The cat i' the adage

"The growth of knowledge depends entirely on disagreement" Karl Popper (1902 - 1994)

Monday, May 23, 2005

Seven reasons to sell the Euro

Whither the Euro? The Morgan Stanley view is negative. They offer seven reasons to sell.

1) The euro is expensive
In terms of purchasing power a level close to parity with the dollar is suggested.
2) European growth continues to underperform
Europe is experiencing feeble growth with structural problems unaddressed.
3) Interest rate differentials should benefit the dollar
Higher US interest rates will support the dollar while European rates are held low.
4) The ECB’s credibility is eroding
It expresses concern about credit growth but appears unwilling to risk monetary tightening.
5) Fiscal deficits on the rise in Europe, declining in the US
The stability and growth pact is a dead duck and without its constraints Italy and Germany in particular are letting spending rip.
6) Europe is heading into a political crisisProtectionism is on the rise and the constitution is in peril.
7) A rise in global risk aversion will favor the dollar
Recent shocks in the credit markets are likely to result in greater risk aversion with the dollar seen as the safe haven.

Though it's fair to say that not everyone reads the runes the same way...


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