Friday, April 25, 2008

Dresdner Kleinwort – The wheels are coming off the eurozone economy,”

Euro dives as wheels fly off eurozone economy

The euro has suffered its sharpest drop in four years as a blizzard of weak data from Germany, Belgium, France, and Spain spark fears that economic contagion may be spreading from the Anglo-Saxon world to Europe. Spain's business federation warned that Spanish unemployment will rise by 500,000 by the summer unless the government takes "valiant measures" to offset the housing and construction crash. "For every dwelling not built, two workers will lose their jobs," said the group's president, Gerardo Diaz Ferran. The IMF has cut its eurozone growth forecast three times since October.

Posted by jack c @ 12:45 PM (1557 views)
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28 thoughts on “Dresdner Kleinwort – The wheels are coming off the eurozone economy,”

  • “Euro dives”

    about time – it couldn’t stay up there that much longer.

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  • Is it me or did the Telegraph forget to tell us about the Pound plunging against the Euro.

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  • So the dollar rises so gold drops?

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  • Pound currently 1.27 Euro against 52 week high of 1.50 Euro

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  • Cracking news ! As far as I’m concerned The euro’s strength being directly linked to the weakness of it’s rivals and having nothing to do with economic stability. OK so the German economy is sound (apparently)………..so what? Is Germany going to support nearly every other member ?
    I’m abroad at the moment within the EEC and they suffering exactly the same effects — Cost of living is rocketing, strength of the euro is killing exports,competitiveness and in Club Med the economies are almost totally reliant on foreign investment.
    To me it’s obvious that the way forward will be Gold.

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  • Throughout the recent currency turbulance, sterling’s value against the dollar has been remarkably stable.

    There is little rationale behind the euro’s strength – if the cracks in the eurozone show any sign of widening, it could weaken rapidly.

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  • The problem with Spain doesn’t surprise me: dodgy constuction companies selling dodgy properties to UK and other eurozone ‘investors’, at inflated prices. I’m afraid the party’s over, and old Joe public’s gonna have to clean up the mess.

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  • An Bearin Bui says:

    Er, the euro is now 1.27 to 1.00 pound whereas a few days ago it was at 1.24 to 1 pound – I would hardly consider that a ‘plunge’ as it’s been fluctuating around the 1.25-1.30 level for a while now.

    When it’s back to 1.5 euros to the pound then let me know…

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  • C'mon Correction says:

    I still think most of the European countries are in much better shape than the UK and US going forward. They haven’t gorged themselves on debt and seem to report most of their economic stats closer to reality than UK and US. I expect to see UK free-fall out of the top ten economic countries in the world whilst France and Germany retain theirs over the next decade, we’ve got so much pay-back from the last decade to make.

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  • What happened to these headlines about the pound tanking and the vast majority on here saying “shows no signs of turning”. However as i said really £ strength is just a reflection of the Dollar strength. UT – not THAT stable – yours truly short of cable @ 2.03.

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  • “Spanish unemployment will rise by 500,000 by the summer unless the government takes “valiant measures” – this is a bit of a scary number – Spanish economy is in as much trouble as UK PLC (IMHO) – of course much of the property development in Spain has been fuelled by Brits releasing equity on their main residence and buying in the Costa’s etc. – you could have people caught 2 ways ie financially crippled by falling UK & Spanish house prices !

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  • Jack and this wasn’t foreseeable months or at least weeks ago when everone was saying that the Euro was a one way bet (UP) because of the IR cycle and interest rate differentials? It really astounds me, that on so many thigs most bloggers are so right but they cant see that a currency is overbought and needs to have a temporary (at least) top against another. I thought the pound bashing really was a bit overdone. Its one thing to “dislike” GB but quite another to corelate that with an ever decreasing value of the pound. (same with Bush and the dollar).

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  • sold 2 rent 1 says:

    I will call some shots now (James bookmark this page into your folder of evidence to attack me later)

    Gold and silver found support at 880 and 16.40 respectively.
    These were the supports put in 3 weeks ago.

    If you want to buy gold and silver now is the perfect time.
    Gold is going to 1500+ and silver 27+

    Remember USD index is rising because the EUR is falling
    The Euro makes up 57.6 % of the USD index

    I could be wrong but f**k it. I am in.

    The PPT will be trying to hammer the gold price down later.
    Will they succeed? I hope not

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  • “The euro’s strength being directly linked to the weakness of it’s rivals and having nothing to do with economic stability”
    This could be argued for any currency in any direction – e.g. some years ago “the dollar wasn’t strong, it’s rivals were weak” etc.
    Following this line, no currency is ever strong.
    In as far as the “free” market could be said to be functioning right now (difficult to confirm in view of distortions such as AD’s bailout, carry trades. etc. not to mention the issues in the kitco article earlier today) the judgement seems to be that despite structural worries about Euroland, the situation in US/UK is deemed to be worse.
    Of course, as we know from the housing market, what the market says and what reality is can become decoupled. It’s hard to read much into the comparative value of currencies.

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  • @techieman (12) – I take your point and with this in mind I’m off to Spain early July 2008 – do I buy the Euro’s for the trip now or hold out until a few days before? your input would be appreciated.

