Deutsche Bank euro is doomed to fall

Deutsche Bank: the euro is doomed to fall

Currency strategists at Deutsche Bank noted that further euro / dollar decline toward $ 1.25 (to achieve this mark is expected before the end of the year), there is plenty of reasons. The bank pay attention to the weakening of inflationary expectations and the sluggish growth of the euro area economy, the outlook is more clouded after the escalation of the situation in Ukraine. Russian retaliatory measures will have a negative impact on economic activity, the scale remains unclear, and the ECB has started to operate today to be proactive. the euro is not an unexpected decision of the central bank promises no good and only give impetus to the outflow of funds from fixed-income securities, which is already having a negative impact on the dynamics of the currency. In addition, it is noted, and the decline in demand for European action – that of growth in the euro has provided good support during the last twelve months.

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Euro again approaching their lows

Euro again approaching their lows

Thursday, the euro ceased to increase in
against the US dollar (at least the minimum,
but in the morning he was) and then moves in
face 11-month lows. German
Consumer Price Index, which
was released today, this month
It provides appropriate expectations.
During the day the EUR / USD dropped
from 1.3220 to 1.3183 (it is 0.08%). Support for the pair
It is expected at 1.3153 and resistance
– at 1.3243.

Statistics released by the statistics on
Unemployment in the eurozone. For example, in Germany
the number of unemployed rose by 2000
But it predicted a decline of

and fell against the pound: EUR / GBP
It lost 0.16%.

the financial world still awaits data from
US GDP growth in the second quarter – an important
macroeconomic indicator that
It reflects much of the country.

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Eurozone dreams and grim reality

Eurozone: dreams and the grim reality

A recent statement by the President of the European Central Bank Mario Draghi at the annual meeting of central bankers in Jackson Hole, Wyoming, was of great interest, but the hidden meaning of his remarks was even more striking than many initially thought. If we manage to avoid the disintegration of the euro area, output from the prolonged recession will require increased fiscal deficits, financed by the ECB’s money. The only question is – how this reality will be recognized publicly. Recent economic data have forced politicians to look at the Eurozone serious deflationary risks that were evident at least two years. Inflation stuck well below the target level of annual ECB 2% and GDP stalled. Without decisive policy action Eurozone, like Japan in the 1990s, it will face a lost decade or two painfully slow growth. Until last month, concerns about growth provoked controversial policy proposals. Yens Vaydman, Bundesbank president, has called for higher wages. However, wage growth is not possible without political incentives.

Draghi tried to reduce the rate of the euro at the expense of verbal intervention to increase competitiveness in the region. However, Japan and China also need a competitive exchange rates to boost exports growth and the Eurozone has already accumulated a current account surplus. The German model of growth through exports can not work for the whole euro area as a whole. In some countries, of course, structural reforms are needed to strengthen the growth potential in the long term; However, structural reforms often have a negative impact on short-term growth. The euro area need to boost domestic demand to get rid of excessive debts incurred as a result of the crisis. In countries such as Spain and Ireland, the debt in the private sector have reached unacceptable levels. In other countries, such as Greece and Italy, the national debt was too big, too. To pay the debt, reduced household consumption, business investment and government spending.

However, the simultaneous reduction in the debt burden in the public and private sector is required to limit the demand and growth. Reducing leverage in the private sector in the 1990s, Japan has avoided an even deeper depression, only accumulating a huge public deficit. Therefore, a program of fiscal tightening in the euro zone are doomed to failure. For example, the Italian government has aggressively cut expenditures or raise taxes, the greater the likelihood that its public debt has already exceeded 130% of GDP, reached an unacceptable level. Until recently, the euro area policies deny this reality. Draghi acknowledged this August 22 in Jackson Hole. Without an increase in aggregate demand, structural reforms may be ineffective; and higher demand requires fiscal stimuli, together with the conduct of monetary policy aimed at stimulating growth.

