Foreign Exchange Market Roller Coaster

Posted on July 8, 2011

Years ago there was an old adage proclaiming that “Britannia Rules the Waves”.  It referred to the era when The British Empire ruled supreme on the seven seas and thus extended its influence all around the world.

Today, when speaking of the world’s financial stability, the adage should be “Uncertainty Rules the Waves”.  The stock, bond, commodity, and currency markets are continually changing sentiment, policy, and direction due to the “Uncertainty Influence”. These unknowing elements have been creating havoc and ever-changing lopsided trading directions on financial assets and instruments around the world. The correction and re-corrections of trading trends have caused disorder and disaster for many in the investment community. The effects of these fickle markets have also impacted the security and well being of the non-investors and the average person on Main Street.

While there are many announcements regarding the Eurozone sovereign debt issue being resolved, in reality the can is only being kicked down the road. Even with the latest increase of bailout numbers, Greece will not be able to pay its bills for long without additional help, Portugal’s debt was just downgraded again and Ireland is considering restructuring their bailout program.  Furthermore, recent revelations correcting previous reports of Spain’s and Italy’s more substantial debts continue to surprise the financial world.

The results of a current European bank stress test, requiring new disclosures of individual bank’s exposure to sovereign debt, are due soon.  It’s expected they will only contribute to the “Uncertainty Influence” of these institutions financial stability.  There are basic economic fundamentals, technical analysis, and political rhetoric that will affect the value and direction of financial and commodity assets.  However, when it comes to appreciating the explosiveness and unpredictability of today’s financial arena it’s imperative to understand that it’s UNCERTAINTY that rules the waves.

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