Focus turns to central bankers to qualm uncertainty

Markets have been edgy this week with much of the movement stemming from currency pairs as developed world's central banks and economies took centre stage as risk begins to build up. Most notably was the Japanese Yen's remarkable appreciation against all of its major peers with the government attempting qualm bullish optimism by saying it was ready to intervene in the market at any given time.

The abrupt appreciation of the Yen flies in the face of policymakers at the Bank of Japan who have tried but failed in their attempts to depreciate the currency with extremist monetary policy that's seemingly had an inverse impact.

We also saw shakiness in the Euro as a number of issues take strain on the economic bloc. The ECB came out reassuring the market of it's willingness to up its ante if the stimulus measure currently in place failed to produce the desired outcome market participants had been expecting.

Apart from the monetary woes weighing heavily on the Eurozone, political scandals are not afar with leaked transcripts of conversation between IMF officials providing impetus to believe that negotiations surrounding a renewed bail out deal with Greece and the Troika is set to display the same indecisiveness produced at the beginning of last year.

Notwithstanding this, the worry that the Brexit referendum vote will need more convincing than once thought adding further complexity to matter within the region with the date of both aforementioned issues falling within a tight schedule that wouldn't allow policymakers to give enough attention to each.

It was the turn of Fed Chair Janet Yellen to face the scrutiny of the market's nervousness after she sat on a panel with former Federal Reserve Chairman Paul Volcker, Alan Greenspan and Ben Bernanke discussing the state of the US economy as well as the direction of monetary policy around the globe. Yellen said she did not believe that the US economy had formed a bubble and there were no risks of a burst either. This after presidential candidate Donald Trump made remarks that the US economy could be on the brink of implosion at anytime.

Evidence is pointing to the market becoming unsettled and the lack of response to central bankers dovish tones  is spelling danger for the weeks that lie ahead. The focal point around major central bankers of the world happens as the backdrop of political uncertainty takes hold of fears however this time the once turned to financial superheroes of yesteryear are tripping up over their own powers to save the world economy from it's inevitable fate.

It's been a rocky week for the $5.3 trillion-a-day forex market https://t.co/Uz3hFWDqG4 pic.twitter.com/N23tksqJ3I

— Bloomberg (@business) April 8, 2016

Discussing it earlier this week in Travelling Technicals I had said that the New Zealand NZX 50 Index looked to be the best looking technical chart I've done analysis on so far this year and it proved the best performing index this year amongst its developed market peers.

The reasoning could lie in the fact that New Zealand's economy operates with a wide exposure to agricultural production which probably gives a clue to the performance. In the article below its said that the lack of foreign investment and defensive stock all played its part in helping lift the index. If this were the case it could possibly be one of the first indications that investors are starting to channel their capital towards defensive plays as they expecting a world recession.

New Zealand is a rare case of a developed market that's posting gains this year https://t.co/JDp7BT4ixs pic.twitter.com/Gv1Jm42Xwh

— Bloomberg (@business) April 8, 2016

The cats out the bag for the IMF's plan on the Greek debt crisis

An explosive leaked transcript from a conversation between IMF officials pertaining to the manner in which the monetary body intends on dealing with the Greek debt crisis has rocked the already shaky relationship between the desperate European nation plagued by economic calamity and one of  the three lenders of saving grace, the so called Troika, installed to prevent a spillover of defaulting debt due to non-payment because of inadequate means of doing so.

In the transcript that was released by WikiLeaks on Friday, the conversation suggests that the IMF may try to pressure the European Commission to provide a larger proportion of the debt relief as well as force the Greek government to scrap pension increases that's been at the heart of the stalemate between creditors and Athens. The IMF intends on doing this by threatening to exit from the Troika which could spell disaster going forward however this seems to be a scare tactic that was discussed amongst the three IMF officials who believe such a threat would awaken the European Union from its unrealistic ideals it thinks would be satisfactory to secure stability in the region once again.

This latest developments set off what is expected to be yet another round of back and forth disagreements between Greece and its creditors in an attempt to prevent a crisis. We saw the negative blow to confidence in the global economy when Greece's prime minister Alexis Tsipras fought for weeks over the conditions attached to the renew bailout deal that was eventually agreed upon at a much later date than would've been necessary.

The fight will continue as the deadline to reach a new deal draws closer with July being the cut off, but this time we can look forward to an even bigger resistance from Tsipras with these revelations giving him all the ammo needed to take aim at his nation's creditors. This could be devastating for financial markets as it would bring a new wave of volatility and uncertainty into the mix under tough conditions already being felt.  

#Greece demands IMF explanation over leaked debt transcript https://t.co/EPKuq2wDsd

— Pedro da Costa (@pdacosta) April 2, 2016

One of the possibly reason's why creditors need to see a resolution soon could be because the referendum vote in the UK over whether to stay in the EU or not taking place on the 23rd June 2016. Many believe that the run up to these elections might interfere with the priority of reaching a conclusive agreement in Greece that wouldn't leave much time for policymakers to draw enough attention to the criticalness of such resolution after proceedings from the elections have wrapped up.

Although it can be argued that the Troika has had more than enough time to iron out its differences with Greece, the previous negotiations have left a bitter taste in their mouth with many leaders taking deep political hits to their credibility. In attempting to devise a plan being fully aware of Tsipras resilient and tempered personality, the IMF has tried to avoid a renewed crisis and in fairness who could blame them.

However Greece's 11th hour crucial decision-making antics have pushed the extremities too far that the European Union has been found complacent in its concessions to allow these political point scoring games to continue for as long as they have.

It could be said that the IMF sees the Greek debt crisis as a perpetual disadvantage for the EU moving forward with the latest revelations indicating their unhappiness at the lack of proper restructuring taking place which puts Europe at risk of economic catastrophe. We've heard that the benefits of an expanded monetary program has reached the end of its time and the need to restructure, in referring particularly to developed economies, is catching up with politicians who have for too long made promises that lack the continuity of more than a generation.

If the EU continues to follow such a path that leads to no ends we could well begin to see the end of the EU itself. And so I leave you with a quote:

"The recipe for perpetual ignorance is: Be satisfied with your opinions and content with your knowledge." ~ Elbert Hubbard  

#IMF predicts #Greece's default will coincide with UK's EU referendum. https://t.co/Ic0VnAXSvC pic.twitter.com/Za28kCGaGU

— Holger Zschaepitz (@Schuldensuehner) April 2, 2016