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Why Is The Euro So Strong?
The most frequent question we are getting lately: why is this European currency so strong?
One would think that with the bail-out of Portugal, even more downgrades of Irish government bonds and Greece a Dead Man Walking, the euro would get hammered with this tsunami of gloom & doom news from the European markets.
But, on the contrary, the euro is going strong… very strong!
Currently, the currency is trading at 1.44, a level not seen since
January ’10 and just a fraction from the highs of 1.5 and the ultimate
top around 1.59.
We hear experts say that with the bailout of Greece, Ireland, and now
even Portugal, enough steps have been taken by the European authorities
in which increased funds are made available for even more disasters in
Europe. Frankly, in the long run, this should only be euro-bearish as
these rescue packages require more freshly printed euros.
We feel more for the reasoning that investors are pricing in future rate hikes by the ECB. These moves would make the EU look stronger than its most important peers.
But in the end, maybe investors are looking at it in the wrong way.
The euro isn’t that strong, it’s the US dollar that is becoming weaker
by the day! The benchmark is always the US dollar, as its (still) the
world reserve currency, thus measuring all other fiat currencies against
it.
With the recent negative outlook for US Treasuries by S&P,
investors are dumping their dollar holdings and taking cover in other
currency assets. That’s why the US dollar index, which is a measure of
the value of the United States dollar relative to a basket of foreign
currencies, is getting pummeled.
Even more so, you can see that the US dollar is slowly but surely
turning into confetti as the ultimate currencies, gold & silver, are
going wild, with gold reaching $1502 and silver at $44.5 per ounce this
morning during European trading.
However, we don’t feel that the euro will keep up for much longer.
The pressure in Europe is getting enormous, with the biggest threat
still out there: Spain! If this gigant starts to tumble — which is
still in the cards with the unemployment on a rise, deficits above targets
and weak GDP growth — Trichet & Co will turn up the euro printing
press a few notches once again.
Don’t bet the farm on this euro paper!
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The Euro is strong because Europe has Germans. The US has Mexicans.
Long time lurker, first time poster...
I have some Euros in a Spanish caja that I need to exchange for Swedish Kronas. I don´t really feel the strenght of the Euro, rather the volatility of a dying currency.
It's all just a game - a jury-rigged house of cards soon set to collapse.
Ah... to be a high-ranking PLA officer/CPC official in the right clique!
For the moment, maybe the euro is now the best looking horse in the glue factory.
I had correctly predicted increase in silver price growth speed here, in this March 13th graph.
http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626&st=0&sk=t&sd=a&sta...
But I made that prediction correctly based on consequent correction to 25-28 USD. Have i also predicted correction correctly ( that its coming soon) , and the level of correction price ( its 45 USD in the graph, could be of course even >50 USD in the peak as well as prices move very fast in superexponential growth region)?
We shall know in less than a 2 weeks.
The interesting thing is , stocks has to drop at the same time, as USD value will be somewhat temporarily restored vs. silver and also a bit vs. gold, but oil price should not change dramatically.
Is Iran going to do something stupid? I have no idea what could cause all these events simultaneously. Or some too big to fail bank may fail?
the Euro is strong and US Dollar pants because (yes you've guessed it) Elliott Wave International predicted a weak Euro and a strong Dollar rally
The 2010 'Winners' of worst currency (and market) prediction service in the world, probably ever, has been calling for a US Dollar rally since 2009. All the Elliott clowns technical indicators (whistling in the wind gauges) have been pinging/pointing every week of every month the USD is going on a roller coaster ride to the stratosphere against all foreign currencies. Meanwhile back on Planet Reality the Dollar has of course headed in the exact opposite direction for a kamakazi dive into the drain. Here's the magnificently delusional in his own (in)ability, Rob Prechter, predicting the 2010 USD rally (that never happened)
http://www.youtube.com/watch?v=Tz5PrY2gjz0
As the Dollar recently headed down toward the $1.45 area, the exact opposite of Idiot Waves 'Currency Expert' Jim Martens prediction, he dropped his knickers and rushed out a 'video update' to cover his exposed useless arse, as did the delusional European Editor Chris Carolan. Falling flat on your face, nose right in the doggy doo is all in a days, weeks and months work for this shambolic clueless outfit
And you can guarantee 100% that when the Dollar (finally) rallies, the delusional retards of Elliott Wave will post within minutes a Free Update telling their long suffering subscribers 'We Told You So... our Waves got it right again'. Getting it wrong 14 months out of 15 (on every index) and being absolute shit never makes into the Free Updates to warn punters of their train wreck disaster subscriber services
Worst Euro/USD Predictions for 2010 : Elliott Wave International
Worst Euro/USD Prediction 1st Quarter 2011 : Elliott Wave International
Worst USD/Yen Predictions for 2010 : Elliott Wave International
Worst USD/Sterling Predictions for 2010 : Elliott Wave International
Ronald McDonald Clown Award for Worst Currency Service 2010 : Rob Prechter, Steve Hochberg and Jim Martens, Elliott Wave International
The euro is in a deflationary mode- and money supply is rapidly diminishing with each default. The EU cannot print euros as fast as the FED and in some cases the EU has to print euros using dollars as collateral- not bonds. Ben gave europe the 1 trillion dollar blast so they could helpt the european banks delever. The main economy, Germany, is austere. The US is blatantly idiotic and use flatearth economic models and stats of the day to ensure that the rich and wealthy are spared any hardship. If you are going to use McCurrency then you need to restrict it or else it means NOTHING. The euro sucks less and is not printed in the same manner. Even if everyone defAults that just means less euros, not more. The euro isn't the problem- its the borrowers. In the US its borrower,lender and currency all good for nothing.
