The euro zone is standing on the deflation pedal hard enough to turn the euro northward when the portfolio adjustments have run their course, which could be relatively soon.
And the indications of growing exports are more evidence the currency could bottom and start to appreciate.
Like Japan, when relative prices get to where exports pick up it causes the foreign sector to get short (net borrowed) in that currency, which tends to cause the currency to appreciate to the point exports fall off.
The ‘answer’ is to buy dollars as Japan did for many years, and China continues to do. And note how strong the yen got after Japan stopped buying dollars- strong enough to keep a lid on exports. But the euro zone ideology won’t allow the ECB to buy dollars should the euro start to appreciate, as that would give the appearance of the euro backing the dollar.
So right now a euro strong enough to slow exports would be highly problematic for a continent already in the midst of a deflationary spiral with its fiscal authority, the ECB, forbidden to offer the needed fundamental support.
The price of gold in euro could be the indicator of this turn of events. The portfolio shifting has driven up that gold price, and a downturn could be the indication that the portfolio shifting is getting played out.
But for you traders out there- I wouldn’t be early or try to call the precise bottom of the euro.
There’s no telling how much more portfolio shifting lies ahead.
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