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Realistbear

B B C : Us Dollar Drop Bad For Europe

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http://news.bbc.co.uk/1/hi/business/4767049.stm

Weaker dollar hits world markets

US stocks have taken their cue from Europe and Asia
European stock markets fell sharply on Friday, as the weaker dollar and fresh inflation fears rattled investors.
London's leading FTSE 100 index dropped by more than 2%, closing below 6,000 points to its lowest level since March.
European shares saw their
biggest one-day percentage fall in almost two years
, with the Frankfurt Dax and Paris Cac indexes closing down more than 2%.

If the dollar drops again Monday we could see the Eurpean bourses hit the skids. Recession beckons.

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Not surprising for me.

Forget Iran, which is a smoke screen. I have solid reasons to believe that we are in the early stages of a run on the US dollar and consequent global financial turmoil.

Protect yourselves.

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If the dollar drops again Monday we could see the Eurpean bourses hit the skids. Recession beckons.

Calm yourself, the Euro has previously been higher, it traded as high as 1.3665 just over a year ago, we're back to the same level as May 2005.

edit: currently 1.2920 for reference

Edited by BuyingBear

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Calm yourself, the Euro has previously been higher, it traded as high as 1.3665 just over a year ago, we're back to the same level as May 2005.

It's not the level. It's the rate at which it's plummetting, despite higher interest rates, and the sharp bond sell off. This is not to be taken lightly.

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It's not the level. It's the rate at which it's plummetting, despite higher interest rates, and the sharp bond sell off. This is not to be taken lightly.

It's not that exceptional :-

eurusd.GIF

post-2525-1147463447.gif

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Guest wrongmove

Calm yourself, the Euro has previously been higher, it traded as high as 1.3665 just over a year ago, we're back to the same level as May 2005.

edit: currently 1.2920 for reference

But a year ago, the DAX was at 4250. It is now over 5900. Anyone who makes money selling to the US is going to get squeezed as the $ falls.

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http://www.safehaven.com/article-5157.htm

The painful sideways and choppy upward pattern that was in place since many weeks, had an end when the long expected decline finally started. The dollar declined so badly that we are on the brink of a dollar crisis. There are now many similarities to the year of 1987. If correct, we will experience a serious decline into autumn. Trades where triggered.

....

The decline finally started. Trend line breaks to the downside across the board. I don't know if some of my readers are familiar with the events of 1987. The crash in autumn started with a massive dollar and bond decline in spring of 1987. We are experiencing exactly the same right now. There is a distinct possibility that we may see a slightly altered repetition of 1987. A four-year rally without any significant correction literally is begging for some form of major decline. Don't expect this decline to be over soon.

....

The US-Dollar has suffered an unprecedented serious decline in the last month (the last similar decline dates back to 1987). The expected bounce did not come, and the US-Dollar cut through support easily.

....

5157_a.gif

GOLD: Gold is continuing its relentless upmove. A correction is overdue, but when? There is no way to determine the timing and extent of an overdue correction.. The prediction of the correction is unusually difficult because of a looming stock market correction and the Iran crisis. Don't short gold and don't short commodities. Expect continued appreciation.

....

5157_g.gif

USD - THE EURO AGAINST THE US-DOLLAR:

I expected a bounce in the US-Dollar last week. It did not happen. Instead further sharp losses occurred. I expect now 1.30 to hold and produce at least some form of correction. This is a very sharp decline of the US-Dollar. Not good at all for investors (but good for the American economy). The US-Dollar has suffered an unprecedented serious decline in the last month (the last similar decline dates back to 1987). Expect further losses ahead.

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And the events of 1987 eventaully led to the Great Crash (1989-96) where property tanked and confidence dissappeared for about 7 years. Any bubble assets are going to come under heavy selling pressure in thje weeks ahead as turmoil in the currency markets and collapsing export trade filters through. Notice how the European bourses dropped by almost twice as much as the DOW due to their export dependence. An expensive Euro may finish the European recovery given its existing fragility due to the oil crisis and inflationary pressures that have been set in motion.

My guess is that we will see some marked swings in currencis as the effects of a falling dollar become realised. As the post above says, you do not get a smooth passage when the world's largest trading currency devalues this rapidly. The bottom line is that IR are headed much higher than the markets had anticipated and the fallout is going to be some sharp correction in assets that are IR sensitive: the housing market is the most obvious asset that will see some corrections very soon.

It is interesting to note the the far smaller drops in the US stock markets compared with the UK and the EU (Friday: DOW down 1.04%, FTSE down 2.15%). The drop in the value of the dollar is more beneficial to the US than it is to Europe (boosts exports and overseas earnings by multi-national US companies) which may explain the the smaller DOW correction on Friday. The improved Trade Deficit for a 2nd month running may also have limited the damage.

Here is the market analysis from the US perspective:

http://finance.yahoo.com/mo

Market Update

4:20 pm : Stocks tumbled for a second straight day
as realization that interest rates are still going higher, perhaps much higher than what has been priced into the market so far
, prompted broad-based consolidation which closed all three major averages down at least 1.0%. The absence of any notable leadership, as all ten economic sectors finished in negative territory, and above average volume to the downside lending even more conviction behind another dismal performance, kept buyers sidelined heading into the weekend.
Before the bell, investors found some comfort after the U.S. Trade Deficit unexpectedly narrowed for a second straight month in March to $62 bln. However, realizing that such a decline will leave an upward revision to Q1 GDP growth -- a red flag for inflation hawks
-- and additional data that showed the largest jump in import prices since September, which will weigh heavily on the April Trade Deficit, continued to underpin a sense of nervousness throughout the Treasury market. As a result, stocks again took a bearish cue from rising interest rates and traded in sympathy with further deterioration in bonds which lifted the yield on the 10-yr note to another 4-year high (5.18%).
With no notable earnings reports on the docket and over 90% of the S&P 500 having already reported Q1 results, investors also turned their attention to further weakness in the dollar -- a concern that we're not buying into as a presumed bearish factor for the market.
After all, a modestly weak dollar is actually good for U.S. equities since it increases demand for U.S. products and increases the value in dollars of overseas profits for U.S. companies
. Nevertheless, the recent damage done on the commodity price front due in part to a weaker
Edited by Realistbear

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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