I'm tired of ppl bashing the Euro... get some real news... or at least get some facts.
There is more dollars in the world than euros... So when ppl are dumping fiat en masse, of course the dollar will be the weaker currency.
Some European countries are bad ... so what... USA states are in very rousy condition, right ? wrong !
In the long run both Euro and Dollar are going down/devalued...
IF the Euro survives at the end it will be the stronger currency of the two (I'm saying IF).
What I mean by this is 1 euro will be exchanged for 1.XX $, simple as that.
The dynamic is that the Euro get hurt first in all cycles, because it is a bit hard for them to print, compared to USA.
Who knows this could be beneficial in the long run if the European countries are forced by the market to take their pill earlier.
And btw, European market is bigger than USA, just factoid. So in theory (all things equal) it should be able to absorb more fiat of its own.
I gain as much insight from the comments as I do from the articles here at ZH. Thanks, all!
And sometimes more
The United States garnered significant criticism in November 2010 when the U.S. Federal Reserve announced that it planned to expand the U.S. money supply by up to $50 billion per month for the next 10 months. Critics argued that most of that money would simply find its way into commodity markets, inflate prices and add inflationary pressures. Considering that the American money supply is up by 38 percent since January 2005, those are legitimate criticisms.
But the criticisms are also incomplete. The U.S. dollar is hardly the only currency — and the U.S. Federal Reserve is hardly the only monetary authority that has been increasing its money supply. And all of them are increasing their supplies more than the Federal Reserve.
Since 2005, Japan’s money supply has risen 39 percent, the eurozone’s is up 52 percent and China’s is up 250 percent. Of the combined $16.7 trillion (U.S.-dollar equivalent) increase in the total money supply that these four economies represent, less than 15 percent of the increase is due to American actions. China alone is responsible for roughly half of the increase — $7.8 trillion, to be precise.
Read more: Oil Prices: Investors Are in the Driver's Seat | STRATFOR3rd article today on Zerohedge bashing the Euro-zone. I thought it only the mainstream media that were going to be pummeling the Euro-zone when gold hits 1500 and the USD drops below 75 !!
Ahhhhh zerohedge IS MsM.
Remember people. The Euro took 30 years to build. That means it was built KNOWING the USD was on an unsustainable track. Hence why the ECB demanded 30% of the Euro float in 1999 in gold bullion.
The Euro is going no-where. And you can quote me on that.
#byebyeusd
To those who think EUR is strong:
Checked your CHF/EUR pairs much? Or how about the AUD ones?
The real comparison should be against currencies with some degree of reserve backing (AUS, CH, CAN etc.) As soon as you compare those pair the weaknesses are plain for everyone to see.
The real problem is what does one do with CHF to invest?
(Answer): CHF denominated Silver puts
Drive across the border and go shopping; it has the added benefit of leaving one with more CHF for future investing.
CHF is just a € derivativ. The fear € goes to CHF, that´s why CHF is strong. It means nothing.
BTW: Got CHF silver call options since last november. And you?
CHF is just a € derivativ. The fear € got CHF, that´s why CHF is strong. It means nothing.
BTW: Got CHF silver call options since last november. And you?
CHF is nowhere near a € derivative. It may appear that way when looking at charts of both CHF & EUR dollar crosses, but when you examine CHF & USD as EUR crosses the divergence is apparent. The SNB makes choices from an entirely different perspective and motivation than the ECB. The SNB can resume actively devaluing CHF to minimize EU export erosion and keep a lid on the PIIGS membership can, or the SNB can simply let a rising EUR achieve the same result at less cost to the Swiss taxpayer in the near term. There is a fear trade driving money into CHF but it is distinct and dwarfed by the fear trade out of USD and into EUR, the timing of the two fear trades is coincidental, not causal, as the USD->EUR tidal flow could reverse with certain deliberate actions by the ECB or FED. The big players in the USD->EUR migration are to a large extent shut out of the Swiss market, since SNB isn't issuing massive amounts of debt which they can consume, unlike the PIIGS nations (or the EU proper next year).
To you and Fred.
You guys are right. And those calls must have certainly made some handsome returns till now. The puts I'm targeting are rather mild (mid 30's) targetting mid-summer.
I'm a fellow silver bug, but I can't help thinking we'll some major correction past the $50 mark before resuming. Hell, I haven't liquidated the silver bars to buy the puts. Just a small-ish gamble to safeguard profits.
I loaded up on CHF silver calls on monday. I am up over 7% already...
Good luck with those puts!!
