ECB pledges to do "whatever it takes" to preserve the Euro

Mario Draghi, president of the European Central Bank has reiterated today his commitment to the preservation of the common currency by hinting at upcoming supportive measures. Mr. Draghi said today during a conference in London that the ECB is prepared to do "whatever it takes" to keep the euro-boat afloat. The announcement sparked a relief rally in  risk assets such as the EUR/USD, the S&P500, Gold and Spanish yields. But, without hard facts, the rally will most likely be short lived.

Greece has to stay in!

The Greek may not be the hardest-working fellows in Europe, as they like to think of themselves as, they may not be the tax-loving people that Christine Lagarde wants them to be, they may have one of the biggest average salaries in the European Union, but these are not good enough economic arguments to allow for their eviction from the EU. It is not about Greece anymore, Greece is a symptom of a bigger problem: should the European Union push for more integration ?

Swiss Franc: Will another peg bite the dust ?

When back in September of last year the EUR/CHF was heading towards the 1.1 level, many were expecting some sorts of monetary intervention, under the form of a showering of Swiss francs towards the commercial banks. Since the benchmark interest rate was already at the rock-bottom level 0 - 0.25%, and the minimum reserve requirements for short term debt are already at 2.5%, there was little leeway for "traditional" policy instruments. On the 6th of September the Swiss National Bank (SNB) announced an unprecedented peg against the Euro at the 1.20 yardstick. Within minutes the EUR/CHF reached 1.2180, a spectacular 10% gain, after which it hovered around 1.218 - 1.245 depending on the minor jolts sent by the SNB.

Brazil joins the currency world war

Brazil has been no stranger to monetary intervention and currency devaluation, but, until now the political rhetoric has been rather passive on this subject. The tone changed a bit after Brazil`s finance minister Guido Mantega declared this week that his country will no longer "play the fool" and let its currency appreciate while richer nations gain economic advantage by devaluing theirs. As a result the government extended this Monday a tax on foreign loans to 6% (similar to the Robin-Hood tax that the European Union is planning to implement). Will this coll down the hot money inflows ?

Risk off as EU summit talks dissapoint

The risk markets sold off today as a reaction to the news that UK rejected the European fiscal and budgetary constraints, followed by Intel's 1 billion revenue slash. Ratings agencies Moody's, Standard and Poor's and Fitch were again late at the party in expressing their worries about the long term sustainability of the rescue plan. Fitch declared that last week's summit did little to address the regions sovereign debt crisis and predicted a "significant economic downturn" across the region. Standard and Poor's added that European officials might need another financial shock to get it moving. Gold sold off today as well, in what is a more and more obvious correlation with equity markets. The precious metal is losing its safe haven status.

Europe divided (again)

David Cameron, the Prime Minister of UK managed to stir the markets up a bit yesterday by vetoing the new EU treaty. The accord was meant to turn the European Union into a fiscal union which, in turn, would strengthen the common currency. After 10 hours of negotiation in Brussels, all other 26 member countries agreed to sign the new treaty, but as treaty rules say, in order to amend or change any parts a consensus must be reached.

My 2 Cents about the future of EU

Nowadays news are full of reports on the financial difficulties that European countries are facing: rising interest rates, high rates of unemployment, political turmoil, economic malaise, but once you look for the real source of these systemic risks, you realise that this is window-dressing for something bigger. The fact that the European Union is under a process of fiscal and budgetary unification followed by the political unification and it is using the financial and economic news-bombs as excuses for the loss of sovereignty of some less fortunate EU members.

German Banks showing signs of weakness

The German financial sectors has been hit hard by the European debt crisis and rumors are now emerging of more and more financial institutions that lack the capital to withstand more pain. Even if they are not in the top 4 banks by Italian and Greek debt holdings (the bonds that were hit by far by the recent debacle), Deutsche Bank, through its North American Taunus Group and Commerzbank are maintaining toxic Euro-debt at a very thin capitalization. I am talking here about contagion at the very core of the European Union.

