Mish Mailbag: Why is the Euro Still Rising? When Will it Stop?

MishTalk

In response to Tapering All Talk No Action, Expensive Valuations, Duration Risk reader David is wondering about the Euro.

by Mish

David asks “Can anyone explain why the Euro is still rising in value against US dollar, nonstop? When this will end?”

Hi David, this was expected, at least at this end. Rather than play the Euro which I do not like for numerous reasons, I have been long the pound.

I went long the pound on October 7, after the pound’s big Brexit crash. Peter Atwater had this pertinent Tweet on sentiment about a month earlier.

I believe that “like” was mine.

I am not sure when I first mentioned being long the pound but I commented on it on December 14, 2016 in Saxo Bank CIO Bets on Weaker Dollar, Cites Blowout Equity Bubble.

Both FXStreet and Investing.Com have good chart tools.

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I did not catch the low, more like 1.23 or 1.24. The trade went nowhere for six months. The Beginning of January 2017 was still an excellent time to buy the pound.

Why is the Euro Still Rising?

  1. ECB’s moves are in front of it. Think expectations.
  2. The Fed’s moves are largely behind it. How many hikes will the Fed get in vs promises and expectations?
  3. The Trump reflation bet is over. Expectations were high but there was no healthcare bill and tax reform is questionable at best.
  4. Growth in Europe has been better than expected.

When Will Dollar Rise Stop?

A snapback could happen at any time especially given structural flaws in the euro and the banking mess in the EU. Eurozone risks are high and rising and the Euro is 62% of the dollar index.

However, currency trends are very sticky. Look how high the dollar index rose.

We are all guessing, but I would rather take my chances with the pound than a bet either way on the Euro.

Mike “Mish” Shedlock

Comments (40)
No. 1-39
niall
niall

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batero7045
batero7045

Super interesting!

DonAllen
DonAllen

I wonder what kind of an effect this corona virus will have on Euro and dollar? It is certainly make make people panic especially with the summer around the corner.
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JoeT
JoeT

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George_philips
George_philips

The coronavirus will definitely has threaten the future growth of the eurozone. Although in February the economic indications point to the fact that the first impact has been resisted, the slowdown in demand, the drop in exports and the loss of business due to lack of supplies can reverse the situation and lead to the area of a single currency to new difficulties. I´m afraid for independent Gas Boiler Engineers like me.

batero7045
batero7045

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asiantoken
asiantoken

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JoeLander
JoeLander

I'm pretty sure the coronavirus is causing the Euro to fall right now, and with Brexit happening, it'll probably continue to fall. Now that everyone's at home waiting on this to blow over, I'm sure you can see your yard probably needs work. If so, give us a shout at https://www.delawarelandscaper.com .

Kifa
Kifa

Dear Mish, incredible writing I should say. A topic that most of us readers have been pondering upon in the recent past. Honestly with the present virus pandemic no one can say the real situation of the real situation of the currency. Thank you for discussing your perspective on why Euro is still rising and amongst all discussions I found yours more credible. For those looking into investing in some energy backup at home visit https://www.nantech.in/

Hstern
Hstern

Wondering what the euro looks like now in this Covid 19 scenario.

Are you bearish long term?

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