Euro leads, USD lags by Justin Choi and Agnes Tsang

Discussion in 'Economics' started by Agnes Tsang, May 16, 2007.

  1. Euro leads, USD lags by Justin Choi and Agnes Tsang

    Tsang: From the recent observations, the pattern and trend of the currency exchange rate of GBP and Euro with USD is synchronized. The same trend also appears in the Euro and USD Federal Reserve trade-weighted index. Most of the investors think that Euro is an alternative to USD: when the USD is in the bear market, investors will turn to Euro, vice versa.

    Choi: Nowadays, Euro leads and USD lags. The Euro is the core factor that can affect the USD. When the Europe economy is going to slow down whilst the market do not expect the European Central Bank to increase the interest rate, Euro will finally fall to an acceptable level.

    Choi: Here are some of expectations about the upcoming Europe economy. It will decline because of the following reasons:
    1. Increasing interest rates (by ECB)
    2. High currency rate (the exchange rate is already extraordinary high, Euro/USD >=1.3)
    3. Heavy taxation (Germany and Italy had already increased taxation in the past years.)

    Tsang: Attention should also be drawn to the first season GDPs of France, Italy and German, if these data are softer-than-expected, the currency market will have desirable results. Conversely, when the Europe economy keeps on growing, no matter what happens to US market, the bear market can never be ended.

    Under the effects of heavy taxation and tightened money supply, (Europe) economic growth will be slowed down in the near future.