FX fundamental analysis
Fidesz recent concerns about Hugary’s fiscal situation remind what caused the Greek situation to spin out of control
except iona l ly high PMI and the highes t KOF leading indicator in a lmos t four year s . Headl ine consumer price inf lat ion has exce eded the SNB’s proje ct ion for mos t of thi s year, a l though the lates t reading was sof ter. But more than coming f rom the relat ive per formance of rea l e conomies , the s treng th i s l ikely coming f rom f low dynamics . According to repor t s by some of the countr y’s leading pr ivate banks , r ich foreigner s are increas ing the funds the y ’ve hold in Swi tzerland. Widely f lag g ed concerns about the countr y ’s future as
24 FX TRADER MAGAZINE July - September 2010
the wor ld’s big g es t of f shore wea l th manag ement centre se em now to be completely rever sed. Uncer ta int ies about Swi s s bank se cre c y fol lowing Bern’s acceptance of g reater transparenc y
in March
2009, even adver se publ ici t y f rom thef t s of conf ident ia l cl ient data f rom rogue bank employees , are now downplayed when facing much de eper worries on Euro s tabi l i t y and the potent ia l f inancia l cr i ses in some Eurozone member s .
Europe’s cr i ses has exposed the s ing le currenc y proje ct ’s
f laws . Germans (at leas t a majori t y of them) would probably l ike to se e a return of the Deut schemark. Foreign inves tor s have a lways be en se eking a hard currenc y a l ternat ive to the Dol lar. Such a role for the Euro i s now in dang er. But , as we argued ear l ier, a Euro break-up and a quick demi se of the s ing le currenc y (and a return of DEM) i s ver y unl ikely in the shor t term. Wi th Swi tzer land a l ready a good proxy for Germany ’s e conomy (20% of Swi s s expor t s cros s thei r Nor th border ) the Franc could be a va luable ‘hard currenc y’ targ et . Ironica l ly the s igni f icant reser ves accumulated by the SNB, now holding foreign as set s exce eding mos t other European ins t i tut ions by far, could fur ther boos t conf idence in the Chf , jus t as the Bundesbank’s reser ves
in the pas t bol s tered the Deut schemark. H
ungary: sharing Eurozone des tiny
When the April Hungarian elections gave a clear winner, the Fidesz centre-right party, the country saw a nice rally in its various asset classes: FX (Eur/ Huf got almost as low as 260), bond and equity markets. All the worries coming from spillovers of the Western credit crises seemed to have faded away.
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