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Tag Archives: EUR

The Week Ahead is not about the Week Ahead

It's the last week of August.  Several economic reports will be released in the coming days. They include the US deflator of consumer expenditures that the Federal Reserve targets, China's PMI, and the eurozone's preliminary August CPI.  It is not that the data do not matter, but investors realize the die is cast.  They are looking further afield. The next US tax increase on Chinese imports goes into effect on September 1, and Beijing has threatened to retaliate. The Federal Reserve...

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Tick Up in EMU PMI Does Little, Waiting for Powell

Overview:  Soft data in Asia and the continued decline in the yuan (six days and counting) prevented Asian equities from following the US lead from yesterday when the S&P 500 advanced by 0.8%.  European shares are paring yesterday's 1.2% advance despite an unexpected gain in the EMU flash PMI.  US shares are little changed in the European morning.  Benchmark 10-year bond yields in Europe are 1-2 bp higher, and though the political crisis in Italy has not been resolved, Italian bonds...

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Making Sense of the Dollar: Ten Years Later

My first book, Making Sense of the Dollar, was published by Bloomberg Press ten years ago this week.  It was named a Bronze medal winner by Independent Publishers.  It sought to counter the declinists of the period who, understandably, if even mistakenly, thought the dollar was on an exorable path that had been carved by sterling as it lost numeraire status a century earlier.   In 2008, as the book was being written, the euro reached a record high near $1.60, and sterling was still...

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Seven Points on the ECB and the Price Action

1. As soon as it was clear that the ECB was not easing today, the euro began to recover, after making a marginal new low for the year (just above $1.11). 2. Draghi made it clear that easing was going to be delivered in September and on several fronts including rates (with mitigating measures like tiering) and new asset purchases (not decided on instruments, which plays into speculation of equity purchases—though I strongly doubt this will materialize). 3. In addition to adding...

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Great Graphic : Euro’s (OECD) PPP

US President Trump recently bemoaned the fact that the euro is undervalued.  While his critics complain that he is prone to exaggeration, in this case, the euro is undervalued.  This Great Graphic a 30-year chart of the euro has moved around its purchasing power parity as measured by the OECD.  Currently, the euro is about 22% undervalued, and it has been cheap to PPP since for the past five years.  The OECD's model suggests fair value for the euro is $1.38.  There are a few...

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Collective Sigh of Relief Lifts Equities, Yields, and the Dollar

Overview: A global sigh of relief that the US will not tariff all its imports from Mexico.  Equities are all higher, and the weekend demonstrations in Hong Kong over a bill allowing extraditions to the mainland for the first time did not deter investors from bidding up the Hang Seng over 2.3%, the most this year.  European equities are following suit.  The more modest 0.4% gain through the morning session is the fifth gain in the past six sessions.  US shares are trading higher and the...

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The Thumbnail Sketch of the Euro You are Looking For

Here is an overview of the broad macro considerations for the euro, with some thoughts about the price action, including volatility.   It is shared not so much as an argument as a sketch the considerations that drive a view.   1. An 18-month low for the euro was set on April 26 a little above $1.11, immediately after the US reported a stronger than expected Q1 GDP report. The euro has been consolidating here in May and has been unable to rise above the $1.1265 area on two attempts....

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Euro Bid Above $1.13 for the First Time this Month

Overview:  The consolidative week in the capital markets is drawing to a close.  Equity markets are narrowly mixed.  In Asia, most indices outside of the greater China (China, Taiwan, and Hong Kong) edged higher, leaving the MSCI Asia Pacific Index slightly lower on the week.  The MSCI Emerging Markets Index snapped a ten-day rally yesterday and is little changed so far today.  Europe's Dow Jones Stoxx 600 is off about 0.25% in late morning turnover, and about a 0.5% loss...

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April Monthly Currency Outlook

Poor economic data and soft inflation saw several central banks, including the Federal Reserve and European Central Bank, take a dovish turn in March. Contrary to expectations that interest rates would rise as the G3 central banks were no longer adding to their balance sheets on a combined basis. The sharp drop in interest rates and the flattening of curves in March is one of the key factors shaping the investment climate. The fall in yields has occurred even as oil prices...

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Equities Bounce While Bonds Pullback to End Q1

Overview:  The global growth scare may be subsiding.  It had been fanned by the ECB and Fed statements and projections.  Poor US jobs growth reported in early March and the poor flash EMU PMI late in the month contributed.  The slowdown in China and the flurry of measures to combat it also had a role.  The economic soft patch, late in the business cycle, spooked investors and policymakers but better data has already begun, and more is likely in the coming days.  These...

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