The Coming Break Up of the Euro

7 July 2004. That was the day the eurozone started to fall apart.

Most people didn’t see it – they were too busy looking the other way. They were more concerned about the death of the US dollar.

But back on that day in July 2004, Italy’s sovereign debt was downgraded by the rating agency, Standard & Poor’s.

At the time, we wrote to readers of our e-letter: “It doesn’t take an economics degree to figure out that other mainland European countries are facing a similar downgrade.”

Well we were a little ahead of the game. And the euro kept on going up against the dollar pretty much from when we wrote our warning… until the worldwide financial crisis hit in 2008.

But then, when things started getting really ugly, people suddenly remembered that the dollar was about the safest haven there was. Despite it being the root cause of most of the problems in the financial markets…

Anyway, back to the prediction we made…

“With several European governments having reached a state where you could say that they are fighting for financial survival, it’ll soon be that it’s every man for himself. This in turn is preparing the centre-stage for talks about a return to national currencies.”

Our point was that most Europeans were still unwilling to support tough economic reforms. Which meant the only way to prop up their economies would lie in devaluing the currency.

Of course, individual Eurozone countries are not able to devalue the Euro. That means you have to consider the possible re-introduction of national currencies.

Are we witnessing the slow death of the euro?

It might seem unthinkable.

But since we last wrote, Italy’s sovereign debt has been downgraded again. Ireland has also been downgraded. And the latest shock was in Greece. There could well be more to come.

In the meantime, the currency is getting battered in the markets. Our macroeconomic trading friend, John Lewis, gave us a tip last week. It was part of a test for a new trading system we’re working on.

“The government finances in the Euro zone are fractured with no central issuing authority, unlike in the UK, US or Japan,” wrote John. “This means the individual countries in the Euro zone decide their own public debt profile, but within guidelines set by the growth and stability pact.

“But because of the recession, those guidelines aren’t being followed. Peripheral countries like Greece and others are running unsustainably large budget deficits and debt to GDP ratios.

“The Japanese Yen on the other hand is supported by a very strong external trade position and very large foreign currency reserves. I expect the Yen to strengthen much further against the Euro over the coming weeks. Sell euros, buy yen.”

That trade’s already playing out. It’s 400 pips in profit and too late to enter now, based on John’s risk/reward guidelines. But John’s someone you should check out in the future. We’ll let you know when his service becomes available.

Once thing looks clear. The dollar is no longer the whipping boy of the Forex markets. And neither is the pound. For the next little while, it’s the euro that is on death row.

Look out for this important announcement tomorrow

Tomorrow, you’ll receive one of the most important emails of the year so far. It’s from our colleagues at investment think tank,The Fleet Street Letter.

They’re about to release a set of economic predictions for 2010 which could shock you. But they’re not just scaremongering. They offer you ways to play it.

Step by step, as they outline each threat, they show you a way to deal with it. In fact, despite the frankly terrifying forecasts, you’ll be handed a simple way to not only protect yourself – but also that could help you profit.

I’m not talking about your average financial commentary here. These are the insights of some of our top investment minds. And they have a knack of getting these big calls right.

The Fleet Street Letter team now has the lowdown on a catastrophe worse than subprime and a deception so deep it could lay waste to the faltering UK economy.

These predictions could have a BIG say in your financial future, so we want to make sure you have the chance to access them as soon as possible.

Details are going to be released to all Fleet Street Publications readers next week. But I’ve negotiated a way for you to get this report ahead of most readers.

They’re putting together a “priority list” for readers who have an interest in getting this important report ahead of the game.

We’ll be sending you a special email on Saturday. That will tell you everything you need to know. If things are all in place by then, you should be able to secure your place on this priority list. It will only take seconds to add your name.

And that way, you’ll jump the queue to access this important piece of work…

Be warned, though. The predictions The Fleet Street Letter team are making are likely to shock you. You will not like what you read about their vision of the UK economy… the stock market… the Pound… and the property market.

Just be sure to get access to their solutions if you have the chance. Your best chance of that is to get your name on to the priority list. You can do that on Saturday.

Best wishes,

Frank Hemsley
For The Right Side

P.S. If you enjoyed this article you can find out more about our free email, The Right Side by clicking here.

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