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Posted by on Apr 19, 2016 in Market Insight

Rumblings in Germany

Rumblings in Germany

April 19, 2016

Dennis Gartman is editor and publisher of The Gartman Letter, and strategic advisor of the AdvisorShares Gartman Currency Hedged Gold ETFs (GEUR & GYEN). He regularly contributes to AlphaBaskets and lends his institutional insight to educate advisors and investors about commodities and the forex markets, including about trading gold in different currency terms.

In Europe there is growing enmity between Germany and the ECB, or more properly between the ruling German political party… The Christian Democrats…and Mr. Draghi. Why do we say this? We say this because the leadership of the CDU… and most specifically Mr. Schäuble, the always taciturn German Finance Minister… is now convinced that it is the ECB’s policy of excessive liquidity that has been forced fed into the banking system that is causing the right-ward shift of the voters in Germany at the CDU’s expense. Mincing few words, Mr. Schäuble apparently said of Mr. Draghi regarding the CDU’s rather embarrassing showing at the most recent local and state elections that he…. Schauble… “Can attribute 50 per cent of the results of a party that seems to be new and successful in Germany to the design of this policy…. There is a growing understanding that excessive liquidity has become more a cause than a solution to the problem.”

Schäuble is of course talking about the rise of the AfD…the Alternative for Deutschland… in recent local and state elections in Germany. And Mr. Schauble is not alone in expressing his political and economic concerns. The Transport Minister, Mr. Alexander Dobrint, who is a leader of the CSU… The CDU’s “sister” party in Bavaria…said in an interview with Die Welt that “The ECB is following a very risky course. The disappearance of interest rates creates a gaping hole in citizen’s old age preparations”.

The ECB’s leadership has returned fire to the Germans, although the not yet from Mr. Draghi. The Bank’s Chief Economist, Mr. Peter Praet, said that the criticism from the Germans was and is “hard to swallow.” That said and moving on, clearly the “commodity selling” currencies were having a rather difficult time of it Monday morning, with the Canadian and Australian dollars, along with the Russian Ruble, the Brazilian Real and the Mexican Peso, all down sharply while the “commodity receiving” currencies such as the Yen… and indeed primarily the Yen… and the EUR were stronger. Given the seriousness of the rift that has taken place at the OPEC meeting this dichotomy between the “commodity selling” and the “commodity receiving” currencies may obtain for quite some while.