Grexit Threat: Sound & Fury Signifying Nothing?
Dennis Gartman has been directly involved in the capital markets since 1974 and has been publishing his daily commentary, The Gartman Letter, since 1987. Mr. Gartman is a strategic partner with the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN) and lends his institutional insight to educate advisors and investors about trading gold in different currency terms.
Following the announcement on Sunday evening of the victory by the “NO” vote in the Greek referendum. We have been of the opinion that a “Greece-less” EUR would be manifestly more expensive than a “Greece-included” EUR, and for a few minutes yesterday following the announcement of the material nature of the “NO” victory it appeared that Greece would be summarily tossed from the single currency. However, cooler heads have prevailed since and now it does indeed appear that Greece shall remain within the EURO-zone; that it will remain within the single currency; that Germany/France/the Netherlands et al shall come to some agreement with the Tsipras government that shall keep the single currency intact.
“Extend and Pretend” shall be put into effect yet again, for keeping Greece within the confines of the single currency has always been Germany’s leaders’ intention. As we have said countless times, Germany as an exporting nation knows that it must keep the EUR weaker than it would be otherwise in order to grease the export businesses that are its economic backbone. When push has come to economic shove, the leaders of BMW, of Volkswagen, or ThyssenKrupp, of Bayer et al will prevail over the antipathy toward Greece felt by Mr. and Mrs. Schmidt, the quintessential middle German couple. The market is beginning to understand that reality. So too will Mr. and Mrs. Schmidt… eventually.
We are afraid then that the recent rally in the EUR evident on the weekly chart this page at the immediate left shall prove to have been nothing more than a consolidation…a correction… a modest, laboured bounce from the lows that is about to give way to new and important lows. “Par” is our target and even “Par” will prove ephemeral.