Italian economists, Francesco Dzhiavatstsi and Guido Tabellini explained, which can mean a coordinated fiscal and monetary policies. They offer to cut taxes by 5% of GDP in the next 3-4 years in all countries of the euro area due to the accumulation of public debt in the very long term, which should repay the ECB. They argue that the mere quantitative easing conducted by the ECB, without fiscal easing, would be ineffective. Offers Dzhiavatstsi Tabellini and may require too much stimuli. However, they also raise an important question: how quantitative easing will stimulate the economy? The Bank of England is quantitative easing as a purely monetary policy to support economic growth in the conditions necessary and feasible fiscal consolidation. According to the Bank of England, it works by reducing the medium-term interest rates, increasing the value of assets and the changing preferences of investors, which indirectly stimulates investment and, therefore, demand.

The position of the US Federal Reserve was not so certain. Fed Vice Chairman Stenli Fisher, as well as the former chairman, Ben Bernanke, said that premature fiscal consolidation can hinder recovery after the crisis. Therefore, the Fed indirectly considered quantitative easing, in part, as a means, through the use of which the growth in bond yields can not negate the beneficial effects of large deficits. Position the Fed is more convincing. Fiscal incentives have a direct and strong impact on demand. According to Milton Friedman, they immediately fall into the “current revenue stream.” Only the monetary stimulus do not give immediate results and may cause adverse side effects. Long-term persistence of low interest rates allows unsuccessful companies fight for survival, slowing productivity growth; increasing the value of assets exacerbates inequality; and monetary stimulus are only due to the resumption of growth in private lending, which originally sparked the formation of excess debt.

But if the fiscal stimulus must be accompanied by the purchase of bonds by central banks to prevent an increase in profitability and mitigate concerns about debt sustainability, does not that mean monetary financing of fiscal deficits? The answer depends on whether the regular procurement. In Japan, where the central bank is now owned by government bonds in the amount of 35% of GDP (and this level is rising rapidly), so be it. There is no convincing scenario in which Japan can accumulate a large enough fiscal surplus to pay off a debt: a considerable part will always remain on the balance sheet of the Bank of Japan. Just accepting the offer Dzhiavatstsi and Tabellini would almost certainly lead to a permanent increase in the ECB’s balance sheet.

Whether openly admit this possibility? The argument for this is that otherwise would have intensified fears of a possible payment of the increased government debt, or “withdrawal” from the ECB’s swollen balance, which in turn undermine the stimulating effect of fiscal and monetary coordination. The argument against – moral hazard: if we recognize that moderate deficits, financed by the ECB, is now possible and acceptable, what’s to stop politicians and voters to demand and inflationary large deficits financed by the ECB, in other cases? Of course, high political risks. Consequently, the optimal policy may be accompanied by underhand games; monetary and fiscal “coordination” can mean permanent financial funding, however, open the possibility of never admit. In any case, Draghi strongly promoted this debate forward. Without expanding the role of fiscal policy Eurozone will face a sustained slowdown in growth or a possible decay.

Prepared by Project Syndicate materials Source: Forexpf.Ru – Forex Market News

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Societe Generale advises to sell pound

Societe Generale advises to sell the pound

Short on the pound / dollar (GBP / USD) still makes sense, analysts say Societe Generale. UK is not subject to a major event risk this week, and the pound was a welcome respite after a Scottish referendum: the alarm last week, in the past, says an expert on macroeconomics Societe Generale Kit Dzhaks. The pound is now trading around $ 1.6314. Sale of the pound against the dollar still makes sense, says Mr. Jax. "As in the euro short-covering was not significant, long-term economic growth prospects are not as bright as they were before", – he said. Source: Forexpf.Ru – Forex Market News

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Not all cat Shrovetide Alibaba continues to fall

Not all cat Shrovetide: Alibaba continues to fall

Alibaba Group Holding Ltd
lowered their quotes
the second day in a row, as well as all
Chinese stocks listed in the US. it
It comes amid concerns
second over a slowdown in growth
largest world economy.

