Written by Tendenzias

Financial Market Trends

It fluctuates but does not run. At $ 1.35, the euro is worth more now than at its birth in January 4, 1999, when its first goal was to earn $ 1.17. At its highest levels, last August, it reared to 1.45 against the greenback. But these changes are slight. Current courses are practically equivalent to those of early 2011.Strength contrasts with the panic that hit financial markets.

For ten days, investors clearly considered the possibility of a general breakdown of the euro. This is the meaning to be given to credit spreads of ten years, the sovereign debt of euro zone countries, as well as insurance premiums (CDS) that traders are willing to pay for protection against a possible failure of European states. Eric Chaney, the research director of Axa, also an associate professor of mathematics, made his calculations. He said that these differences (compared to Germany) expressed strong devaluation of national currencies ranging from 8% to 15% for the Netherlands, from 13% to 25% for France and 26% to 50% Italy. These realignments come with a probability of 70% to 35%. Note that with the realignment of currencies, the euro is followed, the less the probability is high, according to a classical probabilistic. These are landscapes that draw Apocalypse markets. All countries in the eurozone are in place. All except Germany. “All except Germany” (EEG), in the words of Andrew Balls, to Pinco, the first global bond manager. The acronym EEG is required to replace the pigs (“swine”), which stigmatizes the poor students of Europe (Portugal, Ireland, Greece, Spain), according to Reuters, which reported the find. That the euro is so strong in these conditions is a “mystery,” said Bruno Cavalier, economist at Oddo Securities.There are several technical explanations, of course. First, the effect of scarcity (which is rare is expensive, one-eyed horse is rare, so it is expensive …). This is what happens to the euro, monetary policy is more restrictive for the dollar, is vilified for this management is too conservative. A second mechanism is invoked, particularly by Francois Chevallier of the Leonardo bank. This is the “carry trade”: it borrows in a currency because it supports low rates (yen), or that you think will depreciate further (the euro), to invest in another (the dollar), considered more sure. For now, this has the effect of supporting the currency of the loan. Another explanation which is more disturbing is that the rates of government securities in the euro area has actually changed little overall since the beginning of the relationship that we at the Bank of France. Only the differences are increased, the German bund fell to abnormal levels at the expense of everyone else. There is no reason to distrust the European currency. Investors believe that buying a “type of DM.” As Valkyrie Brunnhilde encircled by flames from her father, Wotan, who was punished for his sins, the euro remains alive and a prisoner. The knight Siegfried will bring deliverance – one of Germany’s iconic heroes.

Source: Le Figaro


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