Chillin' out till it needs to be funded
A likely think – alike – play – alike in Reuters Insider / Breaking Views team, we feel vindicated by the Euro having chomped off all its summit worries well before Geithener’s speech wore down. Though the era of extreme blood letting will remain on for Europe and S&P may commit a few downgrades post facto despite all the attempts at being one up on the gaping holes in the market fabric, the currency has vindicated the pressure on it
and is likely going to end up in the clouds like the British Pound (dare we say the Yen stares down from the top) than go thru depreciation and scurry like the weakened few. Another developed market comeback story has floundered
for sure, for those who see the link in inflation and growth and hence currency weaknesss as recovery, but the Euro is now well on its way to be an equal safe haven as the Dollar in the next decade. The Yuan is surely going to be there for China’s own NATO like grouping or a trade friendly circle the way it may play out or in the Euro’s case it may just be the currency to buy and keep for a rainy day at your sovereign treasury..as Central banks are wont to realise sooner than later from here.
However trade in the Euro is likely to take a quarter of a bite at one go, maybe twice , maybe just once. As Latam will never buy the Euro too
much after the few IMF bonds it helps along, and the Swiss and Canadian will remain also rans in safe haven targets, the sphere where the Euro gains prominence, like the pound is difficult to fathom or pinpoint. Fed Cash has worked magic for the Dollar and for the Europe even earlier (see, The Fed’s Carter play)
First come the budgets, then come the fiscal corrections bridging the common markets thru developmental finance growing on top of core trade component and we probably have the lesson in self sufficiency we saw in the Euro withstand multiple sovereign downgrades and interest rate runs, unless interest rates start trading at 15-16% for the miserables in the mix. And that is well nigh impossible