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EUR/USD breaks the two-month high, as investors continue to ignore the positive statistics on the States, paying attention solely to offset the timing of the start of the process of normalization of monetary policy by the fed. Bloomberg indicates that since the last FOMC meeting has improved only indicators of the labour market, while the collapse of prices in commodity markets, sluggish inflation and worsening problems in China allow us to postpone the decision to raise rates until better times. Derivatives reduce the chances for September to 24%, the debt market traders shouting that the monetary restriction would be a mistake in terms of narrowing of the differential base rate and bond yield, inflation-protected (TIPC) that would adversely affect public debt. How to grow greenback? Moreover, in early August the experts at the Wall Street Journal gave a landslide victory in September to tighten monetary policy. Really, it is really reflected in quotations, and the current correction in EUR/USD due to the disappointment of investors and the closing of positions on the dollar?
Actually the Euro has a lot of growth drivers. First, the process of flight from risk even against lower compared to the historical average volatility of FOREX (against 9,4 10,3, according to JP Morgan) forced carry traders to scale back operations, which had positive impact on the cost of major funding currencies (EUR, JPY). Secondly the rout in the stock market in China continues. From the perspective of P/E Chinese stocks are overvalued even with the current correction. The ratio is 66, which is substantially higher digits on the 10 largest markets, and is close to the bladder 2007 (68). During this reporting 62% of issuers disappointing, and the economy continues to slow, as evidenced by the rapid collapse of the August PMI in the manufacturing sector for 6.5 years. The peak Shanghai Composite exerts pressure on the yields of U.S. Treasury bonds and puts sticks in the wheels of the process flow of capital from the Old world to the States. And finally, thirdly, the panic in emerging markets contributes to the inflow of money into Europe as it was in the period when the fed announced the tapering of QE. All this, of course, is good, but on September 5, the scheduled ECB meeting, which is clearly not satisfied with dividends of EUR nor falling inflation expectations, measured by the yield of five-year German bonds, to the lowest level since the start of the European quantitative easing program.
I, in turn, we note that to keep a cool head in the General prostration is very difficult. It's trying to do Citi economists who agree with the points made in the previous material point of view about the wrong interpretation of the Protocol of the FOMC. In their view, to international events forced the fed to delay a rate hike in September, we should speak of a systemic crisis. The regulator is looking more and more on the dynamics of core inflation, not CPI, while the positions of the first look steadily. And finally, how to be a statement of the Central Bank that the rate decision will depend on the incoming statistics?
Actually the Euro has a lot of growth drivers. First, the process of flight from risk even against lower compared to the historical average volatility of FOREX (against 9,4 10,3, according to JP Morgan) forced carry traders to scale back operations, which had positive impact on the cost of major funding currencies (EUR, JPY). Secondly the rout in the stock market in China continues. From the perspective of P/E Chinese stocks are overvalued even with the current correction. The ratio is 66, which is substantially higher digits on the 10 largest markets, and is close to the bladder 2007 (68). During this reporting 62% of issuers disappointing, and the economy continues to slow, as evidenced by the rapid collapse of the August PMI in the manufacturing sector for 6.5 years. The peak Shanghai Composite exerts pressure on the yields of U.S. Treasury bonds and puts sticks in the wheels of the process flow of capital from the Old world to the States. And finally, thirdly, the panic in emerging markets contributes to the inflow of money into Europe as it was in the period when the fed announced the tapering of QE. All this, of course, is good, but on September 5, the scheduled ECB meeting, which is clearly not satisfied with dividends of EUR nor falling inflation expectations, measured by the yield of five-year German bonds, to the lowest level since the start of the European quantitative easing program.
I, in turn, we note that to keep a cool head in the General prostration is very difficult. It's trying to do Citi economists who agree with the points made in the previous material point of view about the wrong interpretation of the Protocol of the FOMC. In their view, to international events forced the fed to delay a rate hike in September, we should speak of a systemic crisis. The regulator is looking more and more on the dynamics of core inflation, not CPI, while the positions of the first look steadily. And finally, how to be a statement of the Central Bank that the rate decision will depend on the incoming statistics?
