Thursday, June 3, 2010

Sovereign Crisis Thursday

*Russia will impose new oil tax on July 1. (They need the money)

*Think tank report warns Swiss central bank cannot continue intervening to prop up the euro vs the franc.(ViaZeroHedge)

*Hungarian forint slide accelerates.

*Hungarian default risk at 277 bps

*Goldman adds short EURUSD to Favorite Tactical Theme. (This trade is a little late/insane. EPJ was on the dollar strength/euro weakness early on, but that was when the Fed was the only one playing the tight money game. The ECB is now also playing that game, which means the dollar gains against the euro will stop. It will ultimately mean some type of equilbrium versus the euro, but first there is likely to be a technical reaction in favor of euro. Timing on this is tough, but this is not the time to short the euro.)

*IMF mission chief going to Budapest for informal talks with new Hungarian  government.

*Failed bond auction Romania. Romania has rejected all bids in 600 million lei auction.

* Latest Fed release shows currency swaps increased by $5.4 billion To $6.6 billion


  1. Wenzel,

    You think Euro will begin to strengthen into the summer even in the face of Spanish debt scenarios?

  2. Timing is tough on when the euro strengthens, but I have never bought into the PIIGS crisis as a fundamental reason for the decline in the euro. As long as the ECB doesn't inflate the money supply to bailout the PIIGS, there is no crisis reason for the PIIGS to be a cause of a weak euro ( Aside from some panic German flight out of the euro). I prefer to think of the decline as dollar stregnth.

    Further, the dollar strength as I have said before is not a good sign for my perma gold bull friends.

  3. Further, the dollar strength as I have said before is not a good sign for my perma gold bull friends.


    This is why its nice to have a little of both.

    Not too heavy on the sugar and very light on the cream.

  4. Wenzel,

    Do you think that the PIIGS crisis should be a contributor of strength to the Euro? Or that it should be neutral? It's hard to believe an entire currency zone could have massive debt problems yet those concerns would be neutral for the currency. Could the Euro be discounting the cost of dissolution/abandonment?

  5. @ Taylor

    So are you saying that a country with a 100% gold backed currency should see a decline in its currency, even if the country has a debt crisis but fails to print money?