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Brown Brothers On "Drivers, Direction and Degree" Of The EURUSD
Who the hell knows what is going on with the EURUSD - the only thing that matters now is which central banks will get away with more debasing of its own middle-class. Since Germany still recalls Weimar, the Fed may win this round. Yet, Brown Brothers sees som increasing short-term strength in the EURUSD, then a gradual decline as the increasing weakness in Europe unravels: "After rallying about 6.25% since September 10, the euro may enter a consolidative phase before advancing into the $1.38-$1.40 area in the first half of Q4. However, the euro may then surrender those gains in the second half of the quarter, as QEII is discounted (or not delivered at all), and the loss of economic momentum in Europe, ahead of a 2011 fiscal contraction, keeps debt restructuring fears elevated. The increased possibility that the EFSF has to be drawn upon may also spur speculation that the ECB may not be in a position to remove its emergency liquidity provisions; and indeed may have to actually embark on either more bond purchases or take some additional measures. All this may leave the euro trading around $1.30, if not lower, by year's end."
From Brown Brothers Harriman, Euro Outlook: Drivers, Direction and Degree (pdf)
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"05/13/10
EUR/USD will be > 1.50 at this point, gold > $1,300 "
A guy I work with published this back in May when everyone was expecting EUR/USD parity. It's been pretty accurate
http://thepoliticalonion.blogspot.com/
at least euros know what debt restructuring fear is
I have yet to find an "analyst" who gets FX forecasts right longer than 2 weeks into the future. EURUSD should have been at parity by now right? There are probably just two or three people (hedge fund managers like Bill Lipschutz) out there who can make the best guesses because they're well plugged into the global money flows, and keep their opinions to themselves, or rather put their money where their mouths are.
Should have stopped right there.
Agreed fully, and the reasoning backing the call for $1.30 or lower assumes way the hell too much. But hey, it's presented in a researchy looking document by a fancy sounding firm, so that crapshoot must not be a crapshoot, right?
There seems to be two competing forces in EUR/USD at the moment; the first being the massive race to the bottom countries will be embarking upon in the coming months as QE2 in the US looms and exports continue to be uncompetitive across the board. The problem inherent to the Euro, however, is that it lacks the flexibility to devalue as quickly simply as a matter of the way the EU is structured. Hence, while all and sundry may be debasing their currencies in the near future, the EU faces the likelihood that it will left holding the bag as it fails to get off the blocks in the Great Race of 2011. While Chancellor Merkel will be doing all she can to preclude this, and the EUR/USD should in actuality be somewhere closer to 1.1 given how awful the PIGS and Hungary are performing, political sclerosis will likely prevent this from happening as quickly as it should.
first of all, I believe that USD is falling against MOST currencies, not just euro. Secondly, the euro nations actually do lot of their business with Asia and the BRIC countries including the Middle East so they are not totally dependent on US for their exports...........unlike a country like Canada whose currency will probably take a large downturn sooner or later. Germany controls ECB and the euro effectively, so I doubt that euro can collapse because unlike US, Euro countries are actually (especially Germany) competitive and have products that the world wants (especially the luxury and highly engineered products).
For those reasons, and also because the Fed (Bernanke) is going to desperately try to reflate/inflate/elevate their economy/asset price/stock market via massive QE and outright money printing tricks, and because the EU countries are actually making a serious attempt at not only not conducting massive QE but actually trying to cut deficit and make their economy more efficient, there is much better chance that the euro will gain (like other foreign currencies) against USD in the medium to longer-term. Of course if Ben's gambit fails and he loses the confidence of the global bond market (or the trade/currency war goes out of control), then in the short term we will likely see another massive run on the stock market/banks and perversely, the USD will shoot up as carry trades unwind and safe haven nature of USD beckons
well written. +100.
That note is so badly written that I cant believe ZH posted it. Pathetic piece of arguing. Even faced with continuously improving situation in EU bond markets with Chinese more than happy to support the EU bunds and FED embarking on a self destruction journey, this idiot see EUR/USD at 1.3. I always wonder why would one ever buy dollar. This spineless idiot answers and fits the guy who is on the side of the dollar.
EUR/USD is destined to be world reserve currency and it will take out 1.6 Q1 2011 before spiking to 2.0.
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