The Euro : Time fast running out. EUR/USD will crash.
May 22, 2011 Leave a comment
Greece is bankrupt. No two ways about it. Ireland Portugal Spain and probably Italy and Belgium will suffer even more when the final nail in the Greek coffin is hit, which could be within 6 weeks, and 6 months at the outside.
EUR/USD will in our view crash below 1.20 sometime this year, with 1.1400-1.15o0 our MT target.
The significance for Asia is huge. Last time it was Lehman’s acting as the spark that lit the forrest fire, this time it could well be Greek sovereign debt. If they default, which looks entirely possible, then nearly all of Europe will have a full blown banking led crisis on their hands. If they get bailed out with a soft restructuring gratis of the Germans, Angela M will be history and Ireland, Portugal and others will hold their hands out until the German led Eurozone implodes.
Good for the dollar, bad for oil… and could even be the catalyst to move gold to 1650 or higher.
For holders of Baht, you might consider buying some USD as near 30 as the markets offers this week… or soon. As for Euro, its going to be pretty damned cheap this summer for Baht shoppers, and the winter sales will be even better.
In simple terms, Greece is fucked, most of non Germanic Europe is not very healthy, and the US isn’t much better.
Who said a financial crisis comes but every 7 years? We think they will be as regular as the 4 year World Cup cycle from now on. 2007,2011,2015….. and there are so many bubbles on the make, Europe is just the most obvious.
A final word. The drought in China posses a real risk for soft commodities (corn, rice etc) to rally in style during Q3. This will be disastrous for hundreds of millions of people, not just Chinese, but the global poor who can ill afford another spike in basic food stuffs.
We fear the worst. This is going to be a summer (or rainy season) of discontent.
Black Swans are getting easier to spot…..