We have been explaining for some time how the Euro will accelerate sharply and significantly higher this year, all the way through that silly consensus about Europe being in trouble and Euro dis-integration. As entertaining fiction as that was, we have been making good money being long Euro, and expect a lot more.

The Euro is way over sold on a fundamental basis. It probably belongs at 1.6500, but we are only forecasting 1.5200 for this year. There is even 3-4 year outlook risk of a fundamental overshoot phase to as high as 1.8500. Yes, alongside strong US growth, always forecast here, we will see the continuing decline of the US dollar. This is one of the major reasons the US economy will be strong, a declining US dollar combined with even stronger Asian and Latin American growth, read demand for US product.

Over in Europe however the export demand will be even greater,
and having been sold down falsely on contagion disintegration nonsense, the Euro has to rally a long way just to get back to where it should be, let alone reflect a strong growth period through the rest of the year. You see the slow down in Europe has already finished, in Q1, but we will not see this in the data for another month or two. The US is strong, their currency weak, Europe’s economy has been weak, but the Euro is set to sky rocket.

Keep buying the Australian dollar of course. The coming rate cut is already priced in, while export demand will increase yet again. The Australian dollar has completed the correction, and it is time to go to 1.08 reasonably quickly.

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