UPDATE: EUR/USD

Passing the buck - dollar stocks in Europe

Exane note: Passing the buck – dollar stocks in Europe

“Dollar plays have not performed well, yet. Companies that have large structural transactional exposures to the EUR/USD exchange rate, such as Airbus and STMicroelectronics, have been poor year to date and have only started to pick up in recent weeks. And as we try to show, analysts’ estimates have not yet adjusted to the prevailing currency rates. Both factors lead us to believe that there is still some outperformance to be generated from dollar-exposed stocks.”

  • Still not enough has been made of this by analysts
  • Think it is the chart to watch and still a massive tailwind
  • People maybe worry about growth weakness negating the FX effect but it is going to be a big tailwind. The ECB on a GDP basis could end up doing more QE than Japan as they increase the balance sheet from 2 to 3 trillion

 

 Mon, 28 Jul 2014 07:16

EUR/USD Dealers noted that the gradual widening in interest rate differentials between US/Europe gave the greenback an advantage- The premium offered by two-year U.S. Treasuries over German debt has widened to around 46bps

 

Thu, 17 Jul 2014 10:30

THE EUR VS. THE US DOLLAR: The EUR “reversed” to the downside eleven weeks ago, but only now is the upward sloping trend line in real jeopardy. Note too that as the EUR rallied the volume of trade waned: a sign of impending weakness, not of strength.

That’s from today’s Gartman and I think it is the key chart to watch medium term. If this happens will be positive for the mkt as should see reduced worries of EPS revisions and act as a tail wind. The chart to watch medium term for us.