By Jack Crooks, Editor of World Currency Options
www.worldcurrencywatch.com

I’m concerned about calling the euro a “safe haven” for a couple of reasons:

First, despite our general agreement with Mr. Trichet about his monetary and fiscal views, I have to wonder if Trichet’s reluctance to ease further and faster may not add to Europe’s problems. 

Consider that member countries are busting their budgets to try to drive up demand, while the ECB remains stingy with their rates. In other words, the ECB refuses to offer the monetary stimulus that other central banks are.

This could only exacerbate the fiscal strains Mr. Trichet is concerned about. It could also increase the already widening member country bond spreads. Plus, I believe the emerging markets of Europe could be the Achilles heel for the euro. They’re starving for liquidity even more than the larger euro members. 

The Euro Just Sprang Back to Life Versus the Swissie

My second concern is Germany. The market still believes Europe’s real engine of growth is in decent shape. But, I don’t think that will last too much longer. After all, Germany is an export powerhouse. I believe the exact same dynamic hitting China — no buyers — will hammer German growth. 

However, all that said, I’m still staying open to the possibility. Price action is always the final arbiter no matter what macro story is in play.