The euro and the dollar live mostly calm since the emergence of the European currency in 1999 – Economíahoy.mx

Isabel M. Gaspar / Maria Dominguez / Victor Blanco Moro – 3:44 – 08/16/2016

• the difference between the maximum and the minimum between them is 2.2%

six years ago, Guido Mantega, Minister of Finance of Brazil Back then, he baptized the wiles to which countries resorted to cheapen their currencies and thus stimulate their exports and currency war. And since then, the currency market has had more than a scare. One of the main occurred in August last year with China.

And the People’s Bank of China devalued its currency, the yuan, around 1.9%. It was the first of three consecutive declines that occurred within 72 hours. An action that sparked panic at the possibility that the currency war Tomase force. We must not forget that enforced through monetary policies depreciations impoverish the neighbor, because if a country weakens its currency to boost exports hurts the competitiveness of other countries.

The second moment of panic came in June 2016 from UK. After learning that the British had voted to separate from the European Union, the pound fell to 1985 levels, one of the main effects of this decline, as the Chinese devaluation, exporting deflation.

And in this maelstrom, there is a junction that is living the quiet quarter in its history: the euro / dollar. In this regard, in the third quarter of this year, ending in September, the difference between the maximum and minimum crossing is 2.2%, the lowest since the euro was introduced to world financial markets on January 1 1999.

So, the lowest level since July stood at $ 1.0977, compared to 1.1224 which represent the highest level. A balance almost derisory compared to other registered crosses, as 15% difference that occurred between both ends in the first three months of last year, when the start of debt purchases by the European Central Bank (ECB) and the expectation of a rate hike in the United States led to the common currency to the brink of parity, 1.0496 dollars, the lowest level since 2003 and that contrasted with the $ 1.21 recorded at the beginning of the year (see chart).

Now, what corresponds this apparent calm? According to experts, one reason is the uncertainty about the performance of the major central banks of the world and, on the other hand, the pair could be approaching a fair price.

Analysts give some clues about it: the two great monetary regulators -Booking Federal and European Central Bank how could it be otherwise, are key at this time. They are the major players in this market, as the direction of its monetary policy marked the movement of major currencies parquet in recent years.

Javier Santacruz, professor at the IEB, explains that “within monetary stability being viewed can influence many factors, and one of them is the uncertainty about monetary policy. ” Investors may be waiting to meet new measures of the European Central Bank -in its last meeting, Mario Draghi, president of the institution, reiterated its intention and willingness to expand their stimulus, if necessary, after learning of the decision to UK leave the European Union, plus they may be waiting for more information about when will be the time when the Federal Reserve would raise interest rates in the United States, a decision that is not yet clear -the odds of Bloomberg point to March 2017 -.

Enrique Diaz-Alvarez, director of risk Ebury also suggests that “is due mainly to the absence of dramatic news concerning politics monetary ECB or the Fed. the changes in monetary policy have been the main factors in currency markets in recent years. “

the ‘fair price’?

Besides central banks, another possibility is that the crossing is approaching its fair price. Santacruz explains that “either a matter of uncertainty, or that the cross has come or is approaching a fair price. A few years ago, when the euro zone grew 2%, the fair value of the crossing was in around 1.25 / 1.30 dollars. However, with the strongest economic growth in the US and the weakening of Europe, it may have been reduced to approach the current environment “.

in addition to the above the political component also may be having a role in the behavior of crossing the ECB calmed the markets a few days after learning of the decision of the British, by publishing its forecast that the Brexit only half a point would eat into growth European GDP for the next 3 years. In addition, the moment the polls in the United States still portray Hillary Clinton as the winner in the upcoming presidential elections in November, which may have contributed to increasing stability in the market, as the figure of Donald Trump generates fear.

Best European bag

in this context, although the euro / dollar cross is experiencing a period of tranquility, not the case in equities, where the United States does not cease to celebrate highs while the European stock market countercurrent struggle to try to reduce the accumulated losses throughout the year. Although Wall Street seems a priori become erect as the best option, experts have no doubt: in equities, the Old Continent is better choice for several reasons.

The first is the most obvious: the bags American country are currently at record highs, leaving them a potential means less than their European counterparts, most of which are negative in the year (although the Dax is an insignificant 0.03% change sign).

Interestingly, if you look at the major indices (those that bring together hundreds of listed), United States beats Europe in potential: experts believe that the S & P 500 faces a journey of 8.3 %, while the Stoxx 600 give 5.6%. The picture is quite different if we look small selective. The European EuroStoxx 50 sweeps the Dow Jones, with a route upward of 9% versus 5% calculating experts to its North American rival.

But where support given by analysts to Old clearly shows continent is on its recommendations. 40% of the advice issued on the EuroStoxx 50 companies are buying, a percentage that drops to 23% for the Dow Jones. Axa French insurance company, the Dutch aircraft Airbus (listed in Spain) group and also gala Engie are the values ​​that like most analysts within the European benchmark. In its US rival, they are left with United Health Group, Apple and Visa. On the other hand, both selective only have a sell recommendation (Deutsche Bank in Europe and Caterpillar in the United States).

The PER (number of times the benefit is included in the price) supports the view analysts about the attractiveness of the European market against its American rival. If the EuroStoxx 50 trades at a ratio of 14.2 times, the Dow does 23% more expensive, at 17.5 times.

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