Swiss caught in the wake of massive FX currents

By Edward Hadas
March 19, 2015

Exposure to the European economy has helped Switzerland. The euro has not. The failure of the franc’s peg to the single currency has cut into expected growth, and leaves the central bank searching for a new approach. The lesson: in currency wars, the little guys usually lose.

ECB bazooka a water pistol for emerging markets

January 23, 2015

Between Mario Draghi’s bond-buying plan and the Bank of Japan’s ongoing splurge, central banks are pumping out $1.5 trillion a year in cheap money. The surprise should boost emerging markets wary of rising rates. But fading growth and falling prices will overwhelm the stimulus.

EU insurers’ solvency is shakier than it looks

December 16, 2014

A quarter of Europe’s insurers would fail to meet a basic gauge of capital health if Japan-style low-yield conditions were to persist, recent stress tests found. But actual euro zone yields are even lower. With the bloc on the brink of deflation, that’s not a reassuring sign.

Weaker euro won’t do much to stoke inflation

October 16, 2014

The ECB not-so-secretly hopes a cheaper currency will boost euro zone inflation. Good luck. The fall in dollar-denominated commodity prices is deflationary. And with demand weak, firms will struggle to pass on higher import prices. Only a huge euro slump would bring real relief.

Euro has further to fall

September 5, 2014

The single currency has dropped sharply since the ECB eased policy this week. The central bank now openly hankers for a weaker euro to boost inflation, and is doing all it can to bring this about. Traders sometimes fight central bankers. This time they look happy to go along.

German yield curve is the safest one to play

August 18, 2014

The spread between short- and long-dated bond yields keeps shrinking in the UK, United States and Germany. Stronger economic activity explains the Anglo-Saxon moves, economic weakness drives the Teutonic trend. The trade that relies on euro zone frailty looks the least risky.

“Seller beware” when profiting from market calm

July 10, 2014

Volatility, gauged by indicators like VIX, is ultra-low. While it could be the calm before a storm, investors including Pimco have been selling insurance against price swings. It’s one way to make money amidst shrinking yields, but it’s also a risky bet against the unexpected.

French persist in dead-end strong-euro moaning

July 8, 2014

The Airbus CEO is the latest to complain about the strength of the single currency, echoing similar grumbles by the French prime minister a week ago. But the ECB is right: exchange rates can’t be a primary target of monetary policy.

Europe slides towards the next Minsky Moment

May 19, 2014

The euro zone’s near collapse followed the American economist’s model - excessive confidence in the currency’s stability bred massive instability. The crisis led to genuine improvements, but investors are once again looking over-confident. The risk of a repeat has increased.

Pound joins euro as weak dollar victim

May 8, 2014

The Federal Reserve keeps printing money and Europe isn’t. That forces the greenback down, and the euro and now sterling up. The euro zone’s deflationary risks are rising while the UK recovery is becoming more unbalanced. When Fed policy finally changes, the UK looks more at risk.