February 10, 2008

Is it time for the Pound and Euro to take their lumps, as the UK and EU housing markets fall off a cliff?


Living here in Europe, the answer is "damn, I sure hope so". I could use a dollar rally right about now, and my cash savings are back in US$ (and looking for a safe place to go).

The good news is that Bernanke only has 12 bullets left. Whereas the UK and EU can cut and cut and cut again. All three have printing presses though.


HP'ers are contrarians, and betting ON the dollar sure feels like going against the crowd (and everything we represent!). But it also feels like all the bad news and rate cuts are now priced into the dollar, where the Pound and Euro are just starting. Hell, it seems like most people over here don't even think they're in a bubble - it's just the trailer-trash mortgage problem in the US. Oh, won't they be surprised.

Currency followers weigh in. And if the Pound and Euro fall apart, what's the future hold for the Peso, the Aussie and Canadian dollars, the Yen or the Swiss Franc? Or are all fiat currencies screwed - is that what the gold price is telling us?

The Currency Winds Are Shifting

Bottom line: While there might be more weakness ahead for the U.S. economy and its stock market, currency traders may very well get on their horses now and start running from the seemingly overvalued currencies that are leveraged to global growth — currencies such as the euro.

36 comments:

Anonymous said...

The us bond chart is topping out big time,along with a large tripple top formation.The yeild chart $tyx is bottoming out big time.The dollar chart $usd is ready for one more rally.Bond market is soon to crash,days or weeks away.Stock market will follow,while bond market implodes.

CASH WILL BE KING

W.C. Varones said...

The stability pact is far from perfect, but it's something. The US has no such thing. I'm still betting against the dollar.

Anonymous said...

im short gbp and long swissy as a little speculative bet

Andrew from Russia said...

I've been greening up since November and only keep enough Euros for an occasional trip to Euroland. USD looks unbelievably cheap here, even as the media babbles about rouble being world's most undervalued currency.

westwest888 said...

Euro seems safer than dollar still, because the EU can't ruin the currency with government debt. It looks like the US is about to borrow $1 trillion in 2008 and $1T again in 2009 to finance government operations. The EU's strict rules about deficits make it a safer bet in my mind.

It's not that the Euro is going up so much as the dollar is going down. I don't buy the technical triple top. Show me that triple top for Euro against the 5 other prevailing currencies. You can't. That triple top might just be central bank maniplution. Churning before a breakout. We don't know.

The pound will probably come down a bit because the BoE will mirror the fed.

David said...

In the end they are all just paper, backed by promises. While one may gain against the other on the short term, they are all destined for the toilet. Im sticking with gold and silver.

Rom said...

Instead of going to the dollar for safety, how about the RMB? The Chinese are linked to the USD so if policy stays the same you still have USD returns. If the Chinese actually let the currancy increase a bit (which is looking more and more likely) you'll also get that benefit.

I haven't done this -- just an idea.

Anonymous said...

What will happen to the Swiss Franc?

Tanker said...

They don't know they're in a bubble? Sound familiar? Not many people here did even after it starteed to burst. I saw a statistic median UK house price is 180,000 pounds or roughly $360,000. And UK is in far worse financial shape than the U.S. They have much higher government debt as percentage of GDP and higher consumer debt relative to income and GDP. They're like the American consumer on steroids. And their market will crash. Bullocks!

The BOE will have to continue lowering interest rates and the ECB will have to start. I think we will see a dollar rally (we already are a little) vs the pound and euro. But I also think the Chinese Renminbi will appreciate considerably against all currencies.

Europe's housing bubble is bigger than our own. We buy alot of their goods. There will be no decoupling. No. Everyone is coming down with us.

Anonymous said...

I think the GBP will crater much more than the euro.

BoE, despite its words, believes in helicopters and Benjamins.

Remember, the U.K., like the USA, doesn't really produce much but they have zillions of registered voters in wonky finance jobs. They need free money crack.

The U.K. might even be worse off, since USA has at least exportable agricultural commodities. U.K. can't even turn into a resource colony. Oh yeah, North Sea oil and gas is running out really fast.
Britain is already a net oil importer suddenly if you can believe it.

On the other hand, ECB is a German/French thing, and Germans and French still believe in industrial production, and Germans especially hate inflation. And the Germans have had no property bubble. They are going to start feeling especially smug and superior, and especially pissed about all their losses from Anglo-Saxon financial derivative scams they were sold. (advice: don't let them do too much marching)

Spain doesn't have a peseta any more to short, but it would be a great trade if you could.

