Since the ECB’s negative interest rate policy Sept 2014, M1 money supply grew from 5,947.0 Euros to Q3 2016 at 7005.0. End November M1 was 10,676.0. Core CPI as the mission and price mandate of the ECB and purpose for Silvio Gesell’s negative interest rates remained stagnant at 0.8. The negative interest rate objective was raise prices, CPI. GDP annualized hovered from 1.6 to 2.2. EUR/USD lost 2500 pips from 1.3157 to current 1.0635. Draghi’s “Forward Guidance” informs by buying bonds or extending durations means the hostage crisis not only continues to negatively effect Eurozone populations but economic improvements will remain stagnant in the future.
As the BOJ in the 1990’s failed to extricate themselves from deflation by raising and lowering interest rates, targeting GDP and Current Accounts and playing with sales taxes, today’s central bankers are floundering in missions to raise prices, interest rates, wages and GDP. The BOJ is understandable as they married the failures of Keynes and adopted Keynesian economics as an ideology, evidenced by economic failure after economic failure since 1868.
In the new lost decade from 2008, its scary to witness major central banks to adopt prior Japanese economic policies under assumptions the policies will work. Economics is not the driver or purpose otherwise the world would be residing under economic booms. Lower Exchange rate levels must be the driver but to what end is questionable. Draghi’s bond buying mission informs automatically a lower EUR over time is the overall desire. The Japanese constantly laser beam focus on the exchange rate rather than focus on the economics and allow the market to meld the proper exchange rate levels. Its the backwardness of Keynes.
The last hope for the lost decade is the tag team from Trump and Theresa May. Both have ability, desire and understanding what it takes to alleviate the controlled Keynesian hostage crisis and bring prosperity back to the populations. The first missions must be eliminate the Keynesians on the respective boards and replace with supply siders and move this world forward again.
EUR/USD. Range and vital break points: 1.0820 and 1.0621. The must breaks for higher EUR is 1.0720 and 1.0754. Point 1.0754 drops daily and dramatically as the EUR trades currently inside its neutral zone. As the EUR drops, 1.0754 and 1.0720 follows. The bottoms on a larger scale are found at 1.0318, 1.0423, 1.0470 and 1.0512.
Today’s bottoms are found at 1.0628 with next breaks at 1.0584, 1.0551 and 1.0512.
No dramatic moves are expectd today because EUR is vastly intertwined with USD to inform range trading continues.
Brian Twomey, Inside the Currency Market, btwomey.com