Part 2: Coming Week Market Movers & How To Profit
Once again, it’s all about the EU crisis.
Friday December 9th EU Summit The Likely Big Event This Week
Despite their talent for deferring hard choices, EU leaders appear headed for either an agreement to move towards fiscal and political integration or the dissolution of the EMU and Euro in their current form.
As we noted in our report on the prior week’s market movers, every plan on the table involves more liabilities for the core funding nations, particularly Germany. However, given Germany’s actions (including tentative steps towards a German exit from the EU) it’s far from clear that Germany or the others are willing to accept further economic risks.
The EUR’s failure to participate in last week’s risk asset rally suggests that forex markets expect a rate cut, a disappointment from the Friday summit, or both.
We suspect markets will be moving on headlines fueling speculation about the Friday meeting. We won’t have to wait long.
Clues About Friday Meeting Could Come Quickly
Early week meetings between French and German leaders mean we could have some idea if hope remains by mid-week. The biggest questions:
- Are EU leaders really willing to cede budget control (aka full sovereignty) to a central European body?
- Are funding nations like Germany really willing to take on more liabilities and risk their own economies for the sake of the EU?
Additional Greek 2012 Budget Cuts
On Wednesday December 7th the Greek Parliament is scheduled to pass the additional spending cuts needed to get IMF approval for the next aid payment.
Given the potential for the EU to drag the world down with it, other issues remain secondary.
Other Potential Market Movers
US Decisions On Extensions of Payroll Tax Cut & Jobless Benefits
With both, a presidential and congressional election coming in 2012, you don’t need a crystal ball to suspect these ultimately happen. The only question is whether Republicans are able to get spending cuts to balance the additional costs.
Central Bank Rate Decisions
The RBA, BOC, RBNZ, BOE and ECB all issue rate decisions and comments. While all could spur volatility in their related currencies, we suspect their currencies will be more influenced by overall risk sentiment, which will be moving with speculation about the Friday EU summit.
Disclosure/disclaimer: No positions. The above is for informational purposes only. All trade decisions are solely the responsibility of the reader.