While everyone likes to hate on Cyprus, it is Italy that is the focal point of today's European "omnishambles" that has seen the EURUSD tumble to a five month low as of this writing. First it was economic data that scared investors, with Industrial Sales and Orders tumbling far below expected, posting numbers of -1.3% and -1.4%, respectively, on expectations of an increase. Retail sales were just as ugly, declining by -0.5% in January, on expectations of an unchanged print, with the December 0.2% number revised also into negative territory.
The surging Euro — which is at levels not seen since late 2011 — is one of the biggest stories in global financial markets. Analyzing the factors driving the Euro has become something of an obsession. Morgan Stanley FX strategist Hans Redeker offered his explanation of why the Euro's been to strong in a recent note. He offers a few basic explanations.
FINalternatives submits: A key European Parliament committee has approved the European Union’s controversial hedge fund regulations, but have set up a battle with the bloc’s finance ministers at the same time.
EARLIER today, a friend sent me a note from Louis-Vincent Gave of GaveKal Research (sorry, no link) on how the ECB could preserve the euro without doing anything to offend German sensibilities. Mr Gave suggests that the central bank should stop buying assets and start selling “currency insurance.” It is an intriguing idea, so I have copied some excerpts to provide a flavor of the analysis.Mr Gave begins by arguing that convertability risk is inhibiting investment in the troubled countries:
John M. Mason submits: The economic spokesperson for the Obama administration, Ben Bernanke, and the Federal Reserve System continue to underwrite “big”…Big Companies and Big Banks. The Federal Reserve has just released its survey of senior credit officers. The headlines, “Large United States Banks are Starting to Ease Credit Terms.” Terrific!