IIFT Daily Note with Peter Brown

Pivotal day for bonds and fx

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Yesterday afternoon we were settling in to a nice short covering rally when the Greek announcement came in that there were to be new elections. Frankly I did not think the market would take that so badly.

What a melt down! Euro has hit 1.2680 and the S&P 1320 and Gold 1530

In the short term we have come too far and will recover from these lows.

Longer term this Euro will hit my 1.2600 target but may go a lot lower. Expect a consolidation today with bounces off the lows.

Medium term it is the relationship between Merkel and Hollande which will be key. Can he change the German stance on austerity? We will have to wait and see.

Market is still a sell on all rallies. Gold getting very close to the 1500 buy level.

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