“The eurozone is already in a Japan-trap … What we are seeing in the money supply data and falling monetary velocity is exactly what happened in Japan in the 1990s, yet the ECB seems to think everything is fine.”
-Lars Christensen, Danske Bank
Wait for it … wait for it … Draghi will “save the day” eventually …
The driver of the euro has changed a bit in recent months. Certainly expectations have.
Traders now expect the European Central Bank’s new efforts to support its economies with ultra-easy monetary policy will drive yields lower. And this narrowing yield differential between the US and Europe will weigh on the common currency.
Remember, before, action from the ECB to support economies was seen as alleviating a Sovereign debt problem, reducing pressure on economies and leading the way to growth; and that was bullish for the euro.
Not anymore …
Currency Currents 7 June 2013