Euro 2013-16


 I originally wrote this forecast 2 months ago, but wanted to back it up with a number of individual country forecasts before posting. It has taken rather longer than I hoped due to other commitments and then I was distracted by the Korean events as well.
But I’ve completed the comparison and it revealed nothing that my original analysis had not already suggested. The key time to watch for this currency are:
·         Around October and November of 2013 – this period chows up in a number of individual countries
·         The period March through June in 2014 – particularly April – this period is highlighted in all 6 countries I reviewed.
·         August September 2014 – there is less focus in the original countries in this case but it still stands out in its own right in the Euro chart as being a time to note.
With these confirmations I feel confident in posting my original forecast unchanged.
The trials of the Euro over the last couple of years need no introduction. However, it is the continued existence of the Euro, so far, despite the tidal wave of negative sentiment, to which we should pay the most attention as we look at its prognosis for the coming few years.
Having passed through a very tough patch – with the major configurations hanging over the key points in the currency’s chart in the last years we know see these impacts waning for a while. That is not to say that the Euro is in the clear- not at all- merely that the focus of any difficulties is shifting from external to internal factors.
 Over the last year and at present there has been a background moderating influence – which is probably best correlated with the Merkel/Dragi  effect - which has given a credibility to the Euro despite all the challenges that it has faced.
 
2013
 
The early part of 2013 shows some stability, indeed we have already seen some recovery in the value of the currency during January and I would expect that to continue for the next few weeks despite the fact that there are still some underlying fears for the future.
However there are still some challenges- which may become apparent in the next month (I was writing in Feb) or so.
But I don’t see much change in the overall picture throughout the first half of the year. There is a much better feeling about the value of the currency and stability in that value but it is accompanied by some very difficult aspects to the currency’s leadership – possibly political issues will cause internal discord between the members, even while financial issues are moderated. There are likely to be some particular shocks around May/June
 And by that time there starts to be more action in the value area too. Perhaps just a lot of trading at first, then some suppression in value.
All culminating in external events ( although not necessarily crisis) in July. Indeed the overall balance of the events look positive to me. Perhaps indicating a new accord at the political or banking/(bonds?) level. I don’t see this as the breakup of the currency but if it was it would be accomplished without too much disruption.
It could mean a subsequent change in leadership of the ECB- certainly there will be some unexpected announcements around August September and a shift in the feel of the constituent countries to the currency. This will begin to have an impact on exchange rates by the end of September.
I expect some drama around the currency scene in October. Whether this will be Euro led or Sterling or US led I’m not sure at this stage. Suffice to say it’s a disruptive and volatile time but probably not one to make longer term bets either way.
 Leave that till November when there is a clearer turning point. The theme of the year comes back into play by this point and although there is still some underlying stability to keep things together, there is also a change of heart on behalf of the Euro countries which will be significant going forward.
2014
 
 2014 starts as 2013 ended. And there is little change in mood in the first few months.
March April is another critical point, when the cumulative effect of global events will  shake up the Euro again. There might be some redenomination of the hard currency.  So that by May there really is a confrontational situation. Surprisingly though, this seems to be when the Euro countries actually pull together against external forces with a relatively positive effect.
June is moderately quiet.  But July is another month of adjustment. I’m not expecting massive volatility though- the themes seem to suggest currency wars but without too much trend.
If there is a time for a Euro break up, though, this would be it.
 The impact into the next quarter is rather all over the place. A lot of small scale change and disruption seems to ensue. But little value related activity. This is not a time when much progress will be made due to all the petty issues and announcements/ perhaps a lot of treaty discussions or similar.
It means the year ends on a note of tricky adjustment and with a lot of restrictions  but seemingly with value intact.
 2015
The global picture is changing as 2015 begins. It is neither particularly positive or negative for the Euro – just different.
March sees the last of the impact of the major global configuration on the Euro. And it is transactional rather than value based. There have been a lot of changes but the themes suggest that there is no big collapse in value – what has changed is merely the way of operating.
As a result there is quite a lot of trading activity in May and June.
Over the summer there is a mix of themes; value settles down but there are challenges to trading. These challenges result in a huge amount of volatility around October . There will almost certainly be big changes in the value of the Euro to the dollar then, although they might be short lived.
There are some parallels at this time to the period around September 2008- but the likely effect is unlikely to be much more a lack of direction rather than the establishment of a trend. What we are seeing now is a reactivation of some of those earlier themes for another year or two.
 2016
As a result, early 2016 is very important. This is the peak of the ‘currency war’ aspects.
There is significant and volatile trading throughout the first quarter of the year and to a lesser extent throughout the whole of 2016.
There are stabilising influences on the leadership though. And there might be a tendency to wait and see how things play out.
Little changes in the second quarter, although the themes are not magnified by events so much them. Indeed in June it looks as if the focus is elsewhere altogether.
In August /sept there is more focus on debts again, and a period of volatility follows, as well as a period of sudden acts and statements by constituent countries.
The volatility continues into October . But the Eurozone is being relatively positively viewed at this time. Debt might even be eroded by inflation, understated or otherwise dissolved at this time.
 The themes of the year re-occur in December, and the currency’s future might be under questions again.  Nevertheless, value is preserved throughout these challenges until another key turning point is reached at the year end. 

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