Market returns on well-trodden path

After some doubt as to what course to follow in October, the markets have chosen risky way, which means that the profitability of currency to be the main beneficiaries as the Australian fast shake the frustration that emerged after the decision to keep interest rates steady. As we wrote in the daily forex briefing here a very important strategic point of view, namely, decide whether QE world's problems or make them potentially more difficult in the future.



This week due to the weakness of the dollar, the euro, in comparison with him, pulling the rubber. Whatever it was, whatever that meant, the euro is in the range 1.40 against the dollar. The euro rose by almost 17% against the dollar over the past four months. The only time we saw a similar growth rate for similar time frame - the end of 2002. In those days, the ECB has been able to cut interest rates from 3.25% to 2% in early 2003, not as a reaction to the strengthening of currencies, but in order to curb inflationary pressures. Nevertheless, narrowing the differential with U.S. interest rates has really helped.

At this time the problem is the lack of control by the authorities of the eurozone single currency. Strengthening of the euro - a reaction to the weakness of the dollar, together with the growing desire of Asian central banks to reduce the amount of dollars in their reserves (which makes the euro the leading candidate to replace). Listen carefully Trichet tomorrow, and on weekends. Even if he directly or indirectly, express any concerns about the strength of currency, the European authorities are powerless to do with it anything.

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