The End Of The Euro - Saxo Trading Debates

SAXO Is it the CAPITAL MARKETS END OF THE EURO as we know it ? Is the Euro currency project on the brink of collapse? If Angela Merkel wins the German elections on September 22 she will have to face up to some ugly truths. Join the Saxo #TradingDebates Get firsthand insights from industry experts on what lies ahead for the Euro post-German elections. September 13, Bloomberg's European headquarters in London. Sign up for free now at www.TradingDebates.com AUSTERITY EUROPE Gross government debt as a % of GDP EUROPE IS SADDLED WITH DEBT | 180 156.9 150 123.6 Across Europe, austerity is now recognised as an anti-growth strategy but no credible alternative has emerged to breathe life back in to the 17 countries who share a currency. Since it's impossible to grow while both the private and public sectors are cutting costs, deficit problems in southern Europe are getting worse, not better. GREECE 120 117.6 PORTUGAL 90 60 IRELAND 30 2001 03' 05' 07' 09' 11' 2013 Source: Eurostat EUROZONE BAILOUTS Germany contributes more to the European Stability Mechanism than any other country. Its citizens are fed up of underwriting bailouts for profligate member states. EUROPEAN STABILITY MECHANISM | 118.55 OTHER EUR billion 40.02 190.02 Total funds contributed EUR billion 700 EUR billion At EUR190 billion, more than a quarter of the European bailout vehicle is funded by German EUR billion taxpayers. 83.32 EUR billion 142.70 125.39 EUR billion EUR billion Source: European Stability Mechanism GERMANY VS EUROZONE Unemployment JOBLESS EUROPE | Many Southern European countries are experiencing rising unemployment as a result of the severe fiscal cuts requested by Berlin. By contrast the jobless rate in Germany has fallen to an almost two-decade low. The social blowback from the austerity policies is tearing apart the social fabric in Europe. 12% EUROAREA 11.4 % 11% 10% UNITED STATES 9% 8.1 % 8% 7% 6% 5.5 % GERMANY 4% 07' 08' 09' 10' 11' 12' Year GERMANY NEEDS THE EURO | Real GDP growth rate German exports account for over half of the country's GDP. Further stagnation in the Eurozone could drag Germany under as well. The collapse of the Euro and return to the Deutsche Mark could also see Germany lose its competitive advantage in international trade. GERMANY 2.8 % 0.7 % EUROAREA -0.6 % UNITED STATES -2 -4 -6 07' 08' 09' 10' 11' 12' Year Source: Eurostat SURPLUS GERMANY CARRIES THE EURO Despite the imminent risk of a Euro breakup, the single currency is trading close to two-year highs versus an evenly weighted basket of G10 currencies. One reason is Germany's large current account surplus, which has helped prop up the Euro. CURRENT ACCOUNT AS A % OF GDP 2012 GERMANY FRANCE ITALY SPAIN GREECE EUROZONE 8% 6% 4% 2% 0% -2% -4% The Eurozone's current account ended 2012 in surplus due to Germany's strong terms of trade, which compensated for the current account deficit recorded in many Southern European states. Germany needs the Euro Germany has benefited from a single currency that has been valued significantly below the D-Mark had the German curi still been widely traded. "The Euro carries 14 a significant premium as a result of Germany's membership in the single currency. The Deutsche Mark would be trading 6 to 10% stronger if there was no Euro." EURO John Hardy, Head of FX Strategy at Saxo Bank Source: Eurostat EUR VS USD The Euro has been trading within a range of 1.27 to 1.37 against the US dollar since the beginning of the year. John Hardy, Head of FX Strategy at Saxo Bank, expects EURUSD to fall to 1.15 in the next 12 months. John Hardy's forecast for EURUSD 1.25 1.19 1.15 Key 3 months 6 months 12 months 77% of clients at Saxo Capital Markets UK hold a short position in the Euro against the US dollar. This compares to 23% of Saxo Capi- tal Markets clients who are net long the Euro versus the US dollar. * As of August 13, 2013. 77% 23% Short the EUR Short the USD WHAT IS YOUR POSITION? Source: TradingFloor.com SOURCES: Eurostat: http://ec.europa.eu/eurostat European Stability Mechanism: http://www.esm.europa.eu/ TradingFloor.com: http://www.tradingfloor.com/ This infographic has been produced for information purposes only and should not be considered as investment advice. Trading margin products can result in losses that exceed your initial deposit. Saxo Capital Markets UK Limited is a company authorised and regulated by the Financial Conduct Authority, registration Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. II