''It turns out we weren't seeing the light at the end of the tunnel after all, but a train with a big light on it coming towards us'' -Dr. Suki Mann, Societe Generale
"The Fitch note drives home the apparently unsolvable contradiction in which the Spanish economy finds itself. To maintain debt solvency Spain must squeeze public spending: yet this policy undermines the chances of recovery which itself causes further loss of confidence." -El Pais
Today CNBC's feature headline Remember Europe? Investors Turning Their Focus Elsewhere grabbed attention. But are investors simply shifting their gaze because they can't bear to watch the inevitable European train wreck? The hits just keep on coming.
Today the Euro failed to hold $1.22, closing near session lows at $1.2161. The European Commission is now putting pressure on Hungary, which was bailed out by the EU and the International Monetary Fund in 2008 and is still “in a very delicate situation”, according to European Commission President Jose Manuel Barroso. And the TED spread is still on the express elevator up.
I just reread an Ambrose Evans-Pritchard's article dated January 4, 2010 covering his predictions for 2010. Right down to the protests in the Greek streets he's pretty much nailed it, although some of his bolder predictions such as Japan going bust have not yet come to pass.
Fast forward to May 30, 2010, and commenting on the situation in Spain Evans-Pritchard says "this can end only in two ways."
"The Fitch note drives home the apparently unsolvable contradiction in which the Spanish economy finds itself. To maintain debt solvency Spain must squeeze public spending: yet this policy undermines the chances of recovery which itself causes further loss of confidence." -El Pais
Today CNBC's feature headline Remember Europe? Investors Turning Their Focus Elsewhere grabbed attention. But are investors simply shifting their gaze because they can't bear to watch the inevitable European train wreck? The hits just keep on coming.
Today the Euro failed to hold $1.22, closing near session lows at $1.2161. The European Commission is now putting pressure on Hungary, which was bailed out by the EU and the International Monetary Fund in 2008 and is still “in a very delicate situation”, according to European Commission President Jose Manuel Barroso. And the TED spread is still on the express elevator up.
I just reread an Ambrose Evans-Pritchard's article dated January 4, 2010 covering his predictions for 2010. Right down to the protests in the Greek streets he's pretty much nailed it, although some of his bolder predictions such as Japan going bust have not yet come to pass.
Fast forward to May 30, 2010, and commenting on the situation in Spain Evans-Pritchard says "this can end only in two ways."
"Either Germany tolerates massive monetary reflation by the ECB or Spain will be forced out of EMU, setting off a catastrophic chain-reaction through north Europe's banking system."
The Euro has already dipped over 20% vs. the U.S. dollar this year. Shorting the Euro has become a crowded trade, but events and the market are signaling a further downward move. If the Euro can't hold $1.20 in the near-term look for a quick break to the $1.18 range with an increasing probability of dollar parity before the summer is out.
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