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20 Mar 2013
Forex Flash: Exit, pursued by a (Russian) bear? - Societe Generale
FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale comments that Polonius said that brevity is the soul of wit, and Hamlet had lost his marbles, so here's a short status update.
He begins by noting that the Russians have offered to buy Cyprus´s Popular Bank, according to market gossip. He suspects that Putin may have offered a loan to Cyprus in exchange for a share of future gas revenues. Ultimately, the US would mind that less, than the Russians asking for a Naval Base, and the EU would prefer a loan to the notion of a Russian purchase of a Cypriot Bank.
He writes, “Not that any of this means this is what will happen - geopolitics means that we now wait and see how the EU responds, while Cypriot banks stay shut and Cypriot depositors dare to hope they will end up keeping more of their cash. Time though, is short...” Nevertheless, he feels that this will play out in coming days and strangely, he sees no change in the end game. He suspects that Cyprus will revert to small-country status, there is no massive bank run elsewhere, but Europeans become more risk averse, more disillusioned with politicians, and growth remains elusive. he finishes by writing, “Everyone continues to be surprised by how slowly the euro falls, but it falls anyway. And eventually the ECB eases further. Indeed, if there is any sort of a run on Cypriot banks when they re-open, the ECB's balance sheet starts to grow. That's a liquidity not a solvency issue at that point, as suing the banks' assets are priced reasonably, but it does mean the ECB printing press is cranked up again. So I will remain Euro-bearish. Patiently.”
He begins by noting that the Russians have offered to buy Cyprus´s Popular Bank, according to market gossip. He suspects that Putin may have offered a loan to Cyprus in exchange for a share of future gas revenues. Ultimately, the US would mind that less, than the Russians asking for a Naval Base, and the EU would prefer a loan to the notion of a Russian purchase of a Cypriot Bank.
He writes, “Not that any of this means this is what will happen - geopolitics means that we now wait and see how the EU responds, while Cypriot banks stay shut and Cypriot depositors dare to hope they will end up keeping more of their cash. Time though, is short...” Nevertheless, he feels that this will play out in coming days and strangely, he sees no change in the end game. He suspects that Cyprus will revert to small-country status, there is no massive bank run elsewhere, but Europeans become more risk averse, more disillusioned with politicians, and growth remains elusive. he finishes by writing, “Everyone continues to be surprised by how slowly the euro falls, but it falls anyway. And eventually the ECB eases further. Indeed, if there is any sort of a run on Cypriot banks when they re-open, the ECB's balance sheet starts to grow. That's a liquidity not a solvency issue at that point, as suing the banks' assets are priced reasonably, but it does mean the ECB printing press is cranked up again. So I will remain Euro-bearish. Patiently.”