Currencies may not be our bag but we read the output of just about everyone who makes it their own.Â Most are quite smart and some are brilliant.Â After digesting it all a few things come to the surface.
1. It’s true the consumer, real estate and financial segments will be poor for at least months to come.
2. The flip side if increased exports is working as it is supposed to, we see it in the monthly figures.
3. The current level of the Eurodollar exchange rate is painful enough to change behavior (unlike $4/gallon gas in the US.)
In support of 3. we will go beyond the widespread carping about Europe being too expensive to visit or do business in right now and point to major players like VW and Airbus that are seriously looking at building factories in America (thanks to Steve Waite for the pointer to the Spiegel Online source.)
Economic indicators are not our stock and trade but the behavior of market participants is.Â Based on the attitudes we see it would seem more likely for the $/Euro ratio to move closer to $1.25 than $1.75.Â These things take time and the lag effects are well-documented.Â But come they do… changes in behavior seem to suggest real money is starting to consider $-based assets and production too tempting to pass up.
— Kris Tuttle