FX Hedging: A Hidden Risk for Eurozone Equities

With a synchronised recovery in economic activity underway, memories of the 2015-2016 deflation shock fading and a slew of benign election results (Dutch, French and German), confidence in the euro area has improved markedly since the beginning of the year and has...

Financial Balkanisation of the Eurozone

Convergence in core-periphery sovereign credit spreads since 2012 would seem to vindicate the raft of monetary easing measures deployed by the ECB to stabilise the eurozone. This is only half the story, and the other half is decidedly negative. The eurozone collapse...

German Stocks Vulnerable

The DAX index is near all-time highs, and German stocks are rallying in line with other European markets. While the economic news has been good, our leading indicators for Germany are much less rosy than we would expect given stock prices. There is a big divergence,...

EUR: Tactically Overbought; Macro Headwinds

Macro headwinds are building up for long EURUSD positions in addition to signs that EURUSD is becoming very overbought technically. A few weeks ago we noted that EURUSD sentiment was one of the most bullish (contrarian indicator) among the 50 major FX pairs we track....

EURGBP: Deteriorating Rate Differentials

(from our Weekly Update of 14th February 2017) Rising inflation in the eurozone is driving real rates lower, widening the rate differential between the EUR and other DM currencies. We look at risk-adjusted real-rate differentials by dividing real-rate differentials by...

Negative Feedback Loop in Europe

While most of the attention post-Brexit has been on the UK, we are far more concerned about Europe.  Markets and the economy operate in a feedback loop, and the performance of European banks relative to the stock market points to a fall in lending ahead in Europe. ...
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