Euro Decline May Have Stealth Impact on Many Americans
Think the moves in the euro are too esoteric to be meaningful for most Americans? The Fast Money pros say that’s not so.
In fact, trader Steve Cortes expects it to have a major impact on your life – most of our lives in fact.
That’s because he sees the euro as a key catalyst influencing the oil market and what you ultimately pay at the pump.
It’s an indirect relationship, but Cortes is convinced the impact will be serious and sizable. Here’s his thesis.
The financial woes vexingEurope have triggered all kinds of catalysts that threaten to drag the euro lower.
And by default when the euro declines the US dollar goes higher.
An incrementally stronger dollar is negative for commodities nominated in dollars (i.e oil) because they become more expensive for buyers of other currencies.
(Of course it's not the only catalyst that will drive the price of oil -OPEC and geo-political concernsalso come into play - but it's a big one.)
As a result demand wanes.
“A strong dollar means that crude doesn’t belong at $100,” says Cortes. And Cortes is putting his money where his mouth is, he’s short.
Of course, if you subscribe to Cortes’ theory you’ll want to know where is the euro going – just how low.
Nomura strategist Jens Nordvig tells us he expects the euro to trade down to 1.20 by the end of the first quarter. And he wouldn’t be surprised to see the euro at parity - or a 1 to 1 ratio – with the dollar in 2012.
What does all that mean for oil? “I think crude is going back down to the $80’s,” says Cortes. Prices at the pump should follow.
What do you think? We want to know!
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Trader disclosure: On Dec 14, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Scaramucci is long AAPL; Scaramucci is long C; Scaramucci is long INTC; Scaramucci is long EBAY; P. Najarian is long AAPL; P. Najarian is long MSFT; P. Najarian is long INTC; P. Najarian is long YHOO; P. Najarian is long MOS; P. Najarian has long calls BAC; P. Najarian has long calls JPM; P. Najarian has long calls WFC; P. Najarian has long calls BRCM; P. Najarian has long calls JOY; P. Najarian has long calls ETFC; Cortes is long TSN; Cortes is long SVU; Cortes is short EUR; Cortes is short AUD; Cortes is short GBP; Cortes is short Crude; Cortes is short AAPL; Cortes is short DB; J. Najarian sold puts GLD; J. Najarian sold puts AAPL; J. Najarian is long CBOE; J. Najarian is long CME; J. Najarian is long CIGX; J. Najarian has long call spreads JPM; J. Najarian has long call spreads GS; J. Najarian has long call spreads V; J. Najarian has long call spreads PNC; J. Najarian has long call spreads DMND
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