Euro
Diminishing Volatility in the Dollar
July 16, 2014
Currencies are sharing in the phenomenon of scant volatility seen this year in many financial markets. 2014 is now 54% completed. The most influential currency pair, EUR/USD, has fluctuated between a high of 1.3993 and a low of 1.3475, a high-low band of just 3.8%. Dollar/yen’s trading band of 105.49 to 100.73 so far this […] More
Early Days in a Newly Perceived Threat to Currency Market Stability
June 19, 2014
A lack of meaningful currency market movement this year among the major advanced pairs like EUR/USD and dollar/yen has been one element of a broader dampening of volatility in all sorts of financial markets. Many commentators have noted that often such stability came before disruptive crises, and the worry that we may be in a […] More
What Divergent Monetary Policy Biases Suggest…. Or So We’re Told
June 12, 2014
Students are taught that unsynchronized monetary policies promote currency volatility. For bored currency market watchers, it ought to be heartening to see significant divergences among the major central bank policy biases for the first time since the European Central Bank raised interest rates in July 2008. Now it is the ECB whose stance is most […] More
One Way or Another
May 21, 2014
The euro zone economy is in desperate need of a weaker exchange rate. No surer remedy exists for halting regional disinflation in a timely enough fashion and for ensuring against sliding long-term inflation expectations amid actual inflation that is substantially below target. The euro’s level is not an impediment to engineered depreciation. It’s birth value […] More
Quad-Regional Economic Uncertainty
May 15, 2014
The second quarter of 2014 is half completed, and the unofficial summer trading season in foreign exchange begins in two weeks. Summer trading currency traders are coming and going from summer holidaysl has unique properties, notably a drop in volume and participant continuity. Although several important forex trend reversals were conceived in summer, a bigger […] More
Is the Euro Headed for a Big Correction?
May 7, 2014
It’s fitting on this eve prior to the May meeting of the European Central Bank Governing Council to examine the euro’s near-term susceptibility to a substantial turnaround. Asked a month ago about how a strong euro might affect future policy decisions, ECB President Draghi had this to say: The exchange rate is very important for […] More
Items of Interest
May 1, 2014
Stability of Dollar/Yen and Euro/Dollar Pairs Continuing One can only say so much about dollar stability against the yen and euro without getting bored and frustrated. Currency watching isn’t fun without trend, but stability continues to reign. Over the first third of 2014, the euro traded between a low of $1.3475 and a high of […] More
Euro Poker
April 24, 2014
The European Central Bank’s use of verbal intervention to contain the euro’s strength is producing diminishing results. A change in this tendency is unlikely during the weeks just ahead. The ECB Governing Council at the April meeting felt that more information needed to be gathered before broadening unconventional monetary stimulus. Much more pertinent data will be […] More
Muted Reaction to Draghi’s Verbal Intervention
April 24, 2014
European Central Bank President Mario Draghi issued his bluntest warning yet regarding a readiness to escalate and broaden asset buying should inflation follow a lower-than-assumed path. He explicitly said that additional euro appreciation could trigger such action unless the disinflationary implications are offset by other developments. The dollar is only 0.1% firmer against the euro and Swiss […] More
Will the Euro Lose Significant Strength?
April 3, 2014
Purchasing power parity theory postulates that in the long run currencies associated with relatively high inflation like the United States during much of the 1970s tend to depreciate. Put differently, the external and internal values of money move directionally in tandem. One would correspondingly think that negative inflation, or deflation, might be associated with rising […] More
