Well, former FX trader-turned Bloomberg contributor Mark Cudmore is out with his latest missive and I’ve gotta tell you, I’m not sure I agree with any of it.
The premise is that it’s time to get long euros now that Emmanuel Macron is a lock in the second round of the French elections. According to Cudmore – who is characteristically upbeat on Thursday – the single currency’s existential crisis is all but over.
Nothing, in my mind, could be further from the truth. You’ll also note that we presented to counterpoint to what you’ll read below earlier this week in “It’s That Time Of Year Again.”
In any event, in the interest of presenting both sides of the argument, find Cudmore’s latest below and do note that at least for now, the market seems to agree with him.
Also, this helps:
Elabe polled 1,314 French voters who watched the only head-to-head debate between Marine Le Pen and Emmanuel Macron last night, the two finalists in France’s 2017 presidential election.
- MACRON FOUND MORE PRESIDENTIAL BY 64% AFTER DEBATE: ELABE POLL
- 55% see Macron as understanding them better
- 62% see Macron as more honest
- 53% found Macron as more capable of changing things
Assuming Emmanuel Macron is victorious, it feels like this Sunday’s French presidential election will be the final nail in the coffin for structural euro bears.
- Markets are driven by narratives. We hope that those narratives are based on facts. They normally are, but not always. Most often, it takes time for the narrative to realign as the facts change
- For more than seven years, the euro has been battling an existential crisis. Sure, it’s ebbed and flowed, but it’s never really gone away as the currency’s dominant narrative. It’s now time to move on, and the single unit will appreciate as a result
- I’ll hold my hand up: I didn’t think the euro would survive this long with all its members. But it has, and it has proven its resilience. It has survived a financial crisis, bank problems, debt problems, unemployment problems, populist anti-euro politicians, protests and terrorism
- Most of those problems are behind us. This year, the euro- zone economy continues to outperform expectations. Unemployment rates are plummeting. Anti-euro candidates are failing to win majorities
- Importantly, while ECB policy may not always win enthusiastic plaudits, it has a proven track-record of ultimately doing “whatever it takes” to preserve the euro
- We no longer talk about EUR/USD parity and below. European equities have clearly been in favor the past few months. Greek deadlines get resolved without a broader ripple. We’ve moved on from Italian banking woes
- It’s time for markets to start considering the single currency’s long-term appreciation potential, at least versus developed market peers. The one thing genuinely holding it back are the large negative real yields. But as the structural problems fade into history, monetary policy will similarly adjust in the months ahead
- Those who trade on systemic market risks need to know when their expiry date has passed. It’s time for the euro to enjoy its life out of the limelight and let some other asset be the focus of market worry