November 25th, 2013

The markets have been very resilient in the face of a potential slowdown in the global economies.  This could be because of many central banks getting ahead of the curve in the amount of easing that they are taking on or discussing.  This could cause the markets to go into a fall if market participants do not feel that the data coming out this week (or any week) coincide with their projections.  Looking at the EUR/JPY pair as a gauge of the markets growth prospects we can see that the need for safe haven currencies over potential growth currencies is waning.  In spite of the ECB looking towards more easing and the Japanese economy facing headwinds from tax increases the pair has reached highs of the year.  


As far as safe haven assets go, in the event of news coming out in the global economy that would threaten the growth of the global economy, this pair will be one that I would most likely want to short.  In a slowdown it is expected that the ECB will speed up the process of easing  to stop the crisis from hitting the already fragile recovery in the periphery countries and the Japanese economy will go further into recession with the government slow to act on a strengthening currency for fear of political gridlock.

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