The Euro Returns
We have seen a bit of a resurgence in the Euro of late as it has come off its highs and started to strengthen against the US Dollar and the Pound. What’s the reason for this? A variety of things. Mario Draghi is now hinting that a Eurozone recovery has gained a bit of traction as data has been relatively impressive recently. The markets seem to have taken well to the advent of QE and conversely the cheaper Euro has invited investors to plough money into the Eurozone. The latest example is a Chinese bid for Pirelli which is available to them at a much more attractive price than it would have been a few months ago.
Similarly, the Greeks and Germans seem to be getting on a bit better and a solution to the Greek repayment problem appears closer than it has been for some time. Angela Merkel has moved to a more conciliatory and rehabilitory stance towards the Greeks compared to her previous “repay by whatever means necessary” attitude.
The US seems to have been hit by the removal of “patience” but this has been replaced temporarily with a reluctance to hike rates, although how long this lasts remains to be seen. The UK is suffering from poor data and today we await the inflation figures. The markets are hardly full of optimism ahead of this data with a figure of 0% expected, compared to the previous figure of 0.3%. This is hardly great news for GBP and raises the question of whether we are better to decrease interest rates as opposed to a hike which is unlikely to happen before 2016.
This morning we have PMI from the Eurozone and the headlining Consumer Price Index from the UK at 0930. We also have CPI from the US this afternoon.