Alibaba yesterday lost 3%
$ 87.17 in the US
auction. Total progress starting at $ 68,
offered per share
during the IPO, slowed
to 25%.

shares of most
Chinese companies fell after
as the “Beige Book” showed serious
problems of the economy. Meanwhile,
90% Alibaba sales are
namely China.

I recall the first
business day after the IPO
action “Chinese miracle” added
as much as 38%, placing the next record.
Alibaba has become one of
the most valuable companies in the US
exchanges. Timoti Griski, Director
Investment in the company Solaris
Asset Management, said by telephone: “Heath
on the stock exchange is now serving companies,
services. And it was at this point
timed Alibaba «performance»,
which, as you might expect,
It turned Incredible! “.

Last week
Alibaba earned $ 21.8
billion – and broke the record for the IPO,
established at the time by another
Chinese debutant – Agricultural
Bank Of China Ltd for 22.1 billion (2010).

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US index futures rise on European statistics

US index futures rise on European statistics

MOSCOW, October 23 – RIA Novosti. Futures on indices on Wall Street grew by positive statistics in business activity from Europe. Apparently, investors now feel a certain rise in the hope that the economy still avoid a recession, and will continue steady growth.

By the time 17.13 MSK futures for DJIA rose 0.79%; on NASDAQ – firmed 0.76%; on S P 500 – 0.73%, up to 1939 points.

Driver to the growth of Wall Street futures was the publication of PMI Europe. This index, which assesses the business activity in the industrial production and the service industry, showed a positive trend, even beating analysts’ forecasts. Against the background of gloomy data that is continuously supplied from Europe for the past few weeks, this statistic has become a beacon of light and inspired investors.

"Europe is the focus of investors"- I commented to Bloomberg economist at Commerzbank AG in London Piter Dikson (Peter Dixon).

It contributes to the rise on Wall Street and the season more accountability. Today, data for the third quarter showed Caterpillar Inc., and the data were very positive: net income rose by 5.5%, and the earnings outlook of stocks also rose. The result is expected to increase the company’s capitalization immediately after the opening of US markets. Finally, US automakers General Motors patriarch showed an increase in net profit, which compared to the same period in 2013 doubled that definitely will please investors and is likely to increase the price of the shares of the giant.

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Asian markets rose on Friday

Asian markets rose on Friday

Trading in the Asia-Pacific region in
Friday ended in the green zone. it
It helped a little to reduce the percentage drop
most of the indices for the week.
MSCI Asia Pacific lost per week
1.4%, but on Friday rose by 0.4%.

Nikkei added
0,33%, Kospi up today
0.35%; Hang Seng firmed 0.37% and
Now Shanghai Composite jumped
up to 1.4%. This Chinese growth
index due to the fact that the People’s Bank
China on Friday intervened 8.2
billion dollars on the interbank market
the country with the help of short-term transactions
lending. In the money market in China
very serious rates rose.

a result of increased securities
Chinese financial firms and lenders.
ICBC added modest
1.4%; Citic Securities, Haitong Securities increased
capitalization of 6% each.

And here
loudly announced a project to
“Bow” of stock exchanges in Hong Kong and Shanghai
(Stock Connect), worked
the first week, showed not the most confident
results. Investors chose all
24% quota on the amount of the purchased shares in Hong Kong
(100% – it’s $ 90 billion).

Japan this week happened important
Events: Sindzo Abe dissolved the lower
house of parliament. Already on December 14, will
early election it. unpopular
measure – the second increase in the sales tax
– was postponed for half a year. That’s why
grown up country codes.

large movements of securities can
noted appreciation of 4.2% stake
Casino in Macau Galaxy Entertaiment Group.
oil company
CNOOC added 3.5% yesterday and
now it raises the price of oil, and
securities of companies related to the
“Black gold” perfectly responded
on the news.

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