Short Term Trading forex trading links forex trading books market statistics trader values euro and us dollar Shocks Crashing Europe: In The Cyclone’s Eye?

Saturday, 3 September 2011

Europe: In The Cyclone’s Eye?

(Image: Nasa via Flickr)
As the summer’s heat is fading away, markets are showing an apparent calmness. The Euro/Usd has failed to overcome key technical levels. The current decline could shortly reach 1.41/1.40 against the U.S. dollar, where various levels of support meet.



Germany: the lowest unemployment rate in 20 years
As the summer’s heat is fading away, markets are showing an apparent calmness. Will it last?  None of the important issues have been resolved. A divided Europe is pairing with a divided Fed. Wounds are still open, after weeks of intense battle. The German electorate, as an example, is rejecting the rescue plan that saved Greece few months ago. Chancellor Merkel could see her political consensus evaporate further, despite the unemployment rate reached in August the lowest level of the last twenty years (7%). In reality, nobody wants to pay for the mistakes of others, especially when contributor money is at stake. So, Finland has taken the initiative to organize bilateral meetings with the Greek authorities. The Finnish government is asking Athens for financial guarantees in exchange for its commitment to the rescue plan. A popular move, apparently, since other European nations are demanding the same kind of backing. In effect, the economic growth is fading in Europe. The European Union economic sentiment was down for six months on a row in August and the currency is again under pressure. Euro/Usd has failed to overcome key technical levels. The current decline could shortly reach 1.41/1.40 against the U.S. dollar, where various levels of support meet. Only a move below 1.3770 would take the price to 1.35, 1.33.

E.U.: The Debt’s Tale Stings
The German economy, in particular, is shrinking, along with consumer confidence. The Gross Domestic Product (GDP) declined 1.2 points from the previous quarter, as private consumption is falling for the first time since 2009. In France (Europe’s second economy), growth has stalled in the second quarter and consumes are weak. In effect, the tale of sovereign debt crisis is still in progress and some nations are trying to implement austerity measures. The Spanish government has decided to change the constitution, so that the Maastricht parameters cannot be overcome any more. Reducing debt is a main priority for the Euro zone. It would restore confidence among consumers and unleash E.U. full potentiality. Nonetheless, it will require time to be realized. For now, the ECB must keep on buying the Italian and Spanish bonds, while the Greek banks are starting to be short of the collateral necessary for obtaining ECB’s normal refinancing operations. If this would be the case, the central bank of Greece could step up to provide the liquidity at penalty interest rates. In this fragile economic environment, the European Central Bank (ECB) should keep rates stable for now at 1.5%, as inflation is receding from the highs. Yes, there is an apparent calmness in the cyclone’s eye.

Written by Angelo Airaghi, www.ProfitsOn.com

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