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Time for Alarm Bells?

By | USA, Euro, FX Trading, Opinion | No Comments

Do the Financial Markets need a “Black Swan” event to ring a bell to indicate a crises is looming, or will they just let the below events just play out and create a slow burn, which will eventually create turmoil “run for the exits” style panic sell off.

“A complacent Global Financial Markets to the significant events in the U.S, Europe and beyond which could trigger the next global financial crisis.

Financial Markets, including key regulatory authorities do not understand risk, and they do not price it correctly.

There is a danger of drifting into a global trade war, given US President Donald Trump has finally imposed long promised tariffs on steel and aluminium imports from the EU, Canada and Mexico. If not handled with care by all sides, this could lead to global slump such as that created by protectionist legislation in the US in 1930.

The Eurozone also faces a potentially existential crisis as the result of the new anti-austerity, anti-EU, heavily indebted government in Italy. As the Eurozone’s third largest economy (ranking 7th or 8th globally, and six times the size of Greece) the risk is of a debt crisis that would dwarf the Greek debt crisis in severity and threaten the future of the Eurozone (and perhaps of the EU).

As if all this uncertainty isn’t enough, there is renewed concern about oil prices, global (especially Chinese) debt, the transition – being led by the US Federal Reserve – to “normalise” interest rates, and key elections in emerging markets (Turkey, Brazil and Colombia), with other key emerging nations in dire, debt/inflation-ridden economic circumstances.”

Let’s see how this plays out.

Frexit Update

By | Euro, FX Trading, Opinion, Government | No Comments

1st round occurs April 23

Volatility has hit Markets hard in the lead up to the first round of the French Elections. The stock market was sold off to the tune of 1.6% in yesterday’s trade, whilst a scramble to buy Yen against Euro was evidenced as a risk off strategy in currency markets.

One thing for certain in markets is, uncertainty creates volatility.

Monday morning in early Sydney trade will be less than pleasant for traders and participants jump at shadows as exit polls reveal who the front runner/s are.

The big fear is that far-right National Front candidate Marine Le Pen will win, since she has run on a platform to divorce France from the euro — an action that could threaten the future of the entire euro zone. As it stands now, there is a good chance Le Pen will emerge from the first round pitted against one of three candidates: far-left candidate Jean-Luc Melenchon, conservative Francois Fillon and centrist Emmanuel Macron, a former economy minister.

Buckle up for some extreme volatility over the next month. The runoff election is set for May 7.

Over the next few days, you may see the risk off trade continue, however, remember the Trump victory. All the value was in the 2nd phase trading. Buy the rumour, sell the fact.

Adrian Jones

Italian Referendum 4th December 2016

By | Euro, FX Trading, Opinion, Government | No Comments

Crisis ? What Crisis ? ……..Supertramp 1975 !!!

Italians will goes to the polls on Sunday, December 4, to vote on whether to back reforms of the country’s constitution.

Why is the referendum important?

Firstly, the reforms are significant, so significant, some have argued, that if they are approved by the electorate, they would represent the birth of Italy’s third republic.

Secondly, Italian PM Matteo Renzi has staked his future on the vote, saying he would quit if he is unable to secure a victory for his constitutional changes. That could have wider implications for the European Union, because it would open the door to the possibility of the Eurosceptic Five Star Movement getting into power, who have made no secret of wanting to hold a referendum on Italy leaving the Euro.

The reforms propose drastically diluting the power and size of the senate and replacing elected senators with representatives from the regions.

The other main pillar of the reforms is to rebalance the power of the regions, bringing more areas under the control of central government and removing any duplication.

So, What happens if Renzi does quit?

The paradox is a referendum that is seeking to bring stability of government to notoriously volatile Italy could in fact plunge it into a fresh crisis.

As it stands, Italy’s unemployment rate was 11.4 percent in August and has debts of 132.7 percent of GDP, the second highest level in the EU, after Greece.

Italian banks have massive bad debts, and may need a significant injection of funds. Italy is in a vulnerable position.

This referendum could lead Italy to another, that being, should Italy remain in the “Euro”?, which in turn, could have a contagion effect on the entire Eurozone.

This does not bode well for the Eur/Usd. Sub 1.0000 prices should follow. The USD is King for now.

It’s building folks, Brexit, U.S. Election Surprise, Italian Referendum and Frexit. Hold onto your hats, future volatility is a given, which in turn creates opportunities.

Adrian Jones