Pimco: Euro Will Remain Strong As ECB Is Set To Lose The Currency Race To The Bottom
Quote of the day:
"When it comes to the currency race to the bottom, I think that this is actually a race the ECB is going to lose. They will react to the currency appreciation as the last press conference signaled but I don't see we are going to have any material act as a rate cut until the euro is at a substantially higher level. There is one major difference between the euro and the other major currencies of the world - the dollar, sterling, and yen: the eurozone is depreciating internally via wages; everybody else is trying to depreciate externally via their exchange rate. So, the eurozone can survive with a strong currency vis-à-vis other currencies because the internal devaluation is taking place mainly via wages in Southern Europe. So, the ECB won't likely engage in this race unless the euro gets substantially strong. When they do, they could deliver a rate cut which I think they ultimately will if the economic growth slows down. And that slowdown in growth mightn't necessarily come from a strong currency but probably will come from the balance sheet deleveraging that is taking place across the eurozone."
Andrew Bosomworth, managing director at Pimco (Source: Bloomberg TV)