bundesbank

Euro Parity, Coming Sooner Than You Expect

Euro Parity, Coming Sooner Than You Expect

The time from when we last published our latest addition of the Daily Grail has been rather eventful. From the blistering jobs report 2 weeks ago that propelled market's expectation for a June rate hike even higher, to the continuation of monetary policy bifurcation by the world's central banks that will soon see the Euro trading at par to the Dollar, the month of March has so far endowed the financial markets with much needed cross-asset volatility.

On 22 January, the ECB unveiled something the world had never seen before. Mario Draghi, President of the European Central Bank, announced that for the first time in the 14 years of the Euro's existence, the ECB was going to monetize debt securities to the tune of €60bn/month. Just 2 short months ago, the ECB termed this open market operation the EAPP (Expanded Asset Purchase Program).

2 months and 1000 pips later, the ECB has coined a new term - the PSPP (Public Sector Purchase Program).The big question on the minds of currency traders across all trading desks is when will parity be attained on EURUSD. Not if but when.

Europe Frozen In Coldest Deflation Ever

Europe Frozen In Coldest Deflation Ever

Everyone certainly knows about the blockbuster Disney animation film "Frozen" and its plot. Though we realize, rather humbly indeed, that we will never come anywhere close to Chris Buck's eloquence in personifying fictional fantasy, we nonetheless were able to connect the quaint dots of what was one of the most popular movies of 2013 & 2014, and that of the biggest stories of the global economy.

We liken Elsa to global oil prices; once the innocent commodity everyone vied for has now become the harbinger of disinflation and deflation, causing great pain and blowing a bone-chilling deflationary wind across much of the world. Anna (Elsa's beloved sister), which we liken to central banks, embarks on a journey of wanderlust and real purpose to try to rescue her dearest sister who has uncontrollably morphed into an Ice Daemon.
Once in the bliss of a dearest sisterhood with Elsa - like central banks were to elevated asset prices, Anna now frantically embarks on an unprecedented journey of uncertainties to save Arendelle from an eternal ice age - like central bankers are now embarking on extraordinary monetary programs to reverse the unintended consequence of their previous misdeeds.