The deal to bail out Cyprus raises more questions moving forward than it currently answers.
Ok, so germany have got their pound of political flesh out of larger depositors but at a threshold of €100k there will be plenty of honest money involved too, and should rightly make others around the Eurozone just a little bit nervous about their own bank deposits.
And what of the Russians? There was plenty of conspiracy theory over the week-end that they had deliberately refused any further aid to Cyprus in the hope that the little island would just implode and exit the eurozone. At which point they ( the Russians ) would come in, seize assets by default including the gas reserves and get themselves a much desired warm water port for good measure.Then there is the matter of whether we get russian reprisals against germany for what they will see as a deliberate targeting of their country’s alleged less than clean cypriot “investment”.
I can understand an immediate demand for euros as a sigh of relief perhaps but the fall-out from this deal is yet to be fully understood, and I’m not convinced at this early stage that buying euros is such a great idea overall.
The eurozone is not without its own recently re-visited problems after all so this may well become a buy USD play as a safe haven given further impetus by the slowing down of the US monetary presses, and/or maybe gold finally gets the nod again. The pound still has problems of its own including our own bank capitalization issues, and we are inextricably linked to the fate of the eurozone.
So approach this week with caution, take nothing for granted and stay flexible on view. There are more twists to come for sure.