Out of the box #7 – A Fistful of Euros – The European Crossroads and how to trade it
In recent weeks, we have been beating the drum about underlying fragility within the Eurozone. This view was initially a contrarian one but is now gradually becoming consensus- or at least the expectations of a slowdown/recession seems to slowly becoming the prevailing conviction in the market:
Chart 1: Inflation Expectations EU
The Euro remains resilient against most currencies (excluding the USD as we rightly called), and the market seems to be showing a lot of confidence in the Euro compared to peers- a view we don’t think will prevail- at least not as broadly as it has the last couple of months:
We have not been shy about our euro skepticism lately (to say the least) but as we now trade it, I thought it only appropriate to add some broader context to it. The way I perceive and understand the Eurozone I owe much to the influence of Edward Hugh who is sadly not with us anymore. I had him in mind writing this piece
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