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Broadgate: Market News 6/2

6 February 2012

When there is a crisis in the global economy the multinational currency often collapses. The two main reasons for that are either debtors who can’t fulfill their obligations, or creditors who are concerned that they won’t get their money back. The first situation described is already taking place in EU and the second one might appear in the relationship with the US and China. But economic organization of the US remains unique.

It manages in equal conditions with others to overcome the hard times quickly and get to the path of recovery while the same can be applied neither to the European economy nor to other countries. Even China with its unprecedented development pace still is far behind American stability level. Nowadays there are a lot of arguments whether the US Dollar will give in to the Chinese Yuan as a reserve currency or the latter will just be included into the basket of reserve currencies. There’s no secret that the global reserve currency is the one that constitutes the lion share of central banks’ assets.

In a broader meaning this is a currency that is accepted as payment for goods and services worldwide. Recently during the past year the image of Euro has been shaken severely and ambitious aspirations to compete with the USA Dollar as a reserve currency remained pretensions. Moreover the Euro continues to lose its image and weight and analytics worldwide presume probable collapse of the EU in 2013 and the Euro along with it.

The aforementioned facts make all the good news about the Euro relevant only in the short term. Greece is as close to the default and abandoning EU as never before. Quite likely that it’ll be followed by Portugal, Ireland, Spain and Italy. All these facts create quite nervous atmosphere around the Euro. The situation is extremely tense.

The information set out herein has been obtained from various public sources and is by way of information only. Broadgate Financial can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

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