12 Jun 2015
Currency wars: Merkel makes an entry – BBH
FXStreet (Barcelona) - Mark Chandler, Global Head of Currency Strategy at Brown Brothers Harriman, mentions that the currency war evangelists found some support after German Chancellor Angela Merkel’s comments on Euro’s strength.
Key Quotes
“Those pundits that insist on framing the issue in the foreign exchange market as a currency war appear to have been given much fodder this week. According to an unnamed French official, US President Obama began the week by complaining about a strong dollar at the G7 meeting. Then was BOJ's Kuroda's comments about the yen that saw triggered an immediate and sharp reaction in the foreign exchange market. Today it was comments by Merkel that triggered a quick half cent or more loss in the euro.”
“Of course, one needs to ignore the fact that the White House and Obama personally denied such comments. It does not appear that Obama was complaining about the dollar's strength but the lack of aggregate demand elsewhere, and perhaps cautioning against relying on exports to the US, instead of structural reforms at home.”
“One needs to also ignore the fact that rather than talking the yen down, Kuroda suggested that on a real effective basis, it was difficult to see much more yen weakness. The yen rallied strongly in response. What kind of currency war is that?”
“Merkel's comments today are less inflammatory than the initial headlines read. This is not the first (nor will it likely be the last) time that Bloomberg went with a headline that was misleading and/or taken out of context. Its modus operandi seems to be first with the headline and then later release rest of the story.”
“Merkel reportedly said that when countries “that have undertaken considerable reforms like Portugal, Spain, Ireland -- but especially Spain and Portugal -- find themselves in a global environment in which a very strong euro means that they can harvest the fruit of the reforms only with great difficulty, including in the area of exports, then I do want call for understanding when a central bank like the European Central Bank thinks about what you need to do when the inflation rate is so low”."
Key Quotes
“Those pundits that insist on framing the issue in the foreign exchange market as a currency war appear to have been given much fodder this week. According to an unnamed French official, US President Obama began the week by complaining about a strong dollar at the G7 meeting. Then was BOJ's Kuroda's comments about the yen that saw triggered an immediate and sharp reaction in the foreign exchange market. Today it was comments by Merkel that triggered a quick half cent or more loss in the euro.”
“Of course, one needs to ignore the fact that the White House and Obama personally denied such comments. It does not appear that Obama was complaining about the dollar's strength but the lack of aggregate demand elsewhere, and perhaps cautioning against relying on exports to the US, instead of structural reforms at home.”
“One needs to also ignore the fact that rather than talking the yen down, Kuroda suggested that on a real effective basis, it was difficult to see much more yen weakness. The yen rallied strongly in response. What kind of currency war is that?”
“Merkel's comments today are less inflammatory than the initial headlines read. This is not the first (nor will it likely be the last) time that Bloomberg went with a headline that was misleading and/or taken out of context. Its modus operandi seems to be first with the headline and then later release rest of the story.”
“Merkel reportedly said that when countries “that have undertaken considerable reforms like Portugal, Spain, Ireland -- but especially Spain and Portugal -- find themselves in a global environment in which a very strong euro means that they can harvest the fruit of the reforms only with great difficulty, including in the area of exports, then I do want call for understanding when a central bank like the European Central Bank thinks about what you need to do when the inflation rate is so low”."