The EU summit - divided we stand

*EU leaders agree that they disagree. Leaders seem to agree that protectionism is bad - France launches a 6.5 BN Eur for a French autoindustry bailout, and gets EU approval!

All talk and no action. That sums up this weekends EU summit quite well. From here there will be "individual solutions" to any CEE country in dire straits. The CEE countries were mainly advised to use the IMF, World bank, EIB, etc to raise extra funds whenever needed, but the EU leaders also pledged that the Western european bank owners are supposed to pump in money into their CEE subsidiaries via government support programs designed to refinance the Western european banks.

The EU leaders have now also agreed on what kind of specific national support solutions will be allowed in order to refinance Western banks; "Toxic banks", government capital injections via ownership stakes, loans or buying of bank assets, nationalisation.

First of all, I have a very hard time believing that governments will actually approve pumping taxpayer money into CEE "black holes" via the western banks, as leverage for Western european banks remain at record levels, western companies are strapped for cash and western households are getting into truble. Nah, dont think so.

Secondly, EU leaders have basically made clear that "anything goes" on a nation by nation basis when it comes to save ones banks. Zero coordination, zero plan -massive financial protectionism.


In short, it seems the CEE countries are in for another round of pressure. The intervention threat stated by the Polish and Hungarian authorities are about to be called upon. They have painted themselves into a corner. This is not good. They will surely need their FX reserves badly for other purposes before long. This will be another exercise in money wasting. They might win a battle or two but they will most definitely loose the war vs the market.

I am short PLN, HUF, ZAR, TRY and CAD. Looking to go short RUB and to add to the other positions on currency rallies. TRY should be in line for a move towards 1.80 as the middle east flows are weakening. Eur/PLN to test 4.90/5.00, Eur/HUF to test 310. Centralbanks resolve will be tested in the process. More volatility ahead!
Usd/Zar should test 10.5o for starters.
Usd/Cad to test 1.30.



*More pressure on the Baltics - time to float their currencies
The Baltic countries would be best adviced to float their currencies while they have any reserves at all left. Anything else would be foolish. The ensuing situation in the Baltics will be very harsh, no doubt about that, but it will be far worse if wasting the FX reserves before floating. Because they will float - if they want to remain a democracy.
I am long EUR/LVL.


*SEB and Swedbank - one last correction higher before 10 SEK?
Although the macro situation is worsening by the day via the Baltics, Ukraine, Germany, etc which should drag these banks down, there seems to be some technical base building.
While I will remain short, I might actually take some profit on a tactical basis purely for TA reasons.


*Gold - needs to close below 947 for a swift move to 910/920.
Think we will have a go towards 910/920 shortly as long as 960 holds - despite the very gloomy macro environment. Gold badly needs a washout. Even the taxidrivers will tell you to buy Gold these days. (No offense).
I am short gold and am looking to add on a break lower.



As always, good luck


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