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  • And the wheels keep turning, all the time,
    But there’s no pounding or purring, not a sound,
    Just a feeling of stirring, hold them down, hold them down, hold
    them down.

    Yes it might happen this way,
    You have no warning, she is going away,
    She was the backbone, to your life and your plans,
    And now the unknown, holds you down with its hands,
    And then you know that there’s no turning back from here.

    And the wheels keep turning, all the time,
    No mechanical churning, not a sound,
    Just a feeling of stirring, hold them down, hold them down, hold
    them down.

    Yes it might happen this way,
    She is familiar, nothing much more to say,
    And then the day comes when you look in her eyes,
    And what you see there takes you quite by surprise,
    And then you know that there’s no turning back from here.

    People moving, going about their day,
    People planning, knowing just what to say,
    In one year we’ll have money to spare,
    And in five all we require,
    In ten years we’ll have a place of our own,
    And in forty we’ll retire.
    So we do what we must, before we turn to dust.

    And the wheels keep turning, all the time,
    No expansion or burning, not a sound,
    Just a feeling of stirring, hold them down, hold them down, hold
    them down.

    Yes it might happen this way,
    You have no warning, she is going away,
    She was the backbone, to your live and your plans,
    And now the unknown, holds you down with its hands,

    And then you know that it might happen this way,
    She is familiar, nothing much more to say,
    And then the day comes when you look in her eyes,
    And what you see there takes you quite by surprise,
    And then you know that there’s no turning back from here

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  • “Throughout the recent currency turbulance, sterling’s value against the dollar has been remarkably stable.”

    Which just goes to show what a crock of ______ the £ really is. (Add the word “gold” or “sh*te” depending on your perspective. I think I’ll go with the latter.)

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  • Jack not sure about tourist rates (not sure its a holiday) but basis “proper” spot rates I would be looking for between 7750 and 7620 (currently 7870 ish) to liquidate my hedge. If i were you (in case im wrong) and it makes sense value wise, i’d say do half now and half then in July (or the other half if it gets to my target in the meantime). Usual caveats about this not amounting to specific financial advice etc. s2r1 wants to ride a black swan then remember!

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  • sold 2 rent 1 says:

    “really astounds me, that on so many thigs most bloggers are so right but they cant see that a currency is overbought”

    Agreed.
    We are all on a learning journey – some slightly ahead of others.

    But on another level, when I say gold started to decouple from the USD back in autumn 2005, and you’re not convinced, is this really any different.

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  • s2r1 – well no its not different BUT that assumes you are right and i am wrong. i assume its ok for us to agree to disagree. I mean Gold has been falling while the dollar has been rising. Corelation? I think so but you dont – well ill correct i think there is a peception at the moment that a stronger USD = weaker gold (and oil for that matter). But really you can think what you like as i said before why its falling doesnt worry me that much – whereas it seems to concern you. Fair enough.

    I think Gold goes lower than 872 – but yes i could be wrong and i have no short side short term trade to worry about so it doesnt worry me. Having said that i hope you took some account of my “nod” on the Euro? For me i effectively hedged on the daily lower lows. Euro / pound that is.

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  • sold 2 rent 1 says:

    The euro was a result for me. Transferred 40K EUR back from Ireland last week at the peak rate.
    If the eurozone breaks up Irish banks are doomed.
    Don’t really want to get caught in that mess.

    25k has gone into gold yesterday and today. The rest next week.

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  • @techieman (17) – I’m off on holiday (Balearic isalnds to be precise) and whilst the amount of pounds to be converted is not really a large sum, I’m not averse to securing the best possible deal. I’ll take your client specific advice and do as you recommend ie half now and half in July – if I’m disdavantaged you’ll be getting a letter from my no win no fee solicitor (LOL)

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  • jack if i dont see you before have a great time! me im mountain biking round lake garda (really!) have decided to leave the DB7 at home, in view of the cupid stunt drivers! [well thats not true but i do own an Alfa believe it or not!]

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  • Nice one s2r1

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  • @techieman (22) – thanks for your kind comments and input – I’m planning to stroll down to the beach (200 yds from Hotel) and do now’t but relax for 2 full weeks. No work, no internet and no mobile for a fortnight – lets hope Blighty is still in one piece when we get back (S2r1 posts can be a bit scary at times)

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  • [email protected]

    Couple of points here : The Market is not free in the true sense. It is being manipulated by vast amounts of bail-out funds driving down the value of involved currencies. This is very different to a genuinely strong currency which is backed by strong economy. Secondly this value will strangle exports.Therefore the euro is at this point a ‘fortunate’ currency without doubt to me. In fact I am confident we will see a signifcant decline over the remaining year. Just my opinion,but IMHO I cannot see it maintaining this run.

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  • This may not be the start of a run on the Euro, but one is sure to come as the ECB has followed the same path as the Fed and the BoE with pumping the markets full of ‘liquidity’. When the run on the Euro has been done, speculators will look to do the same to another currency, as they have already done to the dollar and the pound.

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  • Euro plunges? Well not exactly. But if it does some day soon, then brilliant. Try living on the Continent on a UK pension these days. If this euro nonsense got any worse you’d have all of us packing it in and roosting in Devon. Just what GB needs!

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