Eur/DOL take a nose dive Sunday night, Monday morning S&P downgrades
USD, never let a good headline go to waste. When you can control the news,
currency, medicine and next food, you control all.
In 2011, Time's Man of the Year will be the Printing Press (worldwide).
Win!
I think you are right that the ECB's rate hike and the expectation of further rate hikes has supported the Euro exchange rate. We can also give this more of an international perspective than just against the US $.Here are some thoughts on its performance against the Japanese Yen.
The way Banksters are currently minting money.
They are driving the USD index down and pumping up everything else. This process will continue till there are no long positions left in the USD index and no short positions in any of the commodities, stock or currencies other than the USD.
The operators are then likely to take the long position on the dollar and short position on everything else. They would then use their money power to move the markets in the direction which would get them the maximum profit while screwing all other traders / hedge funds / investors.
The stock, commodity and currency exchanges have been reduced to gambling dens whereby the more powerful traders with deep pockets move the markets to maximize their own profits at the expense of the remaining not so powerful players. The big boys have enormous money power to move the markets in the direction which results in maximum profits for themselves. They effectively use the media to lure the other players in the market to a position where they would incur maximum loss.
The markets will turn downwards only when the banksters have eliminated all the short positions and only they themselves have positioned themselves to profit when the market falls
OR
When an unexpected world event catches the banksters with their pants down and the softwares they use to rig the markets go berserk beyond their control.
http://www.marketoracle.co.uk/Article24581.html
Why should the Euro be worse off than the dollar? The answer; it shouldn't be. Why? Because many of our states have larger economies than the Euro states mentioned and their economies are much worse off. Seems like a case of the pot calling the kettle, no? All this pointing of fingers at the EU is meant to prop up our Treasuries. That is all.
The level of articles continually touting fundamentals is really getting weak.
The current price action has nothing to do with the overall fundamental picture. The real story is about leverage, liquidity and yield.
The market will keep pushing this anti-dollar carry trade until the entire system implodes, which it no doubt will.
The markets have proven to be completely inefficient at pricing in recent years and this is nothing but a scramble from too much money chasing chasing too little opportunities.
1+
Simple but very correct explanation for the exchange rates of Euro, Dollar, or any other fiat currency.
" The euro isn’t that strong, it’s the US dollar that is becoming weaker by the day! "
This is the whole point in one sentence.
Kaiten;
I agree wholeheartedly!
The pricing mechanism for pretty much every market is broken... too much central bank interference, QE, and straw-man purchases. Nothing is real anymore. The Euro isn't strong or weak... it's just sitting at a number for a while.
You can't analyse chaff -- you'll only get chaff-squared back. Better off consulting the chicken bones and banker entrails for a glimpse of the future.
Agreed ... there is no free market. We have price controls on EVERYTHING, only they are not elected government price controls; they are bank-empire (the uber gvmt) price controls.
... and as Governor Tarkin tightens his grips, more banker slime sqeezes out between his fingers. Good idea to use their entrails for something useful.
What kind of headline is this? Euro is not strong, unless you measure it against the dollar. This is obvious, and instead, headline should have been : How far are FED going to devalue the US Dollar?
It is futile to attempt to predict the direction of EUR/USD. I mean predict, not make guesses masquerading as predictions that depend on 92 conditions being filled (Chinese buying, dollar trashing, interest rate differentials, debt restructuring, money printing, Tricheur's hairstyle....) or making astute observations on possible price movements contingent on support/resistance levels being tested that are 2 cents apart, or claiming with 20/20 hindsight that a correct prediction had been made.
Default or restructuring of Greek or Portuguese debt per se should be bullish for the EUR because of the deflationary effect. I would not bet on further money printing by Tree-Shay in the near future because the hawks in the EU (Germany Finland, Holland) are not stupid and will resist it.
"debt restructuring" --> Please don't say such ugly words. "Liability Management Exercise" sounds much better.
I see this as akin to betting on one of two fighters in the ring, both of which you know have been paid to throw the fight. Its less a matter of which fighter is going to hit the canvas (they both will) its just a matter of which will do the "face plant" first.
Good point.
Is this why the FTSE is up nearly 1.5% percent today and the Dow is up over 1% pre-open?
I don't understand what is happening at the moment other than Gold and Silver.
DavidC
ES started the lift off after 4pm EST yesterday with some nice earnings beats. HFTs have fucking hammered this thing into oblivion, up basically 20pts since yesterday's close, which is quite the feat. EURUSD just confirms the risk trade (equities) is back on as well.
Note the PMs are considered part of this risk trade as well.
Last at 144.97 ... Dollar 74.650 ... Gold 1506
that is true I guess.
Damn you guys noticing some storms coming over your place.
I just Had a look at the FFT guys. And they are predicting a big set of tornados to come.
http://www.forecastfortomorrow.com/news/2011/04/tornado-season-look-out/
They have been VERY SPOT ON in the past...and say : "Expect it to be very bad over the next couple of days in the US mid-west, south and maybe even up toward the Canadian borders. At least one F-5 will come out of this, maybe more than one"
Stay safe people. MIght get rough.