Making the Bullish Case for the Dollar/Euro

Provocative piece in the weekend Barron’s making the case for a big reversal in the dollar/Euro exchange rate. The essence:

  • European monetary policy is considerably more profligate than critics think
  • The Euro is not recession tested
  • Rapidly-aging European populations and immigration-related unemployment problems create growth pressures
  • Asian central bankers are finally realizing the downside to their current currency pegs


  1. Mark Tlapak says:

    I’ve been a GaveKal (source for the Barrons article) subscriber for years, and its worth pointing out they have been bullish the US $ vs. the Euro for years.
    Nonetheless, it’s interesting that every pitch for buying the Euro is, “yes, it’s overvalued by 25-30% based on traditional valuation methods (near perfect agreement on that), but near-term the US fundamentals look terrible.” That makes sense from a trader’s perspective, since momentum in currencies is much more powerful that in other markets.
    But, do fundamentals ever look good at a bear-market bottom?
    I’ll add that historically the Euro/$ (and DM/$) has several times hit 30% overvalued vs. a reasonable “fair value” estimate, but never over, and once again we are at 30%.

  2. interesting but i think your final bullet point is where the real story lies—emerging asian currencies, especially yuan are where the action is going to be for a long time(excellent article on this by Michael Gomez of Pimco-on their website), watch the yuan and of course crude oil continue upward—Pk of OilGasFutures.Com