Print This Article

Yes, the Euro Will Survive This Mess

jhaddock (April 29, 2009)

Wednesday, April 29, 2009

(As Long As…)

Also In Today’s Letter…

By Chuck Butler Well, it seems that the currency markets are noticing that the Mexican Swine Flu continues to spread. Plus, we have the news that at least six of the 19 “mega banks” are being told to add capital. (Let’s just say they’re not “worthy” as they are now.)

We also just saw a bump in Consumer Confidence yesterday. In my mind, it has to do with the Treasury Auctions, but that’s just me…

Big Dog Euro Is Back Chasing the Buck

In the markets this morning, the currencies are bid… commodities are bid… and the dollar is being offered! That’s trader lingo for traders are buying up currencies and commodities, and selling the dollar. (There, now you can talk like a trader.)

So the Big Dog euro is nipping at the heels of the 1.33 handle once again, while all the little dogs are also jumping off the porch and chasing the dollar down the street. There’s been a lot of on the porch/ off the porch here lately with currencies, but for the most part, the bias has been to sell the dollar.

The euro got a further boost this morning when German business and consumer confidence reports showed better than forecasted results. The levels of these indexes remains very low though, so this is not a true show of confidence, just a tiny one!

The Two Slowest Buffalos in the EU Herd

Yesterday, I had a conversation with a few of the experts here in Bermuda and we eventually weighed in on whether the euro will survive this crisis.

I sat there for a while listening to the other writers talk, but finally I had to speak up because hey, this is my bag baby. Again, long time readers know how I feel about the euro, but for the new readers to class, I want to give my position one more time.

Every day we hear stories of how Italy and Spain are in deep trouble and could leave the euro so they can deal with their own problems in their own individualistic manner. That has certain analysts believing the euro will eventually collapse.

But honestly, I’m just not one of them. Italy and Spain have always had their problems, so this is nothing new. Second of all, I don’t buy into the thought that these weak links would cause the euro to collapse. Sure it could cause traders to sell off the euro temporarily, but definitely not collapse.

The only thing that would cause the euro to collapse is for Germany to leave the currency union. And that’s not going to happen… at least not as far out as I can see.

Remember the slowest buffalo story? The slowest buffalo gets killed, but allows the herd to go faster. Well, as far as I’m concerned, Italy and Spain are the slowest buffalos in the EU herd right now… if they drop off, their absence will eventually make the euro stronger.

From Bermuda…Have a Wonderful Wednesday!
Chuck Butler

P.S. I’m gearing up for my currency boot camp this afternoon, but yesterday I had the pleasure of hearing two of my new currency colleagues speak – currency bigwigs, Cornelius Luca and Ashish Advani…You wouldn’t believe the amount of information these two masterminds packed into 40 minutes a piece! Read on for a glimpse at their best insights…

More From The Author