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19 Feb 2014
Flash: Balance of payments hints EUR to stay strong - RBS
FXStreet (Bali) - According to Greg Gibbs, FX Strategist at RBS, the strong balance of payments in the EUR should keep the currency very well supported.
Key Quotes
"The EUR continues to trade strongly as a vehicle to express a weaker USD and risk haven from emerging currencies that appear to have had a set-back with evidence that China is tightening policy to control credit growth."
"The external balance data for the Eurozone remains very strong. Reported on Tuesday, the current account balance eased only a little from its record in Nov of EUR23.3bn to EUR21.3bn in Dec, posting a new record three month moving average."
"The balance of payments data also reveal strong portfolio flows. The un-seasonally adjusted report showed net bond inflows of 12.6bn in Dec and 26.8bn in the year to Dec, equity inflows of 26.1bn in Dec and 110.6 bn in the year to Dec. Direct investment flows also were inward in Dec of 4.1bn, although -11.8bn in the year to Dec."
"The outflows balancing the current account surplus have been dominated by short term other debt instruments -101.3bn in Dec, -322.7bn in the year to Dec. This often is indicative of a market that is underlyingly short EUR, funding investments with borrowing. As such, EUR may well remain very strong even if the economy underperforms and the ECB attempts to incrementally ease policy."
Key Quotes
"The EUR continues to trade strongly as a vehicle to express a weaker USD and risk haven from emerging currencies that appear to have had a set-back with evidence that China is tightening policy to control credit growth."
"The external balance data for the Eurozone remains very strong. Reported on Tuesday, the current account balance eased only a little from its record in Nov of EUR23.3bn to EUR21.3bn in Dec, posting a new record three month moving average."
"The balance of payments data also reveal strong portfolio flows. The un-seasonally adjusted report showed net bond inflows of 12.6bn in Dec and 26.8bn in the year to Dec, equity inflows of 26.1bn in Dec and 110.6 bn in the year to Dec. Direct investment flows also were inward in Dec of 4.1bn, although -11.8bn in the year to Dec."
"The outflows balancing the current account surplus have been dominated by short term other debt instruments -101.3bn in Dec, -322.7bn in the year to Dec. This often is indicative of a market that is underlyingly short EUR, funding investments with borrowing. As such, EUR may well remain very strong even if the economy underperforms and the ECB attempts to incrementally ease policy."