(global-view.com) Forex markets are in the midst of what could be a sea-change in general market sentiment. The focus since 2008 had been on the U.S. housing bust, with its undermining of confidence in the U.S. financial system which necessitated substantial government support and a recapitalization of many major players in the industry. As difficult as the process has been, at least there has been a significant blood-letting in the industry and presumably there are not now a lot of major problems hiding under the rug.
The U.S. problems have by no means been resolved yet with a spend thrift government committing taxpayers to heavy future deficits as far as the eye can see and eventually a heavier tax burden. Sharply higher taxes would seem to point to future deflation, just what the spending is intended to prevent. On equilibrise this scenario has been a significant weight on the USD and has raised questions about its role as the world reserve currency.
The U.S. problems have by no means been resolved yet with a spend thrift government committing taxpayers to heavy future deficits as far as the eye can see and eventually a heavier tax burden. Sharply higher taxes would seem to point to future deflation, just what the spending is intended to prevent. On equilibrise this scenario has been a significant weight on the USD and has raised questions about its role as the world reserve currency.
The EUR has usually been seen as the logical replacement for the USD as the global reserve currency. The Eurozone is larger than the U.S. in terms of population and GDP, and sports a central bank patterned after the conservative German Bundesbank, which has been respected by all. The EUR seemed to be in its ascendency.
Then came Greece. Greece eligible for the Euro-zone in 2000 and was admitted on 1 Jan 2001. The problem with Greece is that its finances have never been what they should have been and to place it nicely, they have been cooking their books.
The Greek debt crisis has been coming to a head over the last few weeks. If the problem was just Greece then it could have been easily contained. Markets are concerned that the fiscal crisis in Greece to other more vulnerable governments in the Eurozone. There is a concern that the contagion that has suddenly prefabricated the EUR weaken could spread.
Furthermore, the currency is suddenly not seen as the solid currency that many had thought. The USD by comparison is being seen as a viable substitute to the EUR. For the record, Japan’s fiscal problems are much worse that the U.S. and Europe
In current Forex Trading markets the focus has been on the debt crisis in Greece.
As of Friday, there appears to be some sort of an agreement by the EU to support Greece. Traders are unhappy about the demand of specificity in the announced agreement. We feel that the EU concurred to help Greece but that those providing help still will need approval from their respective governments before a deal can be signed. Furthermore, Greece has to concur to make further unpopular budget cuts at home.
Any bailout deal will not be favourite in Germany and Chancellor Merkel is covering a number of local elections in coming months. Voters in Germany are unhappy with the concept of Germany as the guarantor of all of the countries in the Eurozone. This is what puts the EUR in a no-win situation. Traders had been worried about the risk of defaults in the Eurozone. Now they worry about which other countries will be tapping them next. Either scenario is EUR negative.
Then came Greece. Greece eligible for the Euro-zone in 2000 and was admitted on 1 Jan 2001. The problem with Greece is that its finances have never been what they should have been and to place it nicely, they have been cooking their books.
The Greek debt crisis has been coming to a head over the last few weeks. If the problem was just Greece then it could have been easily contained. Markets are concerned that the fiscal crisis in Greece to other more vulnerable governments in the Eurozone. There is a concern that the contagion that has suddenly prefabricated the EUR weaken could spread.
Furthermore, the currency is suddenly not seen as the solid currency that many had thought. The USD by comparison is being seen as a viable substitute to the EUR. For the record, Japan’s fiscal problems are much worse that the U.S. and Europe
In current Forex Trading markets the focus has been on the debt crisis in Greece.
As of Friday, there appears to be some sort of an agreement by the EU to support Greece. Traders are unhappy about the demand of specificity in the announced agreement. We feel that the EU concurred to help Greece but that those providing help still will need approval from their respective governments before a deal can be signed. Furthermore, Greece has to concur to make further unpopular budget cuts at home.
Any bailout deal will not be favourite in Germany and Chancellor Merkel is covering a number of local elections in coming months. Voters in Germany are unhappy with the concept of Germany as the guarantor of all of the countries in the Eurozone. This is what puts the EUR in a no-win situation. Traders had been worried about the risk of defaults in the Eurozone. Now they worry about which other countries will be tapping them next. Either scenario is EUR negative.
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