Anonymous said...

NOT VOTING FOR OBAMA OR MCCAIN.

that is like choosing between Lenin or Stalin, or like Mussolini and Hitler.

F that.

I'm writing in Ron Paul, or voting for Romney if he comes back as a THIRD party

Anonymous said...

The UK Pound will continue to fall as they have only begun rate cuts, this information should be easy for everyone to find on the web.

As for the Euro it may be sticky as they keep trying to fight inflation and are less likely to cut rates (see recent G7 comments)

As a longer term position, short GBP buy some Yen.

If you are not setup for f/x you can buy the Yen ETF

As for my credentials im a former professional currency trader and would like to remain anonymous as I am still in the financial field

Anonymous said...

I expect the dollar index to trade within the current range of .75 to .77 until the summer. The Euro and Pound will weaken but will they weaken relative to the Dollar? I expect that the ECB and BOE will lag behind the FRB in actions to destroy their respective currencies. This I believe will lead to a dollar index of .72 at year's end. Going forward for the next 12 months one will have to be highly selective in choosing currencies. You no longer can say the Dollar will fall relative to everything.

My rather uneducated guess as to what will prove to be the strongest currencies are the Canadian and Australian Dollars, Swiss Franc, Swedish Krona, Yuan, and possibly Yen.

Over the next few years the absolutely best currency will be gold.

Anonymous said...

I sure hope the dollar starts to strengthen against the Euro. As an American living in Europe, I have all my money in dollars as well and the exchange goes from bad to worse. Warren Buffet recently said he expects continued weakness for the dollar. I sure hope he's wrong and you're right.

Anonymous said...

"...and my cash savings are back in US$ (and looking for a safe place to go)."

Was it four days ago or five that you were talking about being completely out of US$? You're starting to sound like Kramer, pump a stock one day, trash it the next and then 6 months later claim you knew what was coming and always proclaimed as such.

Anonymous said...

Everyting proceeds as ordained. The total global meltdown will end globalism. The one worlders will go into hiding, their livestock (sheople) are left untended and starving. God help them if and when the sheople out of pain and misery become what the one worlders are, ravenous wolves. The wallstreet pigmen and their globalist masters deserve what they get.

Anonymous said...

the euro jumped the shark when it showed up in a music video

Anonymous said...

I think the dollar will rally against those overpriced currencies.

I will problably fall against the Yen, since the Yen is way undervalued.

Danny

Lurker said...

Interesting. Just a few days ago, you claimed that the US dollar will be sinking for years. And now you are a "contrarian" and expect a rally?
I bet you got that idea from Mish. You should be nice and give him attribution.

Satchel said...

I'm bullish USD at these leves, against most fiat currencies except Yen (and maybe Swiss Francs). There's a lot of talk about "dollars coming back from overseas" and ramping inflation (Peter Schiff argument, basically). But there's no real money. Only treasuries and toxic debt sitting offshore. These securities will either have to be sold (tresuries) or defaulted (toxic stuff). In either case, real dollars will be sought, and as long as Bernanke doesn't get funny with the monetary base (for all the talk of him printing, he hasn't yet! But he might!), cash WILL be king.

I like the Yen, though, for similar reasons. Lots of debt denominated in Yen that will have to be repaid, leading to a scrambling for Yen currency.

The Euro is going to be a mess once the cuts start - and they will!

A US stock market implosion would also be bullish USD. Look at what happened to the Yen after the Nikkei imploded. 84/dollar by 1993 or 1994...

keith said...

In the 2 1/2 years I've lived in Europe, the dollar has gotten absolutely slaughtered. Expats holding or making dollars are f*cked.

That said, it's been stable even though Bernanke is now panicked and slashing. Which means the market has priced in the Fed taking rates maybe even to zero.

Now that the UK is cutting, and the EU has signaled they're not going to raise anymore, we may have seen a peak vs. those two currencies.

Thank god. Even stable would be good vs. the hell it's been.

But then you have inflation roaring in places like China, Russia, Australia and more. Those central banks can't cut, they have to raise to put out the inflation fire.

The Yen is the most confusing. They're still in their 10-year plus deflation, the economy sucks, the market sucks, and they can't raise rates.

I'm drawn to aussie dollars and swiss francs but I haven't made the switch yet, still doing research.

Meanwhile, I've got some 5.5% cd's expiring soon that need a home, and US savings accounts are paying 4% now, not the 5%+ just a few weeks ago.

