2010-03-19

Declining social mood in Europe sinks euro

Protectionism and anti-foreign sentiment are on the rise as the social mood declines. Now we see Europe is splitting internally:
German Chancellor Angela Merkel has defied France and the IMF, refusing to modify Germany’s strategy of export reliance or boost growth to help alleviate the deep crisis sweeping Southern Europe.

"Where we are strong, we will not give up our strengths just because our exports are perhaps preferred to those of other countries," she told the German Bundestag.
Germany is in a strong position. They can do well under a deflationary scenario and given their export status, as the euro weakens they will see their exports to non-euro countries increase. Expect these disputes to get worse before they get any better.

Also remember that the euro and EU came about at the peak of social mood, with booming stock markets and booming economies. This will probably grow to become the darkest period in Europe since WWII or at least the bleakest moments of the Cold War.

Here's FXE, getting ready to break its recent lows. Next resistance would be $1.30 if it declines, and then it's on to test the lows of the 2008-2009 financial crisis.

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