aferre's blog

Eurozone facing potential dislocation.

EUROZONE FACING POTENTIAL DISLOCATION

Barely three weeks after the announcement of the second bailout package for Greece events point to an uncontrolled unravelling of the situation.

Over the first six months of 2011 the Greek budget deficit jumped by almost 30% on an annual basis. Without further drastic measures to reduce spending this year’s deficit could reach 13.5% of GDP, compared with a target of 7.5% (The Economist, August 13th 2011).

How the Euro zone can solve its challenges and preserve integrity

HOW EUROPE CAN SOLVE ITS CHALLENGES AND PRESERVE INTEGRITY

The Eurozone’s sovereign debt crisis continues to threaten its integrity and thus far a solution that addresses the main challenge of fiscal sustainability while preserving the integrity (and advantages) of the monetary union continues to elude policy makers.

The performance of our Long Term Monitor- An assessment

THE PERFORMANCE OF OUR LONG TERM MONITOR
AN ASSESSMENT

In mid-may our long term monitor has generated a negative signal for the Eur-Usd. We consider it useful therefore to examine why we consider this signal a relevant element to adjust strategic exposure in the currency.

Our long term monitor is a proprietary quantitative formula that seeks to offer an explicit pointer as to the underlying direction of the market for an average time horizon of 6-12 months.

From November 2005 this is the 6th signal generated by our Long Term Monitor.

THE GREEK CRISIS: DEFAULT, RESTRUCTURING OR RECHEDULING?

One year after the European initiative to help Greece with its daunting and self-inflicted debt crisis the issue remains, if anything, as intractable as ever. In the intervening 12 months the crisis has not only deepened but widened. The European initiatives to assist the beleaguered Greeks, Irish and Portuguese have already committed sums that run into a stupefying 50% of the combined GDP of these three countries.

Actualisation Eur-Usd

Alors que tous les objectifs haussiers de moyen terme pour l'EUR-USD ont été atteints une actualisation paraît utile.

J'ai des indications d'une saturation intermédiaire de la hausse, ce qui peut se transposer dans une pause avec un risque correctif toutefois limité à des proportions tactiques et qui est peu susceptible à ce stade d'influencer perceptiblement l'orientation positive de fond de l'EUR-USD qui reste haussière sur base de mes moniteurs de long terme.

Fed policy and the Market

FED POLICY AND THE MARKETS

With economic growth running at an insufficient pace to reduce unemployment and core inflation well below target at 1.0% the Federal Reserve is about to launch a second round of quantitative easing.

This is economic jargon to express the fact that the monetary authorities will substantially ramp up liquidity creation by purchasing a substantial amount of Treasury debt paper. In the current context this initiative has three major objectives: