2107奔驰cla动感型:Euro below US$1.30 (2)

There is continued speculation that the SNB will raise the effective Euro/CHF peg. Swiss investor confidence results were negative and, in addition, exporters are really feeling the pressure. However, these rumours have been around for some time now, I accept;

The German investor confidence index (the ZEW) came in at -53.8 in December, slightly higher than November’s 55.2, though well below the average of around 25. The construction, component was particularly strong, though private domestic consumption is holding up well. The ZEW economist suggested that Germany GDP may contract in the 1st Q next year, but recover thereafter, with GDP of +0.9% forecast for 2012. Exports are expected to decline modestly. Basically a better than expected report, particularly given recent events, though I remain sceptical;

The Bundesbank has agreed to providing funds to the IMF, as long as other countries (France, the UK, US and China) do so as well. Whilst these funds cannot be earmarked for Euro Zone countries, they certainly will be heading that way;

Mrs Merkel has stated that the size of the ESM would be capped at E500bn, with no leverage. Her comments came ahead of a key speech to the German Parliament in respect of the bail out funds, so not unexpected. However, the funds available to the EFSF/ESM is simply not enough. The proposed E200bn to be provided to the IMF by EU countries,to be on lent to Euro Zone countries, is fraught with difficulties – basically where will the money come from;

One key issue – German officials are now stating that (both) the size of the EFSF/ESM will not be increased and that Euro Bonds are not on the cards “AT THIS STAGE”. At this stage is the key message. Merkel has to bring her people around – that’s the issue. How long will it take – too long. As a result, another Euro Zone crisis is very likely, which will force Euro Zone politicians to ultimately move towards enabling the ECB to buy bonds aggressively and, in addition, employ QE. I remain convinced as there is no other alternative;