Why is the euro starting to trend lower?

Posted on 22. Jul, 2014 by Jean Jacques Ohana in Weekly Focus

We have anticipated the euro’s strength for more than a year against the consensus.
The main forces behind the euro’s strength are still at work:

Current account in the Eurozone is still progressing due to uncooperative and simultaneous policies of competitiveness. The Eurozone current account is nearing 3% of GDP, implying recurrent repatriation of foreign currencies by [...]

The euro is not ready for a sell

Posted on 27. May, 2014 by Jean Jacques Ohana in Weekly Focus

The EUR/USD was undoubtedly hit in the aftermath of Draghi’s pledge to react to low inflation and low growth conditions in the Eurozone, dropping from around 1.40 down to 1.3650.

As a matter of fact, Riskelia’ s trend indicator (figure 1) which had been hovering around a significant 60% value since 2013, fell in slight positive [...]

Time to fear the bubble on EU risky debts

Posted on 20. May, 2014 by Jean Jacques Ohana in Weekly Focus

May 20, 2014

We had recommended long positions on EU sovereign debts on several key occasions since April 2013. Their trends have increasingly grown mature and our bubble indicators have significantly expanded since the start of 2014 onwards. All the most significant investment bubbles are now concentrated in the euro zone, either in peripheral or high [...]

Financial markets directionality and Global Macro opportunities

Posted on 05. May, 2014 by Jean Jacques Ohana in Weekly Focus

Markets directionality may be defined as the propensity of financial assets to trend.

To compute this directionality on a dynamic basis, we first compose a basket comprising an equal number of stocks indices, commodities, currencies and bonds futures. We then calculate, on this set of markets, the average absolute Sharpe Ratios over a three-month horizon. We [...]

ECB’s exchange rate guidance: a game changer? Probably not.

Posted on 17. Mar, 2014 by Jean Jacques Ohana in Weekly Focus

Last week, we experienced an interesting turnaround in the ECB communication. For the first time, the ECB expressed its concern regarding the level of the exchange rate, arguing that the euro strength aggravates the problem of insufficient inflation. The speech has had the desired effect on the euro but the impact has been quite short-lived, [...]

Is EUR/USD heading to 1.40?

Posted on 17. Feb, 2014 by Jean Jacques Ohana in Weekly Focus

The outlook of the dollar has been indecisive since Mario Draghi’s pledge to “do whatever it takes to save the euro” and the subsequent announcement of the QE3 Federal Reserve program. For sure, the emerging currencies have been hardly hit but the euro has served too as a repatriation currency during market stresses.

As showed in [...]

Playing the Eurozone disinflationary trend

Posted on 03. Feb, 2014 by Jean Jacques Ohana in Weekly Focus

The current emerging markets rout happens at the worst moment for Europe. As Eurozone countries have made the choice to export their way out of debt, they have made themselves increasingly vulnerable to the growth prospects in emerging economies.

The ongoing landing of the Chinese credit bubble and the sudden stop experienced by emerging countries running [...]

Are you so sure that interest rates will rise in 2014?

Posted on 20. Jan, 2014 by Jean Jacques Ohana in Weekly Focus

Judging from the trends on sovereign bonds, the Radar is increasingly constructive on bonds (figure 1) beyond corporate bonds where we have maintained a positive view since mid-2013. Besides Italy and Japan, Canadian and French bonds are flipping to positive trends while the dynamic of US and UK sovereign debts is improving.

The situation in Canada [...]

The risk of France is not the one you think

Posted on 13. Jan, 2014 by Jean Jacques Ohana in Weekly Focus

Once again, the discussion regarding a plausible attack on the French debt comes back to the surface. The same thing had already happened in July 2013, when Fitch downgraded the French debt. These warnings had proved wrong, exactly as we had predicted.

Investors willing to short France put forward a number of (politically-charged) arguments to support [...]

Easing of euro zone debt spreads, convergence of correlations

Posted on 06. Jan, 2014 by Jean Jacques Ohana in Weekly Focus

A slow convergence process of euro zone sovereign interest rates has started since the ECB considered the launch of the OMT program. The OMT is not a quantitative easing program, it’s a promise from the ECB to intervene as lender of last resort should a country ask for the help of the European Stability Mechanism [...]