Got exactly the scenario we outlined for the Euro of “short term pain, followed by long term gain”. Well, we have yet to see the long term gain from here, but we may well be in day one of a substantial bull market.
Our Euro support at 1.2980 remained intact, and now we have this very strong first impulse wave to the upside. While several days consolidation in the range could be expected before the favoured break to the upside, it is important to note that the dominant risk is now at all times to the upside.
The fundamental argument for a significant Euro rally for the rest of the year could not be better. Europe has dealt effectively with the sovereign debt challenge, will have the most fiscally responsible economies in the world over the next 1-3 decades, and continues to experience rampant demand for its good s and services from Asia and Latin America, as well as the forecast pick up in economic activity in the US. All this and the market had been bearish? So the catch up to the far better reality than the consensus had forecast, is likely to see rapid price gains.
The US dollar will continue to trend lower. Remember the “strong dollar policy” is in fact, the “orderly decline of the US dollar policy”. Also the reason for the as forecast strong state of the US economy at this time is the rest of world demand for American goods and services, particularly out of Asia and Latin America. Asia and Latin America lead the global economic cycle and have done so for many years.
While some will begin to suggest that the US is now leading the world out of global recession risk, (you should never read anyone who says this ever again by the way, as it confirms they have no idea), the truth is the US economy will and can only remain strong if the dollar continues to move lower to a level that more accurately reflects its true worth in the world, on a par with the Euro and the Yuan once it freely floats. So despite economic well being returning to the US, the US dollar is expected to remain under significant pressure, as greater wealth is created elsewhere in the world and global portfolios continue to be re-weighted away from the US dollar.
The Australian dollar can only go from strength to strength in an environment of stable and high yield, not to mention the burgeoning resources boom, still in its early stages and with another 5- 15, perhaps 30, years to run.
Keep buying both the Euro and Australian dollar, against a US dollar still in long term decline.
Clifford Bennett
Our Euro support at 1.2980 remained intact, and now we have this very strong first impulse wave to the upside. While several days consolidation in the range could be expected before the favoured break to the upside, it is important to note that the dominant risk is now at all times to the upside.
The fundamental argument for a significant Euro rally for the rest of the year could not be better. Europe has dealt effectively with the sovereign debt challenge, will have the most fiscally responsible economies in the world over the next 1-3 decades, and continues to experience rampant demand for its good s and services from Asia and Latin America, as well as the forecast pick up in economic activity in the US. All this and the market had been bearish? So the catch up to the far better reality than the consensus had forecast, is likely to see rapid price gains.
The US dollar will continue to trend lower. Remember the “strong dollar policy” is in fact, the “orderly decline of the US dollar policy”. Also the reason for the as forecast strong state of the US economy at this time is the rest of world demand for American goods and services, particularly out of Asia and Latin America. Asia and Latin America lead the global economic cycle and have done so for many years.
While some will begin to suggest that the US is now leading the world out of global recession risk, (you should never read anyone who says this ever again by the way, as it confirms they have no idea), the truth is the US economy will and can only remain strong if the dollar continues to move lower to a level that more accurately reflects its true worth in the world, on a par with the Euro and the Yuan once it freely floats. So despite economic well being returning to the US, the US dollar is expected to remain under significant pressure, as greater wealth is created elsewhere in the world and global portfolios continue to be re-weighted away from the US dollar.
The Australian dollar can only go from strength to strength in an environment of stable and high yield, not to mention the burgeoning resources boom, still in its early stages and with another 5- 15, perhaps 30, years to run.
Keep buying both the Euro and Australian dollar, against a US dollar still in long term decline.
Clifford Bennett
Clifford Bennett
Chief Economist
White Crane Group
Sydney, Australia.
+61 (0) 423 950 427
clifford@whitecranegroup.com.au
www.whitecranegroup.com.au
