Euro struggling under its own weight?
Written by A Forex View From Afar on Friday, January 18, 2008Back to www.thelfb.com
Since the beginning of 2008, the Euro-Zone started to fail at beating, or at least reaching, analyst expectations for News releases.
Out of 31 releases, 12 came worse then expected, 12 came as expected while only 7 beat market expectations.
What is important to distinguish is that most of the releases that came worse than expected were related to future expectations by consumers, managers or financial analysts. Out of 7 releases, 5 came negative and 2 as expected.
Most pooled persons, change their view on future growth since the summer of 2007, around the appearing of sub-prime.
This can have a long-term impact, Central Banks put a lot of weight to the public's expectations regarding future development and growth. With lower consumer expectations, they will spend less (retail sales were reported lower in Europe) and tends to cool down inflation. No more rate increase speeches, no more Mr. (Hawk) Trichet sending the Euro as far as he can
Most traders see this lack of confidence in consumers as a result of the Euro strength; we see it as media intoxication.
Markets are now in a frenzied state, it is unclear whether the US is going into a recession, markets don't have a clear direction and it is very possible this then affect consumers through diverse media channels. Since Globalization is at our front door, it is nothing new that people in remote part of the world talk about US recession. Hearing only negative things from the world leader can have a great influence in future expectations.
It's a matter of time until we see the result of these new future expectations; whether US will drag the world down, or will they escape and run wild.
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