EURO @ 1.2774 = Overnight, Japan was the big news, but in present times it is surely not mother of all the ills. After Shinzo Abe's comment that he would like to see "Unlimited Easing" targeting 2 pct to 3 pct inflation through liquidity injection, combining BOJ's act by slashing policy rate to zero or below.
Well this is the global problem that leaders, politicians, IMF, World bank or a country's trading partners jump in, make lot of noise and start giving sermons on economic dis-balance. China in recent times is the best example, as it is blamed for manipulating its currency by keeping it artificially low. What did the developed economies achieved and how is US benefiting from weaker US Dollar if we compare the exchange rate from the era's of 70's. Until then gold was fixed at USD 35 per troy oz. Then, one USD would fetch Yen 360, GBP 0.42, Swiss franc 4.30, and Deutsche mark 3.60. Today, Gold is trading at $ 1715, the parity versus is YEN 81.20, GBP 1.5860, CHF 0.9432 & EURO 1.2775.
Yes, the size of the economy, the value of asset, balance sheets of banks and financial institutions, revenue collection based on percentage they all goes up as it inflates. In my view these are all economic gimmick. The real beneficiary are mere 1 pct to 3 pct of the elite population, the law makers, the politicians and the selected lot of business community engaged in big set-ups has caused huge global debt, as theses elite of the society are not the sufferer, it is the country and its remaining 97 pct to 99 pct of the population that is suffering.
So if the global leaders really want to overcome the economic, unemployment and debt problem then currency adjustments, quantitative easing, zero interest rate is not the solution and instead depositors in huge percentage that are helping the nation are being penalized due to bad policies. The real way to correct the problem is by raising taxes in such a proportion that higher the earning goes, higher should be the tax ratio, no matter how much it is, allow it to the maximum of 90-95 pct on highest earnings/revenue (this surely needs some working). Bottom line is that larger pool of money should go into the exchequer's kitty and not into the share holders pocket or the individuals, if the world really wants to fix problem.
As of today, I think US economic data will not have bigger role, as US fiscal cliff is the bigger issues, but Europe is once again in the limelight after the news of 17-nation back in recession, this news will sure not help the overall sentiment, as Europe is fully packed with its long list of unending problems. What bothers me is that economic data indicated that Germany and France 2-largest European economy was OK, but economic signs emerging from the 2-biggest Euro-zone nation are not positive, so what if 2-economies deteriorates. One also wonders that in such a horrible situation how will the countries demanding money to meet its funding requirement will take hash austerity measures to reduce its deficit and debt.
It is all pointing towards more tough times ahead. Window dressing will surely be tough for the European financial managers and hence future of EURO is certainly bleak.
I don't mind giving some more space to EURO, as it could make some more gains as long as it hold 1.2740 and could see a push towards 1.2815-25 zones before falling, So pick the top on up move to sell EURO. Drop below 1.2710 risk for bigger fall.