupt Banksters and the Elite order can control with cash the decision makers, the Polititians.
From a general public point of view, most are fully aware just what a corrupt bunch they are, BANKS and INSURERS are top of the most hated and distrusted sectors of society.
Austerity measures forced on Governments by the IMF ECB etc are creating a new World hatred, by the general public of the institutions stealing their wealth, to prop up the Banking Gangsters, who stole the Worlds wealth.
To create an overvalued Euro in a uncompetitive Eurozone as the dominant currency for the IMF-Bundersbank.
Sure the idea was good but just watch the public, they have big boots as well, Spain will fail next because of the greed of the banks, and its masters who tried to control the Worlds CASH.
Modern communications by the public will decide the future and the corrupt will feel the force of public opinion much sooner than anticipated, the ball is rolling allready.
The earlier Irish bank failures and Irelands debts suggest the Euro will silently devalue; it has no options acceptable to member states. It is extremely overvalued, and its problems are compounded by an overpriced uncompetitive shamble of EU mismatched dept laden countries. First it was the eastern block countries then Greece, now it’s Ireland, Portugal will follow then Spain. Whose close trading relationship between Portugal and Spain will mean Spain is next, followed by Italy, then France, again close dependent trading partners. Making matters much worse is fraud, which has become endemic. The root source being AIGFP a Zurich Financial Services owned subsidiary company that caused the failure of the financial system and the banks, destroying the last lingering hope of a European stable Currency.
There are closely related transactions many fraudulent related to Ireland’s banking failures. Some of these go back several year and have again connections with Zurich Financial Services its Banks and its AIG and AIGFP subsidiaries.
The 2008 Bailout of Parent Company Zurich Financial Services by the American government effectively restricted some contagion spreading to Europe. The EU failed experiment with a single Euro currency fits all, including dead duck participants like Greece, Ireland, Spain, Portugal, Italy, and Ireland.
Appears so similar to the American experience that questions must be asked about the Mortgage and Bonds debts held by Banks with interconnections between ZFS its holding companies and subsidiary banks.
Further investigations related to its insurance empire should reveal that it is over-exposed and a threat to the stability of the European Union, and the rest of the World.
The EU trillion+ Euro war chest will not go very far compared to the American bailout experience. This just delayed the hit on Europe and the Euro.
Ireland is just the start, paying an unsustainable rolling dept will not help. Austria has baulked payment, Germany may follow, then France, who will argue “why assist, the dept laden beneficiary’s, the benefits are dept.
Now we have the problems accumulating Portugal is expected to require funding within weeks. The Euro weakness and ECB intervention again will not work, the Euro is overvalued– the yen, dollar, and pound are clear indicators.
As of August 2010 funding by the ECB was
Greece 96 Billion Euro, + Bank deposits 26% = 40% of GDP.
Ireland 95 + 14% = 60%
Portugal 50 + 15% = 30%
Spain 15 + 5% = 11%
The new addition of dept laden Eastern block member countries, being further anchors round the more affluent competitive EU countries necks. And doom from the Spanish housing market indicate clearly Spain will need funding regardless of bullish comments from Ministers and ECB member Banks” but.
It is now time for the ECB to act and devalue the Euro or face a wave of countries opting out of the Euro. The UK is in a primary position and prognosis indicates it will be the currency to hold, with Gold being long term.