FX Technicals by Marc Chandler of Marc to Market,
Guest post by Marc Chandler of Marc to Market.
Our concern then is that Q4 is going to be more volatile that is currently implied and that has directional implications for the dollar. Many longer-term investors believe the US fiscal cliff and debt ceiling issues are the biggest risks facing the world economy. Others are more concerned about the unresolved European debt crisis an the signs of prolonged economic weakness.
The key may not lie with the economic data. The important steps announced by the ECB, Federal Reserve, and BOJ has stolen the thunder from the near-term economic performances. Instead, we suspect politics and positioning may be more important.
As we have noted, the signals coming from European officials indicate that there has been an important climb down from pushing Greece out of the monetary union and the indications from intrade.com, where the odds a country leaving the euro zone this year has fallen to the lowest in at least two years, suggest investors recognize this.
Exactly how the proverbial circle can be squared–how Greece’s debt outlook can be judged to be on a sustainable path–is not clear. Yet this is not the top issue on the agenda. In fact, since earlier this month, European officials appear to be playing for time, and not just for the mid-Oct EU summit, which had previously seemed to be the case. Instead, expectations have been massaged and now a November decision is more likely.
Instead of Greece, the political spotlight in Europe is on Spain. There are two conflicting impulses. On one hand, Spain is reportedly engaged in negotiations to design a structural reform package that could be adopted prior to formally asking for assistance that would in fact meet the Troika’s conditionality. These structural reforms, which may not include new taxes or spending cuts, could be announced toward the end of next week.
Guest post by Marc Chandler of marctomarket.