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Euro Jumps Higher As Swiss Franc And British Pound Sterling Continue Upward Blast

|Includes: ACWI, DBB, EWJ, EWP, EWU, FEZ, FXB, FXE, FXF, FXS, FXY, SPDR Gold Trust ETF (GLD), IWM, JSC, TZA, UNG, USO, ZROZ

The Euro, FXE, jumped higher with the strong European currencies, the Swiss Franc, FXF, and the British Pound Sterling, FXB.

The Swedish Krona, FXS, and the Brazilian Real, BZF, was drawn up as well; all on the Yen, FXY, popping yet higher.    

FXE: 2.39%

FXF: 1.75%

FXS: 1.61%

FXB: 1.60% ..

BZF: 1.09% ..

FXY: 0.93% ..

The jump in the Euro, came partly from bullish trading, partly from being drawn higher with the strong European currencies, the Swiss Franc, FXF, and the British Pound Sterling, FXB, and partly from the call for strong economic governance coming from the EU Commission as reported in EurActiv article Brussels Tables New Economic Governance Plans. The  European Commission yesterday (30 June) presented its latest proposal to strengthen the Stability and Growth Pact after the Greek crisis had exposed the weaknesses of the EU’s budgetary surveillance system, proposing four policy enhancements.

First, to jointly review each others’ draft annual budgets before they are adopted at national level, during a so-called ‘European semester’, starting July 2011.

Second, to establish a detailed system of sanctions for member states which do not respect budgetary discipline requirements set out in the Stability and Growth Pact.

Three, farm aid cuts for high deficit countries.

Four, concerning eurozone members only, the Commission could propose the establishment of “an interest-bearing deposit” for countries which have not shown sufficient progress in consolidating their budgets.

EU economy ministers will discuss the proposals at their next meeting in Brussels on 13 July. They are likely to endorse the plans and the new measures could enter into force as early as next year, says EurAsiaReview.

It is this author’s contention that if the EU Finance Ministers approve the enhancements of the Stability And Growth Pact, would further confirm the loss of national sovereignty that came in early May 2010, when the EU Finance Ministers waived national sovereignty and announced what they called a bilateral loan agreement providing monetary aid to Greece, but which was in reality a seigniorage monetary grant.   

The vetting of budgets each July, imposition of farm aid cuts, possible imposition of fees, and assignment of a deposit to an interest bearing account, would establish a federalized european economic government where countries would no longer be sovereign nations, but rather states existing in a region of global governance, specifically one of ten called for by the Club of Rome in 1974.

Profit taking came to gold, GLD, down 3.8%, and silver, SLV, down 4.2% as fears of contagion of the European sovereign debt crisis subsided;  base metal, DBB, fell 0.78%.

Oil, USO, fell 3.21%; base metals, fell 0.78%, and natural gas, UNG, rose 4.77%.   Sandy Shore of the Associated Press reports that oil prices fell for a fourth day Thursday after disappointing economic news triggered worries about whether demand would pick up at all during the typically busy summer season. Benchmark crude for August delivery dropped $2.68, or 3.5 percent, to settle at $72.95 on the New York Mercantile Exchange. A series of reports revealed more negative news about the U.S. economic recovery: jobless claims rose more than expected last week; construction spending declined in May and the number of buyers who signed contracts to purchase homes dropped in May to the lowest level on record dating from 2001.

The developments could prompt consumers to cut back spending on energy products, perhaps forgoing long driving trips for vacations at a time when oil and gas usage typically increases. “You’ve got a bunch of things along those lines that are just not helping right now,” analyst Peter Beutel of Cameron Hanover said in an interview. Retail gasoline prices also continue to languish. Natural gas prices rose slightly after the government said stockpiles grew by 60 billion cubic feet to 2.684 trillion cubic feet for the week ended June 25. Analysts had forecast an increase of 61 billion cubic feet to 65 billion cubic feet of natural gas storage inventories, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

ETF gainers included: Spain, EWP,  4.7%, Italy, EWI, 2.9%, Austria, EWO, 2.6%, European shares, FEZ, 2.0%.

ETF  fallers included: The too big too fail financials, RWW -1.2%, regional banks KBE, -0.9%, and Russell 2000, IWM -0.7%.

I’ve been consistently recommending the Direxion 300% inverse of the Russell 2000, TZA for institutional investors; it rose 2.20% today.

Google Finance chart of DBB, EWU, DIA, EWJ, JSC and IWM shows that Global Growth ended April 16, 2010 on China credit tightening when the currency traders disinvested from base metal carry trades causing the UK shares, EWU, and Japan Shares, EWJ, to fall in value. 

Debt Deflation commenced on April 26, 2010, as currency traders sold the world’s currencies against the US Dollar causing the financially sensitive Russell 2000 IWM, shares to fall in value. The Japan shares, EWJ, had been outperforming the Dow, DIA, up until April 26, 2010; now they are running neck-and-neck. The currency traders in going long the Yen and short various currencies has led to the Japanese Small Companies, JSC, having better performance, albeit in a downward projectory, than the Dow, the Japanese shares, the UK shares and the Russell 2000.

The age of competitive currency devaluations commenced on June 7, 2010, when the US Dollar, $USD, turned down as the Euro, FXE, rallied on news of the call for the EFSF Monetary Authority to be established (it as of yet, still has to be approved by member states) . 

The chart of the US Dollar, $USD, traded by UUP, shows today’s  massive fall from a head and shoulders pattern, to $84.53.

All currencies, with possibly the exception of the Yen, FXY, have now peaked out; and are in various stages of fluctuation.  The Euro, FXE, is currently rallying with the strong European currencies, the Swiss Franc, FXF, and the British Pound Sterling, FXB; never the less, these currencies are only rallying; they will never ever reach their former highs.

Lack of a strong down day has paused the parabolic rise in IEF, and TLT;  but the longer out maturity ZROZ blasted 0.88% higher.  These are only temporary shelters of investment value, and will fall rapidly in value soon as concern grows over US deficit spending. 

The chart of world stocks, ACWI, shows terrible depression, that has come from a higher Yen, FXY. If the currency traders take the yen lower, will the world stocks revive? Click on charts to enlarge.

Chart of the Yen, FXY: it may have peaked out for now; or this might be as high as it goes.

Gold, $GOLD, despite today’s fall, and potential to fall to 1090, has clearly arisen as the sovereign currency and storehouse of wealth; its true worth is in the protection it affords in black swan events such as the possible collapse of British Petroleum, BP.   Click on chart of Gold to enlarge.

 



Disclosure: I am invested in gold coins