Fundamental Forex – A Wake-Up Call for Europe

June 20, 2016

Ladies and gentlemen, we are about to witness an event that could change the face of Europe as a whole. On Thursday, United Kingdom's citizens will vote in a historic referendum. Either to leave the European Union or remain part of it. Any fundamental Forex analysis from this moment on depends on this referendum's outcome.

Fundamental Forex

To this day, it is not clear which side has the upper hand. Because recent polls are close to 50/50 the outcome is a coin flip.

Every trader, every financial institution prepare for the potential market turmoil that could wipe out entire fortunes. Nobody knows what will happen with the stock market. Or, with the British Pound, should the “leave” vote wins. And, in the same time, nobody knows how the markets may react if the opposite should happen.

In either case, one thing is clear – we sail in uncharted waters.

“Nobody in Europe will be abandoned. Nobody in Europe will be excluded. Europe only succeeds if we work together”.
Angela Merkel, Germany's Chancellor

What if Brexit Happens - How Will Fundamental Forex Analysis Change?

The main fear that comes from Brexit is that it’s contagious. And, that the UK’s referendum will start a chain reaction.

Further, it will lead to a total collapse of the European Union as we know it. While it may sound a bit too dramatic, anything is possible.

The European Union's existence relies on trust things go in the right direction. But, the unemployment rate is above 10 percent in Eurozone. The economic growth is non-existent. And, austerity measures, introduced during the peak of the crisis, still run in some countries.

Furthermore, bureaucracy is on the rise. The problem is that those changes often enough affect those who create jobs and wealth. Inn other words, entrepreneurs.

Business activity is sluggish. Mario Draghi called for more aggressive structural reforms for at least two years now. Yet, politicians fail to deliver.

Unfortunately, without change, the European Union cannot move forward.

How Will the Euro React?

Perhaps the UK’s referendum will act as a wake-up call to everyone. Leaving the Euro-area has been a hot topic in several countries in recent years.

Yet. Euro as a common currency survived. Being part of the common currency is not the issue here. Many EU and EZ countries are in debt.

And, unfortunately for them, leaving the Euro will not fix their budget problems. Quite the opposite. It may turn out to be the worst decision possible.

Just look at what happens in Venezuela. The government managed to create hyperinflation.

As a result, it destroyed the entire economy, largely by printing new currency units out of thin air.

Conclusion

European Union’s fate is the hands of policy makers. The Brexit vote is a very good sign to everyone that, perhaps, it’s time to start thinking about potential changes in the way the entire union operates.

Hopefully, it is not too late. If the EU should fall apart, then it may take decades to clean up the mess.

And, during the process, Europe may fall further behind everyone else in terms of life quality, security, and innovation.

How about that for a fundamental Forex analysis?

Long live Europe!

Capital Properties FX
June 20,.2016

Capital Properties FX