Charbel Khoury – Friday June 26th, 2015 – 09:50GMT
Whether you’re a trader, or someone hiding cash under your mattress, you’re currently wondering whether to buy or sell the Euro.
According to Bloomberg’s C. Mobi and K. Miura, if Greece is forced to default, sell the Euro. And if Greece reaches a deal with its creditors, sell the Euro.
I say even if Greece finds a hidden mine of diamonds, and finances Germany: sell.
Why? You ask. Well if I don’t tell you, this article would be a big failure. Wouldn’t it?
Bloomberg’s article “Never Mind Greece, Euro Seen Driven Towards Parity by ECB Policy“, posted on June 26, reminds readers that the European Central Bank decided to keep the 1.1 Trillion Euro Quantitative Easing program until at least September 2016. Lowering bonds. Boosting stocks. The Euro is the worst performer this year after New Zealand. The land of sheep and kiwi. This will keep pressuring the euro lower.
You see Europe’s superpowers aren’t so super. Italy and France have serious structural issues whose consequences have been resurfacing. Spain has been struggling with austerity, and the anti austerity parties are boiling to see if Greece will exit, giving them a new valid cause to break hell loose, while the government prays to Madre Maria. The United Kingdom, that was close to being un-united, is now much more prone to get out than get further in to the EU. And Eastern Europe countries are on their toes as they found Jesus again, at least until the Greek nightmare is over.
Which leaves us with Merkel Land. The land of prosperity and… apparently with all the above, heavy weight lifting. Caught in between its weaker siblings and rich grandpa frowning IMF.
And so my clients ask me with a smile: “does this mean that a Grexit won’t be the end of the world?”. No. A Grexit would be an acceleration of the already looming disease. Like piercing the life jacket of a drowning man. Something that mama Merkel and her accountant Hollande won’t let happen. At least not without a huge fight, as you can deduct from this week’s events.
So to answer the question: if no drastic change happens, the Euro is due to test parity by year end. It would even touch 1.05 before the end of the summer.
If you’re going long on the Euro, across such a hot summer, you better short it.