French Attacks Hurt Emerging Market Currencies

http://www.forexconspiracyreport.com/french-attacks-hurt-emerging-market-currencies/ French Attacks Hurt Emerging Market Currencies By www.ForexConspiracyReport.com Minor currencies are taking a hit from an expected Fed rate raise, a Chinese economic slowdown and now terrorist attacks in France. Bloomberg Business reports that emerging markets slide as French attacks hurt emerging market currencies. Emerging markets bore the brunt of a clamor for safety as Europe’s worst terror attack in more than a decade exacerbated a selloff driven by deteriorating global economic growth and looming U.S. interest-rate increases. A gauge tracking 20 developing-nation currencies fell to the lowest level since late September. The MSCI Emerging Markets Index declined to a six-week low. Asian air carriers tumbled on speculation tourists will cut back on travel to Europe, while Turkish Airlines fell 2.6 percent in Istanbul. Concern deepened that geopolitical tension will curb trade and slow global growth after at least 129 people were killed in seven locations across the Paris area on Friday night. Emerging markets are dependent for their growth on developed nations. This is largely because emerging markets depend on export of raw materials to the EU, North America, Japan and China. The French attacks hurt emerging market currencies because traders believe that chaos in Europe will hurt the global economy and trade. Our belief is that a concerted war on terror will stimulate the global economy. Defense Spending After 9-11 the USA went to war in Afghanistan and then Iraq. The total expenditure through 2014 was $1.6 trillion for the cost of Iraq, Afghanistan and other global war on terror. With enactment of the FY2014 Consolidated Appropriations Act on January 1, 2014 (H.R. 3547/P.L. 113-73), Congress has approved appropriations for the past 13 years of war that total $1.6 trillion for military operations, base support, weapons maintenance, training of Afghan and Iraq security forces, reconstruction, foreign aid, embassy costs, and veterans’ health care for the war operations initiated since the 9/11 attacks. For good or for bad the war in the Middle East has been a stimulus to the U.S. defense industry and the economy in general. This is similar to the effect of WWII when the US economy was slowly recovering from the Great Depression and then went into overdrive to support the war effort. Our belief is that if the US ups its spending as does Europe it will amount to an economic stimulus in the two largest economies of the world and that the effects will be felt in Japan and China as well. Many are concerned about too much spending but austerity did not work to bring Europe out of the recession but spending just might. And rather than attempting to stimulate the European economy with lower interest rates and other Central Bank measures it might be more effective to pay real people for real work and along the way rid the world of a terrorist scourge. Flight to Safe Havens The safe haven currencies have traditionally been the USD, EUR, YEN and CHF. Add the British pound, Australian dollar and Canadian dollar and you have the major currencies. When times are uncertain money moves into those currencies that are considered safe havens. Thus money has moved out of Russia since the Crimea annexation and Ukrainian civil war, out of Brazil as it experiences a recession comparable to the Great Depression and China as its decades-long economic miracle grinds toward a halt. French attacks hurt emerging market currencies in the short run because traders move assets to safety. But, as it becomes clear than ISIS is probably not going to gain a foothold in Brazil or China, for example, the French terror attack effect will lessen. In the meantime France is calling on the rest of Europe to join an expanding war on ISIS. France and Russia launched a punishing wave of attacks against Islamic State targets in Syria on Tuesday, as French leaders invoked an emergency pact to demand European allies join an intensifying military response to last week’s terrorist carnage in Paris. To the extent that a more comprehensive and aggressive response to ISIS and other terrorists groups in the Middle East is successful it will restore economies and confidence. That will help emerging market economies. https://youtu.be/t4wgt4euYNg

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