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Stock Market Rally, Euro

by @ 10:25 pm
Filed under: financial,money — Tags: , , ,

euroWe knew it was coming, but I didn't expect the Europeans to pull off a rescue plan as early and as boldly as they did. Good for them and good for the markets which responded in kind by rocketing up today around the globe. Banking shares, specially the battered European ones, like ING, were on fire today.

Now we know that Europe means business defending its currency, the euro. The real test however will be in the coming days and weeks as the euphoria and wishful thinking subsides and reality is back to being front and center. Will the storm become a faint memory, or will this so called contagion return with a vengeance. We will see what we will see.

Dollar Rally

by @ 11:49 pm
Filed under: financial,money — Tags: , , ,

The last time the euro was below $1.30 USD was over a year ago. It's below $1.30 once again. This despite the fact that the consensus had been for the US dollar to continue to be under pressure and see further declines. The fundamentals in the US haven't really changed much. There's still a monster-sized deficit and growing and there's even talk about the US spending all its income servicing debt in a few short years.

What's changed is the financial fiasco unraveling in Greece and gripping Europe by proxy. That has the investors scurrying and flying to the US dollar. It's a short term relief for the dollar where in normal conditions (in my opinion) should be trading at parity with the euro.

For now the market is nervous because it doesn't know how deep the rabbit hole in Europe goes and as usual the governments aren't saying much, lest they spook the markets even more. That has opened a short-term advantage for the dollar.

But my feeling is that the favorable period for the dollar will soon pass as Europe bites the bullet and faces the issue head-on, instead of wavering and hoping that the situation will correct itself. If the US hasn't addressed its deficit issue by then (and I see no evidence of that), the dollar will resume its slide and who knows how far the American rabbit hole will go.

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