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15 Apr 2013
Forex Flash: Europe is over-saving like never before - Societe Generale
FXstreet.com (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale believes that Europe is over saving like never before.
he begins by commenting, “We already knew Europe isn't growing. Then we got a US slowdown. Then we got a Russian slowdown and then the Chinese data came out and sent further despondency into the markets. Down went gold, down went equities, credit indices. Yield curves steepened and up went yen, dollar and korean won, against pretty much everything else.”
He notes that this morning's European data came in the form of a Eur 12bn trade surplus, the biggest, seasonally adjusted, for a single month since the Euro's birth. Further, imports fell 2.1% m/m and exports rose a modest 0.1%. He writes, “That supports everything you thought you already knew about Europe's austerity regime and how it plays out, and if anyone tells David Cameron that the biggest buyer of Euro Zone exports is the UK, he'll be even grumpier.”
He continues to add that European trade data don't tell us as much as the current account data will but they do confirm that at a macro level Europe is over-saving dramatically, as public sector austerity just can't be offset by private sector profligacy any more. He feels that the Japanification of the region continues apace, so it's hard to hate bonds, and not surprising the Euro is so hard to trade. he writes, “Down because Japanification ends with the European equivalent of Abenomics, or up because that won't happen for a long time? We vote for the latter as a forecast, but concede it will be slow going.”
he begins by commenting, “We already knew Europe isn't growing. Then we got a US slowdown. Then we got a Russian slowdown and then the Chinese data came out and sent further despondency into the markets. Down went gold, down went equities, credit indices. Yield curves steepened and up went yen, dollar and korean won, against pretty much everything else.”
He notes that this morning's European data came in the form of a Eur 12bn trade surplus, the biggest, seasonally adjusted, for a single month since the Euro's birth. Further, imports fell 2.1% m/m and exports rose a modest 0.1%. He writes, “That supports everything you thought you already knew about Europe's austerity regime and how it plays out, and if anyone tells David Cameron that the biggest buyer of Euro Zone exports is the UK, he'll be even grumpier.”
He continues to add that European trade data don't tell us as much as the current account data will but they do confirm that at a macro level Europe is over-saving dramatically, as public sector austerity just can't be offset by private sector profligacy any more. He feels that the Japanification of the region continues apace, so it's hard to hate bonds, and not surprising the Euro is so hard to trade. he writes, “Down because Japanification ends with the European equivalent of Abenomics, or up because that won't happen for a long time? We vote for the latter as a forecast, but concede it will be slow going.”