28 Jul 2011
By Jason Hoerr – forextraders.com
Currently, the global economy is facing a major setback on several fronts. In Europe, sovereign default fears in Greece reached fever pitch again in recent weeks as the European Central Bank and EuroZone members had to offer Greece a second bailout in order to stave off a complete collapse.
12 months ago, no one would have thought that the United States would be facing similar fears of sovereign default, but that is exactly where the US is now. Currently, debate is raging within the walls of Washington whether or not Congress should raise the debt ceiling. If they do, the US will be able to meet its debt payments in August. If they don’t, the US will not.
These events are combining with general unease concerning China’s economic situation and resulting in strong general uncertainty regarding the global economic outlook. John Taylor, Chairman, CEO and Founder of FX Concepts, is very bearish regarding the global economic outlook for 2012. FX Concepts is the largest strictly-FX hedge fund in the world with around $8 billion under management.
Taylor recently stated that he believes the European and US efforts to deal with record debt loads will help alleviate fear in the short-term, but the underlying problems will not go away. Taylor expects that the short-term fix will lead to one more risk rally where global equity markets press toward recent HI’s and possibly break into higher territory. That, however, will be the that last hurrah before recession takes hold.
Since Taylor’s fund deals strictly in the FX space, he, of course, has a strong stance concerning his outlook for the US dollar and euro. When EUR/USD rose off its lows in May 2010 when Greece was finally rescued by the ECB and IMF, Taylor stated that he expected a rally in EUR/USD. He expected the market to turn its attention from a Greek default to widening yield spreads between the US and EuroZone. At that time last summer, Taylor stated that he expected EUR/USD to move no higher than 1.4500. Euro reached a HI of 1.4700, but it has now fallen sharply back down to 1.4300.
After this last hurrah unfolds, Taylor is expecting recession in both the US and Europe to push price aggressively lower in risk aversion flows in the Fx market. This means that yen and dollar will most likely rally versus risk currencies such as Australian dollar, Canadian dollar, New Zealand kiwi, euro and British pound. Taylor said that his fund is targeting $1.15 on EUR/USD, and he fully believes that parity is an actual possibility.
If you are trading currencies actively, it is always a good idea to keep the pulse of major market players. Taylor is one of the largest players in the entire world in the FX space. Only time will tell if his outlook of one last risk rally followed by severe risk aversion plays out.
Currently, the global economy is facing a major setback on several fronts. In Europe, sovereign default fears in Greece reached fever pitch again in recent weeks as the European Central Bank and EuroZone members had to offer Greece a second bailout in order to stave off a complete collapse.
12 months ago, no one would have thought that the United States would be facing similar fears of sovereign default, but that is exactly where the US is now. Currently, debate is raging within the walls of Washington whether or not Congress should raise the debt ceiling. If they do, the US will be able to meet its debt payments in August. If they don’t, the US will not.
These events are combining with general unease concerning China’s economic situation and resulting in strong general uncertainty regarding the global economic outlook. John Taylor, Chairman, CEO and Founder of FX Concepts, is very bearish regarding the global economic outlook for 2012. FX Concepts is the largest strictly-FX hedge fund in the world with around $8 billion under management.
Taylor recently stated that he believes the European and US efforts to deal with record debt loads will help alleviate fear in the short-term, but the underlying problems will not go away. Taylor expects that the short-term fix will lead to one more risk rally where global equity markets press toward recent HI’s and possibly break into higher territory. That, however, will be the that last hurrah before recession takes hold.
“We’re going into a recession, a really big one, bigger than 2008—I’ll hang my hat on it,” Taylor said. “It’s descending on us already. Next year’s going to look worse.” During the last run of global risk appetite before the descent, Taylor believes that commodity prices will boom, Australian and Canadian dollars will rise, and that gold could reach $1,900 an ounce by October.
Since Taylor’s fund deals strictly in the FX space, he, of course, has a strong stance concerning his outlook for the US dollar and euro. When EUR/USD rose off its lows in May 2010 when Greece was finally rescued by the ECB and IMF, Taylor stated that he expected a rally in EUR/USD. He expected the market to turn its attention from a Greek default to widening yield spreads between the US and EuroZone. At that time last summer, Taylor stated that he expected EUR/USD to move no higher than 1.4500. Euro reached a HI of 1.4700, but it has now fallen sharply back down to 1.4300.
After this last hurrah unfolds, Taylor is expecting recession in both the US and Europe to push price aggressively lower in risk aversion flows in the Fx market. This means that yen and dollar will most likely rally versus risk currencies such as Australian dollar, Canadian dollar, New Zealand kiwi, euro and British pound. Taylor said that his fund is targeting $1.15 on EUR/USD, and he fully believes that parity is an actual possibility.
If you are trading currencies actively, it is always a good idea to keep the pulse of major market players. Taylor is one of the largest players in the entire world in the FX space. Only time will tell if his outlook of one last risk rally followed by severe risk aversion plays out.
