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Thursday
Aug072014

Weak economic data would test bonds in the periphery

Volatility has engulfed the eurozone in the past few weeks, but bond markets remain a relative sea of calm. This could change quickly however, if the economic data in the periphery takes a serious turn for the worse. Given the absence of active balance sheet expansion at the ECB, Q3 PMIs have suddenly taken in critical importance

 

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Picture is courtesey of Pantheon Macroeconomics and has also been posted on Twitter. 

Wednesday
Jul162014

Is the Euro Overvalued?

Well, yes if you ask Mr. Draghi it is, but not if you look at fundamental long run charts. Looking at both the REER and the trade weighted index, the euro is currently bang on average. Obviously, the ECB would like a weaker currency, but the best way to reach that objective will probably be to do nothing. It is difficult to expect a weaker currency amid a cyclical recovery with strong portfolio inflows and a current account surplus. 

 

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Pictures are courtesey of Pantheon Macroeconomics and have also been posted at Twitter. 

Monday
Jul142014

Confirming or Rejecting the idea of a eurozone recovery

The following chart is an interesting one, depicting the sub-index from the EC consumer survey for major purchase intentions in the eurozone over the next year. Still moribund, this indicator suggests that the consumer is still very cautious in the euro area, but what if it breaks higher? 

I will be watching this closely for a move higher—or a move back down into its post-crisis range—in coming months. 

 

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Picture is courtesey of Pantheon Macroeconomics, and has also been posted at Twitter.