Weekly FOREX outlook: USD/HUF, USD/JPY and GLD

Provided that Berlusconi does not surprise us in a negative way, this week's investor sentiment should switch from from the European debt crisis to the US structural problems. The day of 23rd of November is closer and closer and by that date the leading American parties will have to decide on $1.2 trillion in spending cuts over the next decade. If the budgetary supercommittee fails to reach an agreement, the US budget crisis circus may repeat itself. So the limelight switches to US.

European circus continues as Papandreou is rumored to resign

The farce is underway as the newest juicy rumor that hit the press is that the Greek Prime Minister will offer to resign in the next 30 minutes. According to BBC, Pap "will meet the Greek President Karolos Papoulios after the emergency cabinet meting finishes". The new coalition government will supposedly have "former Greek central banker Lucas Papademos at the helm". This comes after the surprising decision of Papandreou to call a referendum on the European Bailout Plan.

Next week's FOREX trading outlook

This week has been a hectic trading week, with most of the FOREX currency pairs behaving like in a bee hive. The global turmoil was enhanced by the two major news: first is the agreed haircut of 50% of the Greek debt and the subsequent leverage of the EFSF and the second one is the systematic dump of US Treasuries by the foreign investors (the latest to join the party is the Norwegian sovereign wealth fund which dumped all US Treasuries and all US mortgage backed securities). What is in store for us next week?

Precious metals rebound as global uncertainty deepens

Gold managed to break out from its bearish flag formation and sailed right through the $1700 level. Silver, on the other hand, is still within the bearish flag and at the moment is struggling to push through the $33.4 level. For long term investors this is a confirmation of the long term trend in gold and silver (which is here to stay), but for short term investors this may prove to be a good opportunity to reap a few profits by going short.

When the EU tsunami clears out the US debt crisis tidal wave will emerge

Nowadays the media are painting a bleak picture of the European Union debt crisis. The EFSF has been leveraged, the proposed "hair-cut" on Greek debt has been twisted and turned on all sides, without any visible conclusion. Contagion from the perypheral countries (PIGS) may spread out to the more stable countries: Germany and France (which is already on a credit downgrade outlook from Moody's). Meanwhile the US debt crisis tidal wave is closing by without anyone noticing.

Qvo vadis, Gold ?

The precious metals have been under fire recently, with gold dropping from its all-time high of $1920 close to its 200 daily Exponential Moving Average which acted as support level for such movements since early 2008. It spiked downwards beneath the 200d EMA for a brief period to its recent low of $1533 after quickly recovering ground and consolidating in the $1610-$1690 interval.

Is the EFSF going to save Greece ?

The yields on peripheral countries are getting higher and higher, reflecting worries about the high levels of debt and fiscal deficit within these countries (Portugal, Ireland, Greece and Spain). The 1 year Greek yield reached an apex of 188%. Just a year ago the yield on a 1 year Greek bonds was only 5%. The same goes for Portugal where the 1 year yields 18%, from 3.2% the 2010 figure. Ireland was partially saved by bond purchases and the yield stabilized to 8% after peaking at 22%. Will the EFSF cool-off the European debt crisis ?

While Greek yields skyrocket, the US continues its road to serfdom

The European Union may have done a very costly mistake by banning naked CDS shorts, because traders will now retort to outright shorting the underlying bonds. And short they will: Greek yields reached a staggering 188% for a 1yr note and they don't show any signs of cooling off. With Angela Merkel and  Nicolas Sarkozy still undecided about the European Rescue Fund, things can only get worse. Meanwhile America continues its slow road to serfdom.

Germany fails to auction 10y Bunds on EFSF concerns

Growing concerns regarding the leveraging of the European Financial Stability Facility (EFSF) are weakening the core EU financial markets. Yesterday, Spain has been downgraded by the rating agency Moody's, two notches to AA1 level and France looks to be the next to lose its triple A rating.

All these concerns have started to spill out at the core of the European Union: Germany, France and the United Kingdom. Does EU really have a firm response for the upcoming debt crisis ?

Yuan closer to reserve currency status

Even though the Chinese currency, the Yuan (or Renminbi), is still pegged to the current reserve currency, the Chinese officials are taking more and more steps towards consolidating the global role of Yuan. One of them is the long term purchase of gold, as the saying goes, with every dip, there is Chinese gold buying. The second step is to start offering gold in Yuan. The next step can only be denominating the yuan in gold and restricting yuan purchases.