Euro Archives - Record Currency Macro

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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

Czech that out ! A story foretold in FX markets

6th April 2017/0 Comments/in Currency /by Andrew Bloomfield, CFA

We assess the implications of the removal of the CZK to EUR peg on April 6 2017 and what this means for how central banks manage peg removals going forward.

Masters of their own fate: Explaining the Swiss Franc Strength, 2011-2015

11th May 2016/0 Comments/in Currency /by Andrew Bloomfield, CFA

Did safe haven flows drive an ever appreciating Swiss Franc in the run up to January 2015?
The data reveal that, on the contrary, a general lack of Swiss outflows and repatriation of foreign bonds bought by Swiss domestic investors, can explain much of the pressure on the Franc to appreciate.
Ultimately domestic investors created an insurmountable problem for the Swiss National Bank (SNB) in the run up to the removal of the peg.

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.