Going Long The Euro

Featuring Yvan Berthoux

Yvan Berthoux, economist at Economic Perspectives Limited, lays out his long euro trade. He explains why America’s twin deficits will support a strengthening European currency. Filmed on June 7, 2018.

Published on
11 June, 2018
Topic
Valuation, Euro, Bonds
Duration
11 minutes
Asset class
Currencies
Rating
40

Comments

  • MY

    Michael Y.

    15 6 2018 01:19

    0       5

    I know there are many different kinds of investors or traders that are potentially watching this. But, can I test the water to find out how many of you think 3-6 months is a long (thumbs up) versus a short (thumbs down)?

  • NG

    Nick G.

    13 6 2018 10:32

    8       0

    OK, so 2 weeks ago it was short @ 1.1580 with 1.1820 stop (stopped), now it's long @ 1.1700 with a 1.1400 stop. That's gonna get stopped too.
    You just cannot have 3-6 month trades with such tight stops. I thought this series was supposed to educate. It sure is. As in: "don't try this at home, kids."
    How difficult can it be to get someone who can structure it as an option play and enable it to run?
    Or, on the other hand, have Gartman as a permanent guest. That would be valuable.

  • AC

    Andrew C.

    13 6 2018 08:48

    0       0

    THANK YOU FOR THE REVISED MUSIC AND VOLUME !

    Interesting take, but it seems to be a flip of the coin as to whether the Euro will be higher or lower.

  • SH

    Syed H.

    13 6 2018 04:58

    2       1

    Johnny Depp was a nice change of pace. Alright RV!

  • TJ

    Tay J.

    12 6 2018 17:35

    5       0

    Er, choosing the stop-loss level such that it gives you a 2:1 reward/risk ratio sounds backwards (and arbitrary) to me.

    BTW -- i think she's in love ~~~

  • AM

    Andrew M.

    11 6 2018 20:28

    10       0

    Hmm interesting, not sure I agree with all of it. Some rebuttals:

    1. Twin deficits: The twin deficit has been known for months and could well be fully priced - look at how the USD got crushed early this year despite rising rates after Trump passed his agenda in November. I see this as a long-term factor and less important than current USD funding demands right now.

    2. Valuations: Ditto metrics like PPP and real effective exchange rate. They do seem to work, but usually in the very long run. Similarly, on these metrics the dollar is overvalued against a load of currencies and that hasn't stopped it rallying recently.

    3. European growth / ECB: EZ economic growth looks soft, PMIs have been falling since October and core inflation is non-existent. ECB could begin to unwind their balance sheet. But wouldn't that just hurt the EZ in the medium-term, which is completely dependant on QE? The fact that there wasn't a bigger Euro bid on the news that the meeting this week is "live" was telling imo. Not sure how hawkish the ECB can be when they see the damage unfolding before them. And with Draghi stepping down next year, he won't want to undo his "legacy".

    4. Emerging markets: No talk of EM carry trades and dollar funding? EM fx has sold off quite aggressively on a relatively small move up in 10-year USTs (compared to the taper tantrum at least) and some countries have actually fared worse than 2014. Any contagion is going to put a bid under the dollar and, as the Fed continues to unwind its balance sheet, rates could move even higher. That would see portfolio flows leave EM, which accelerated in May after 50 weeks of consecutive inflows (according to IIF).

    And finally, and the fact that India's central bank governor recently warned of a dollar "double whammy" and begged the Fed to relent their balance sheet unwind - followed by an unexpected rate hike this week - should tell you all you need to know about potential EM vulnerabilities (and India is in better shape than most). It was an extraordinary article in the FT. Worth a read, since EM crises invariably send developing countries scrambling for $s.

  • BJ

    Brent J.

    11 6 2018 18:20

    5       0

    I agree with him that short term euro could see a rally. But will stick with my long dollar thesis for anything longer than a few months.

  • SH

    Steve H.

    11 6 2018 17:48

    17       1

    Perfectly rational argument to take onboard, even if you're a medium-term USD bull / EUR bear.

    Last time I let my wife watch RV, though.

  • RK

    Robert K.

    11 6 2018 14:45

    4       0

    Nice interview!

    Ok, ok, I'll say it: was hard to focus on EUR given the abundance of chest hair.

  • DV

    Dimitri V.

    11 6 2018 13:57

    5       0

    Great analysis, Yvan has some great hair and flow!

  • bf

    bart f.

    11 6 2018 11:52

    3       0

    Selling EUR on the back of EU political noise does not usually work for more than several days but all arguments for going long now were also true at 1.2500. The ECB will come “optimistically dovish” this week to try and put out the fire in EM and keep EURUSD low while highlighting the exit so we are in a new range where moves are mainly a function of positioning.

  • KJ

    Kulbir J.

    11 6 2018 10:02

    5       2

    Long USD, Short EUR, that's the better trade in my opinion.

  • CM

    Christopher M.

    11 6 2018 09:49

    5       0

    This aligns with the view of Juliette Declercq for an uplift in EURUSD. This will be interesting to watch play out alongside the dollar strength view of Brent Johnson.