Forex Fundamental Analysis
Over recent months, there has been an exodus of banking funds from Europe to the USA. It has been calculated that some $500 billion has been shifted out of European banks and into US accounts over the past six months.
In retrospect, the EU and the IMF may be regretting paying the €110 billion bailout package to Greece in tranches. As a condition of the loan, Greece must be seen to be adhering to the terms of the loan by making progress on its debt reduction plans.
A few months ago, rumours that the ratings agencies were about to downgrade France’s AAA credit rating in the face of its sovereign debt abounded. The rumours were hotly denied on all sides and have been seen to be baseless (for the time being anyway).
The incoming head of the International Monetary Fund, Christine Lagarde, has called for governments to take “bold action” to tackle the faltering global economy, but the call is light on the specifics of how this should be achieved.
Last week was saw all of the world’s major markets close lower on continuing jitters about the pace of the global recovery and sovereign debt.
The Monetary Policy Committee of the Bank of England has decided to leave UK interest rates unchanged. The rate of 0.5% has now been in place for 30 months.
Germany has long been regarded as the powerhouse of Europe and is one of the world’s leading exporting nations. However, in a global economy, a nation’s success is dependent upon how its trading partners are faring, Month-on-month figures just released for the German economy show that exports have declined by 1.8%.
Switzerland is suffering from being just that bit too stable and reliable. With many of her neighbours suffering from doubts about the long-term viability of the Euro, debt or sluggish economies, Switzerland and the Swiss Franc has become a very attractive safe haven in the current “long winter” of economic storms.
Debt is a commodity that can be bought and sold and forms part of many portfolios, but exposure to individual loans could be risky, so a number of loans are bundled together, “securitized”, to create a financial vehicle with lower risk – the number of good loans outstrips the small number of bad debts, spreading risk and (almost) guaranteeing returns.
Last week was a mixed affair for the world’s major markets. In Europe over the course of the week, the FTSE made 3.2% and closed at 5292; the Dax crept up by 0.02% to close at 5538.3%; the CAC climbed by 2.0% to end the session at 3148.5.
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