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FUNDAMENTAL ANALYSIS

The Euro: Its Beginning, Its End, and Its Future

Euro future, Euro forecast, Euro area crisis, euro crisis, euro analysis, EURUSD, forecast, analysis

22 Apr 2015

The problems currently faced by Euro nations are indeed an inevitable process, which can be observed in the adoption of any new invention. The market has to acknowledge the fact that these nations were the first to implement a common currency in an area where each country was using their own currency to trade. Such an ambitious project had never been tested and implemented in the past, until the European nations did it.

Heading into 2015, and after a few stimulus packages were already implemented to help the Euro nations, Mario Draghi, President of the European Central Bank, in a dramatic shift of policy, announced on January 2015 an even larger asset purchase programme -  €60 billion of funds per month would be allocated to purchase euro-area bonds from central governments, agencies and European institutions. This expanded stimulus was planned to last until September 2016 at the earliest, with a total QE of at least €1.1 trillion. Mario Draghi said that he hopes to see this stimulus package combat the threat of deflation as seen in early 2015, “until we see a continued adjustment in the path of inflation”, he added.

Euro future, Euro forecast, Euro area crisis, euro crisis, euro analysis, EURUSD, forecast, analysis Eurozone Inflaiton DataSource : www.tradingeconomisc.com / eurostat

Although the purchase of sovereign bonds was an intended method which the ECB introduced to lower yields and lead investors to seek better returns elsewhere, the European government bond markets have never been more interesting.  Since Central Banks started enlarging their balance sheets, sovereign bonds investments surged by more than $2T, despite negative yields. However, I still believe that this will make the US bonds more attractive than European bonds, given the differentials in yield. I also believe that applying for financing from Europe would be something worth considering.

Euro future, Euro forecast, Euro area crisis, euro crisis, euro analysis, EURUSD, forecast, analysis Eurozone Inflaiton Data
Source : JPMorgan

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