There’s a lot of good stuff in David Rosenberg’s latest Breakfast With Dave note including, including his take on one of the hottest questions around: the future of the euro.
Will last week’s bleeding has stopped a little, Rosenberg sees more pain to come, implying we could easily revisit levels seen at the worst of the crisis.
Euroland GDP slowed to a mere +0.1% in Q4 (not annualized) from +0.3% in Q3
and if not for France’s +0.6% out-turn, the region would likely have contracted.
Italy’s real GDP did shrink 0.2%; Greece by 0.8%; Spain was in negative terrain
too and Portugal was flat (as was Germany). To the east, we saw the Czech
Republic, Hungary and Romania all post GDP declines in Q4.
In other words, the Euro is in some big trouble here, notwithstanding the record
net short speculative position evident in the Commitment of Traders report. This
is one time when the consensus view is not going to prove to be a reason to be a
The U.S. dollar is at a seven-month high and after breaking some critical
technical levels, appears set to retain its status as a safe-haven currency. What
has really been impressive is how the Canadian dollar has held up in all these
cross-currents — it is actually only a couple of pennies above fair-value (92
cents) and that fair-value line keeps moving north, which is symbolic of a secular
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