The Politics of Economics.

OECD GLOBAL CURRENCY VALUATION (JULY 2012):

(Organization for Economic Co-Operation and Development)

Swiss franc is more than 34% over-valued.

Yen is more than 25% under-valued.

Brazilian real is 12% under-valued.

Chinese yuan 54% under-valued.

Indian rupee is more than 188% under-valued.

EURO:

Impact of zero deposit rates in EU impacts Northern banks more than peripheral banks, as Northern European banks use Target 2 to deposit their funds overnight, but not the peripheral banks, because they don’t get any interest.

Euro moves in the same direction as the US-German 2-year interest rate differential.  The premium the US offers over Germany is around 28 bp, its best level since late 2007.

Euro bears are buying protection for their short euro position by buying calls.

FRANCE:

Peugeot announced 8k cut in jobs on top of the 6k previously announced.  Other companies are also planning layoffs.  The French government is said to be planning another aid package.  

SPAIN:

Announced 3% point hike in VAT much to public dismay.

Tourism which accounts for 10% of country's GDP is showing signs of waning much effected by Austerity measures and EU crisis. More and more people are avoiding Greece, Spain and Italy as their destination because of the spoiled spirit and open hatred towards globalization and American Capitalism, by the people in these countries.  Nobody want to face hostility when they are on vacation in a foreign nation.

VAT rise would hit manufacturing industry sales.

ITALY:

Downgraded to Baa3 from A3 by Moody's, they are most exposed to Greece exit or further borrowing from Spain.

CHINA:

China has shifted from an export oriented economy to consumption oriented economy aka America. New large Capital Investment have reached the point of diminishing returns. Additional monetary stimulus is likely in coming months.

AUSSI:

String of poor data has suggested a rate cut in the beginning of next month. This might start to get factored in the remaining half of this month.