We're in a transition. Let's see where it goes.

Anonymous said...

The EU may soon fall apart. Germany has very high inflation right now, other countries are experiencing deflation.
Euro central banks want to cut rates. How long is Germany going to put up with high, high prices.

These phony put together countries like IRAQ and the EU never last.

The shit is hitting the fan this week.

Anonymous said...

Sooner or later the American Dollar will bounce back up. It has to. It is the reserve currency of the world. We are a shining city on top of a hill that the world looks to for leadership and during these troubling economic times the world will look to America for leadership and guidance and as usual America will faithfully deliver.

Anonymous said...

Re anon at February 10, 2008 10:18 PM

haha i laughed for real

Anonymous said...

keith said...

The Yen is the most confusing. They're still in their 10-year plus deflation, the economy sucks, the market sucks, and they can't raise rates.

I'm drawn to aussie dollars and swiss francs but I haven't made the switch yet, still doing research.


Cashed out the 401K and rolled over to IRA with Europacific. 20% was put into yen & swiss franc. No expert here, but that is where they thought it should be.

Anonymous said...

You people are all Mad!!! Our Federal Budget defecit is about to explode and you think being long the US Dollar is wise. The US will be ground zero from the derivaitve meltdown. Get out of fiat and into Gold. You all have a massive wakeup call coming.

Anonymous said...

Sooner or later the American Dollar will bounce back up. It has to. It is the reserve currency of the world. We are a shining city on top of a hill that the world looks to for leadership and during these troubling economic times the world will look to America for leadership and guidance and as usual America will faithfully deliver.

I see the Kool-Aid is still flowing in some parts of America.

cya said...

Buy silver.

Anonymous said...

w.c. varones and Peter Schiff..

good luck betting agaisnt the USD.

I look forward to more Peter the Great decoupling back pedaling.

Nice to see the Ron Paul losers are still posting.

If Obama does not win he can get a job at Dunkin Donuts.
If we just want a good speaker for president why don't we just elect Anthony Robbins? I just like to have a Senator that does not push the wrong vote button six times. You can't make this up. With Obama we will have awesome diplomacy as planes crash into more buildings. What a naive dumba$$. Hitlery will be the greater evil and we can get it over with quicker and start over.

JaneZinfandel said...

Anonymous said...

Sooner or later the American Dollar will bounce back up. It has to. It is the reserve currency of the world. We are a shining city on top of a hill that the world looks to for leadership and during these troubling economic times the world will look to America for leadership and guidance and as usual America will faithfully deliver.

Yes we are a shining city on top of a hill of debt that we have shared with our brothers around the world. We have provided the proper leadership already by flooding their markets with faux derivative paper and we are now guiding them with interest rates headed toward 2%.

What more can we do for them from our lofty perch with the shining beacon of financial deliverance?

We have faithfully delivered to economies stretching across the globe, and they will surely respond in kind.

Anonymous said...

Sooner or later the American Dollar will bounce back up. It has to. It is the reserve currency of the world. We are a shining city on top of a hill that the world looks to for leadership and during these troubling economic times the world will look to America for leadership and guidance and as usual America will faithfully deliver.

Haha, that was funny, in so many places. Although I do agree that it will eventually bounce back, the questions are: when? and how fast?

Anonymous said...

Sorry Keith, ain't gonna happen. The ECB is holding steady and warning about inflation while helicopter Ben is still cutting in half basis-point increments.

Get your money out of dollars, pronto. You may not want it in euros but pick something else, swiss francs, RMB, etc

Anonymous said...

> Instead of going to the dollar
> for safety, how about the RMB?
> The Chinese are linked to the
> USD so if policy stays the same
> you still have USD returns. If
> the Chinese actually let the
> currency increase a bit (which
> is looking more and more likely)
> you'll also get that benefit.

This is what I did. Go to HSBC China and open an account. A 12-month CD at HSBC China is paying 4.1% right now, and you just know that the RMB will appreciate another 5 to 8% this year.

Anonymous said...

good luck betting agaisnt the USD

Why would they need luck? They are up 40% over the past couple of years. That's like saying good luck to those who shorted housing and financials. It's the longs and the middle class that need the luck and a few more $600 checks to pay off their debt

Anonymous said...

i vote canada as country of the year, and people also....sorry tho about the damn cold

Nemoudeis said...

Actually, Ben's only got eleven bullets left.

You always save the last one for yourself, y'know.