19 Feb 2015
Capital flows in the euro bloc weighing on EUR – Westpac
FXStreet (Edinburgh) - Strategist Richard Franulovich at Westpac assessed the release of the last balance of payments in the euro area.
Key Quotes
“Today’s Eurozone balance of payments data for December shows that capital flows remain a serious drag on EUR”.
“The region saw a hefty EUR42bn in net portfolio equity outflows and a net EUR34bn in portfolio debt outflows in December alone. The overall basic balance – the sum of the region’s current account, net direct investment and net portfolio debt and equity flows – hit EUR-49.5bn in December, the fourth consecutive basic balance deficit”.
“Net long term portfolio debt flows are the main swing factor, though, and the long term trend here typically tracks long term bond spreads, much as one would expect”.
“The 10yr bund-treasury spreads hit -170bp this week, its most EUR negative levels since mid-1989, suggesting that in the first couple months of 2015 these flows remain very hostile for the euro. Recent stability in EUR appears to be nothing more than a temporary pause”.
Key Quotes
“Today’s Eurozone balance of payments data for December shows that capital flows remain a serious drag on EUR”.
“The region saw a hefty EUR42bn in net portfolio equity outflows and a net EUR34bn in portfolio debt outflows in December alone. The overall basic balance – the sum of the region’s current account, net direct investment and net portfolio debt and equity flows – hit EUR-49.5bn in December, the fourth consecutive basic balance deficit”.
“Net long term portfolio debt flows are the main swing factor, though, and the long term trend here typically tracks long term bond spreads, much as one would expect”.
“The 10yr bund-treasury spreads hit -170bp this week, its most EUR negative levels since mid-1989, suggesting that in the first couple months of 2015 these flows remain very hostile for the euro. Recent stability in EUR appears to be nothing more than a temporary pause”.