Focus of the day:
"EUR: Coming to America.
The US could be a willing recipient of the wave of portfolio flows we anticipate out of Europe.
The US current account deficit is still primarily financed via portfolio flows from reserve managers.
– Private investors at the net portfolio level are still leaving the US.
– But from a gross perspective, we are starting to see a shift, with private investors buying US fixed income instruments.
Is the EUR becoming a safe haven? Not yet.
The euro area net international investment position is still in a deficit.
– Traditional ‘safe haven’ currencies such as JPY and CHF have large surpluses.
– Gross assets/liabilities in Europe are much smaller than in surplus countries.
The NIIP is however slowly improving, driven for now by ‘other investments’
The shift we anticipate in portfolio flows would further support the NIIP.
– But the stock deficit is still very large, several year of BOP surpluses will be needed.
EUR/USD Forecasts: 1.05 in 3-months, and 0.98 in 12-months."
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