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Jakobsen: Europe's cliff-hanger moment
Europe's competitiveness is being eroded almost daily by the high levels of the euro. EURUSD "fair value" is USD 1.20 to 1.25, says Saxo Bank's Chief Investment Officer, Steen Jakobsen, and should the euro fall due to Fed 'tapering', it couldn't come a moment too soon for European authorities. The high euro, he says, adds pressure to deflation and limits growth.
The European Central Bank has plenty of options but it is running out of excuses to do nothing. What it does do next is a a real "cliff-hanger", according to Steen. A full round of quantitative easing is likely, he says, despite it being opposed by the German Bundesbank and against the spirit of the European treaty. It would certainly weaken the euro.
Interestingly, it's what European equity investors are betting on. If there's more QE, shares are likely to rise. If the economic picture improves and there's more growth in Europe, that would be equity positive too. It's why he suggests it's a good idea to be long European equities.
02:06 minutes
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