Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 19 November 2012 at 12:14 GMT

When PIIGS become FISH: The woes of France-Italy-Spain-Holland

Head of Trading / The ECU Group plc
United Kingdom

“Looking for FISH, don’t climb a tree” - Chinese proverb

Fish to pig In a week that has the potential to be very quiet for financial markets, with the Thanksgiving holidays damping volume and activity towards the end of the week, the Bank of Japan (BoJ) policy meeting and the Bank of England (BoE) policy meeting minutes are likely to grab attention.

The focus of the week is likely to be the Eurogroup meeting tomorrow, where I would expect some further positive sounds towards the Greek aid tranche. The risks perhaps are that the discussions move at a slightly faster pace and that there is an announcement about the formalisation of a Greek plan. That is perhaps not the central expectation but I would suggest that the risks for the EUR are very modestly skewed to the upside in the very short term.

In the bigger picture the situation for the eurozone continues to decline. The Q3 GDP data are very significant in this regard. This weeks Economist has a special feature on France which it describes as “The time-bomb at the heart of Europe”. While Spain and Italy saw their respective pace of economic declines slow, the Netherlands saw a very sharp and unexpected contraction. While in the short term I see the balance of risks as marginally positive for the EUR, the longer term risks are becoming increasingly negative and perhaps most significantly emanating from outside the periphery.

In 2008 until now, eurozone weakness has been epitomised by the troubles of the PIIGS {Portugal, Ireland, Italy Greece and Spain}; 2013 will likely see that focus shift to the FISH {France, Italy, Spain and Holland}.    

fxtime fxtime
Holland IMHO is definately an economy to watch.....we see a hung tenuous government ready to scrap more fiscal largesse for Greece and frequently align themselves with Finland by suggesting Greece must go. Holland could well be the black swan event by demanding the above or demanding a referendum on the supposed budgetary increase currently being reviewed for present they too want a controlled tight budget probably at the expense of Greece as keeping their votive powers is proving hard in Holland. If they fail then yet another Dutch election looms.


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