Zhang Tingbin: Euro Will Enter The Depreciation Channel

Last week, two things have basically confirmed the euro's entry into the P. < /p >
P, April 3rd, the European central bank governor Delagi suggested that the European Central Bank has discussed the possibility of negative deposit interest rates and the implementation of QE in order to effectively combat the risk of low inflation for a long time. Two, in April 4th, the United States announced that the non-agricultural employment growth in March was 192 thousand, although slightly lower than expected. However, in view of the revised 1~2 figures for the month of 37 thousand, and the growth of non-agricultural employment in March all came from the private sector, it proved that the recovery of the US economy was quite solid. < /p >
< p > in fact, since 2013, the euro's strong rise in the US dollar has lacked real support. Since then, the United States has basically passed the system restoration stage after the financial crisis and began to enter the new era of competitiveness Reengineering: the re industrialization has been substantially promoted; the US stocks have been innovating repeatedly, and the cash flow level of the US listed companies has reached the highest level in more than 30 years, which has promoted a new round of technological innovation in enterprises, such as new energy, cloud computing, robot industry, etc. the US energy independence movement has also achieved notable results, the trade deficit has decreased significantly, the US fiscal deficit has also decreased significantly, the real estate and consumption level of the United States has begun to recover, and the unemployment rate has dropped from 10% at the highest level to 6.7%. < /p >
Compared with the strong recovery of the US economy, the European economy has shown signs of recovery, but the unemployment rate has remained at a high level, especially in the P. After Delagi's handling of the European Central Bank, monetary policy has become increasingly loose, but the euro has maintained a strong appreciation against the US dollar. The reason is not sufficient. One of the more reasonable explanations is that after the worst period of the European debt crisis, the flow of funds out of Europe, which was originally panic, returned to normal distribution from the original super low allocation, which supported the rise of the euro. < /p >
< p > but this factor has changed in 2014. This is because the recovery of the US economy is more solid, and the Fed has started to firmly withdraw from the QE, and has released the earlier start of raising interest rates. < /p >
Less than P, more importantly, the fundamental economic contradictions within the euro area have not been really resolved. The core issue of < a href= "http://www.91se91.com/news/index_c.asp > Euro > /a > area is unbalanced development. Despite the integration of the euro, the freedom of the residents in the region has reduced the cost of each country, but the competitive countries like Germany and Holland have benefited more, and the interests of the weaker countries like Greece, Portugal, Spain and Italy will be relatively damaged. This has created an increasingly widening gap in the euro area, which has caused the "European pig countries" to live beyond their means and thus become a sovereign debt crisis. < /p >
Less than P, the rescue of previous rounds of European debt crisis is only the rescue of the credit of governments in the euro area, and this fundamental problem has not been solved. Moreover, with the weakening of financial expenditure and social welfare, the "European pig country" has no strength to further enhance the competitiveness of technology and industry, and the consumption of residents has weakened instead. This will inevitably lead to deflation pressure in the euro area. The CPI value of the euro zone in March increased by 0.5%, down from 0.6%, the lowest level since November 2009, which proves this logic. < /p >
< p > from the comparison of several major economic zones, the United States and Japan have adopted the super quantitative easing "a href=" http://www.91se91.com/news/index_c.asp "monetary policy" < /a >, have adopted the actual negative interest rate policy, in order to support the industrial competitiveness reengineering, push the stock market in the region to stimulate consumption. The depreciation of the yen and the undervaluation of the US dollar are also good for Japanese and American enterprises to gain more shares in the international market. At the same time, China's economic growth has entered a slowdown period, which is also unfavorable to the European economy. < /p >
< p > this is determined by the European "a href=" http://www.91se91.com/news/index_c.asp "financial structure < /a >, and the 3/4 financing of American enterprises is different from the direct financing market. The financing of European enterprises 3/4 comes from bank loans. At the same time, the European Union law prohibits the European Central Bank from acting on the financing of the Ministry of Finance (directly buying sovereign debt). Therefore, the QE of the European Central Bank is more likely to buy more corporate loans or asset securities through commercial banks, so as to reduce the cost of capital and promote economic recovery. At the same time, it will lend commercial banks zero or even negative interest rate loans to support commercial banks to buy sovereign debt of "European pig country". < /p >
< p > this is actually transferring the government's sovereign debt risk to commercial banks, and the financial safety of commercial banks becomes very important. Therefore, the EU reached an agreement at the end of last year, and the European Banking alliance mechanism will start operation in early 2016, directly involving 300 major commercial banks in the euro area member states. The EU will use bank funds to set up a bank rescue fund and scale up to 55 billion euros in the next 10 years. < /p >
"P", but this obviously can not solve the EU's internal imbalance, but makes the European commercial bank a more vulnerable target. This is likely to foreshadow the future banking crisis in Europe. < /p >
In a word, the cycle of a strong euro has ended and the US dollar index is about to enter a new cycle of P. < /p >