Every newspaper and every newssite has countless articles, reports and opinions on the EU debt situation and all that I’ve read are doom-and-gloom for the EUR. The favoured solution seems to be for the weaker nations to leave the EUR, but two bank analysts for whom I have a lot of respect tell me that this solution would be almost impossible to implement. So either Germany relents and allows the ECB a much larger role or the crisis drags on. Other bank sources tell me that the money markets are beginning to freeze again just as in late 2007 so what’s likely to happen if we get another extreme credit-crunch event.
Back in 2007, it was the big leveraged positions which caused the most movements. In the FX market, this meant the big carry trades like AUD/JPY, which had been built up over 4 years, were dismantled in 2 weeks. If you want to know where everything will go in another credit-crunch event, just find out where all the big leveraged speculative positions are, as they will have to be quickly unwound.
