Eurozone Archives - Record Currency Macro

How far can the Euro go?

6th November 2017/0 Comments/in Eurozone /by Joe Spearing

• The euro has been very strong this year (appreciating over 10% YtD against the dollar)
• Fair value (measured using PPP) is 1.33, suggesting the EURUSD pair is still around 15% undervalued
• In this blog post we use a FEER (Fundamental Equilibrium Exchange Rate) framework to investigate what level exchange rate is consistent with a sustainable balance of payments. Our results are broadly consistent with PPP valuations, and suggest that there is a risk of further euro appreciation to come

FX markets in the Trump era

21st December 2016/0 Comments/in Currency, Equities, Eurozone, United States /by Andrew Bloomfield, CFA

Since the US presidential election on November 9th, markets generally have welcomed the more conciliatory tone from the President-elect Donald Trump. How have currency markets reacted, how might the changing economic environment affect hedging decisions, and what does this mean for currency returns?

Have currency markets become more choppy recently?

24th August 2016/0 Comments/in Currency, Eurozone, Monetary Policy, United States /by Andrew Bloomfield, CFA

Are currency markets stuck in a period of short-term mean reversion? If so, what’s driving this and what are the implications for investors?

Agreekment: Mapping out the flows

14th July 2015/0 Comments/in Eurozone /by Andrew Bloomfield, CFA

• The initial details of the bail-out suggest that over the next three years, Greece’s hard-line creditors could be largely ‘paid-off’, leaving the door open to debt renegotiation further down the line.

• While Greece is required to make further sacrifices in the form of asset privatization, the deal postpones economic and humanitarian consequences of Euro exit.

• As always, there are significant uncertainties surrounding long run feasibility including primary surplus and asset sale revenue assumptions.

German “losses”under a full Grexit scenario: a counterfactual exercise

9th July 2015/0 Comments/in Eurozone /by Andrew Bloomfield, CFA

• The perceived direct financial cost of a Grexit for Germany is ultimately not the real cost.

• Both in terms of enhanced current account dynamics and via substantial cost savings for the sovereign issuer, there has been a direct benefit which we put in the order half a trillion Euros (conservative estimate) for Germany alone.

Circular Flow of Euros

2nd June 2015/0 Comments/in Eurozone /by Andrew Bloomfield, CFA

• Courtesy of the ECB we have allowed a costless exit route to any middle class and wealthy Greeks to park their money elsewhere in the Eurozone, free of charge, with full protection.

• There is no formal mechanism to prevent this circular flow of Euros short of the ECB putting a maximum limit on ELA financing to the Bank of Greece and thus setting the pre-conditions for the erection of capital controls in Greece.