Then It Was Back to Greece
February 21, 2017
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.
Money is leaving the European Continent as concerns over the fiscal circumstances in Greece are once again at the front and very center stage, but also as concerns grow of the possibility… not a probability, but merely a possibility… that Ms. Le Pen and her National Front Party may actually win the upcoming election in France in late April. Le Pen and the National Front have made it very, very clear that should they win the election they will move to take France out of the Euro and out of the European Union swiftly and completely. This properly frightens capital at the margins in Europe and that capital is looking for safer harbors when and where they can be found. For now, that means the easy monetary trek to Geneva, or Lugano, or Basel.
We shall say at this point that the defense at 1.0640 in favor of the EUR vs. the Franc by the Swiss National Bank has been “spirited” and has lasted far longer than we would have expected. As we write, the cross is actually trading 1.0635 and so 1.0640 has been bested to the downside; however, until 1.0600 is truly broken through on real, material volume the SNB will continue to fight the fight. In the end, the tsunami of capital fleeing Europe will overwhelm even the Bank’s defenses.
Turning to Japan and the Yen, the Bank of Japan’s Governor, Mr. Kuroda, went before the Diet today and argued that it is premature at this point to consider raising rates in Japan. There has been a great deal of debate that Kuroda-san will begin “tapering” the Bank’s buying of JGB’s sometime this year. Presently the Bank is set upon buying ¥80 trillion of Yen bonds during the year and perhaps the Bank may slow that marginally as a gesture of monetary good-will, but speaking to the Diet earlier today, Mr. Kuroda said that although “Rates are rising in other countries, it would be premature to assume that the Bank of Japan will raise either its short or long term interest rate targets simple because rates are rising over-seas”. We take him at his word.