At the close of G20 (accounting for 85% of global GDP) meeting on 09/21/2014, Christine Lagarde highlighted the increased importance of prudent fiscal policy measures at the face of slow and sluggish economic recovery with increased risks from geo-political tensions. She continued to attach importance to the spill over effects arising due to uneven recovery and the fact the G20 have to prepare themselves towards achieving stronger medium term growth.
The employment figures released last week (10/03/2014) - jobless claims on a fourteen year low, unemployment rate at 5.9%, income and spending increasing by 0.3% and 0.5% - reinforces the stronger growth trajectory of the US economy compared to the Euro zone counterparts.
With the FED ceasing issuing new currency for asset purchases and poised for a rate hike before summer 2015 the European Union braces itself against currency depreciation. A direct consequence of the stronger economic results was evident in a rising Dollar Index closing at 86.81, up 112 points.
The image has been sourced from http://www.futuresmag.com/
As far as economic data is concerned the results look not so promising for the Euro members - even the German powerhouse (accounting for 29% of the GDP in the Euro area) showed disappointing performance with factory orders falling by -5.7% compared to the low of -2.4% in April 2009. At this juncture, the Euro zone is balanced on a knife edge with France, Italy and Spain are rooting for loosening austerity measure, Germany reluctantly holding on to its iron hold.
Policy measures undertaken at this point, particularly in the Euro zone will be critical as the world economy seems to be hovering around a point of inflection as the IMF chief had highlighted at the close of the G20 meet.
As analysts and experts point out the best bet of the Euro zone at this juncture would be to take advantage of the depreciating Euro which showed a 10% decline against the dollar since the high in May 2014.
The image has been sourced from Yahoo Finance
Stimulating exports with declining imports as the dollar further strengthens will propel domestic production and automatically lead to job creation. Easing policy measures both fiscal and monetary (read quantitative easing) as ECB President Mario Draghi highlighted will be imperative towards achieving reforms which facilitate growth in exports.
Amidst rising political tensions and with Germany sceptical about easing reforms Euro zone faces a policy challenge.
As world policy makers meet in Washington this week to discuss sustainable growth trajectories all eyes will be on the Eurozone as leaders attempt to meet growth targets at the face of political tensions and policy impasse.
So what are your thoughts?
The content for the blog has been sourced using:
IMF Managing Director Christine Lagarde Commends Progress on G20 Growth Strategies, Calls for Further Action to Strengthen the Recovery , Bureau of Labor Statistics, USDEUR , European Central Bank - Statistical Warehouse, Austerity versus growth version 3.0 at G20/IMF , The G20 and the World, Weighing The Week Ahead: Will Global Weakness Drag Down The U.S. Economy? , http://ieconomics.com/germany-euro-area,http://www.tradingeconomics.com/germany/gdp, Listen to what the Dollar is saying
time to go to japan cant wait for 1:120 aww yehhh
Highly unlikely. The Euro was initially put out against the dollar at 1.18, which is effectively "parity." Go back to the height of the Eurozone crisis and see how long it spent down at that level before ending the down trend in the Euro. Not long at all, I know because I bought forward contracts at 1.19 to buy a house over there. The Euro at 1.12, isn't going to happen until it starts breaking up.
u talkin bout yen brah ?
So i guess the stint the EURUSD pulled being around and under 1.00 is just.... more parity-ER?
PS - for those calling for a break-up, the Euro is more a political project than an economic project. It was never about having the more (or less) competitive currency for global cap markets, it's all about not having a neighboring country ever wage war with another one. Anybody who doesn't understand this should by all means try shorting eurusd and see how many pips they get before their margin clerk taps them on the shoulder and whispers "whatever it takes... whatever it takes..."
I'm not calling for a break-up. If you want to short the Euro at 1.18... be my guest. I'll likely be a buyer.
Political project rather than economic? I would urge you to do some due diligence into the economies of Germany and France prior to the creation of the Euro. The Eurozone was created because Germany and France (Germany especially) have numerous internal problems such as the aging population, high tax structure, expensive exports, high unemployment, etc. and they needed the unified currency to create favorable trade conditions to help their economies.
World. War. II.
Again, instead of pretending like you know anything about Europe (despite owning them Euro fwds), i highly suggest you revisit history and what brought about the initial phases of what is known today as the broad European Union. There's a reason why Draghi couldn't care less if the EURUSD was at 1.60 or 0.60. It's not about the FX rate and it never was. It's all about having multiple countries economics (and at some point, politics) tied to the hip, to avoid a further war.
A final hint for you, since you clearly need it: you can't focus on the CURRENT structural crises (the factors you mention which i agree are a major hindrance) happening in EU countries, since those weren't existent (or at least, not prevalent) in the early years of the EU. Had they been, it's a safe bet the current structure of the Union would have been very different indeed.
There are plenty of economic benefits for all involved. It so happens that Germany has used its dominant position in the eurozone to eat the vast majority of the cake.
The IMF, France, Italy and the US are going to go in on Germany this week I'm guessing. It probably won't do much good.
dollar doing pretty well in argentina... ~15 pesos :1 dollar black market rate, ~8.5:1 official
'merica fuck yeah!
Amazing how a 120 yen call transforms into an attack on eurusd "parity". Also, while were on the topic, some sh*t has changed since the euro came out... 1.18 is nothing but another number. Keep trying.
^^ this.
For you exotic traders, when's a good time to go long RUB? Did I miss the trade or are there still some upside potential? Up 18% (against USD) in three months after taking a Chris Brown beating. Central bank has sold off 10bn USD and they are increasing interest rate.
Something I'm missing? High risk, high reward.
We all know what the real problem with France and Southern Europe is. You can't expect an economy to function when people are restricted to working for 35 hours a week and can't check/answer emails after a certain time. Add to that a massive immigration problem of un-educated hordes who refuse to assimilate in society and rely on the massive welfare state. In short, I see a very bleak future for France and Club Med.
On a more positive note, @"AndyLouis" - I assume you get paid in USD and with that value of the dollar going up like that in Argentina, life must be good.
Glad we've got that covered.
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