To Whom It May Concern

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The euro is now currently (11.38 CET) at $1.2045.

Update: Ah, now I’ve found the reason for todays move:

The euro fell to a nine-month low against the dollar after European Central Bank Chief Economist Otmar Issing spurred speculation the bank may reduce interest rates for the first time since 2003.

Asked in an interview with Germany’s Der Spiegel magazine whether investors’ expectations of a rate cut in coming months are justified, Issing said: “In the past, financial markets almost always anticipated ECB policy decisions correctly.”

“He is preparing investors for a rate cut and the market is responding to that by selling euros and buying dollars,” said Neil Jones, a director of foreign-exchange sales at BNP Paribas SA in London.

I hasten to add that I consider Otmar Issing to be perfectly authorised to steer the euro down in this way. This is a much more considered move than Jean-Claude Junker’s recent outburst. Basically I agree with it, I am just waiting to see whether Greenspan will in fact be able to continue raising US rates. If he does it once, I can’t see him continuing for long.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

2 thoughts on “To Whom It May Concern”

  1. I doubt Greenspan raising US interest rates, at this point in time. The effective exchange euro/$ rate has dropped from about 1,05 : 1 to almost parity now, in one month! Another US hike could force that to 0,95 : 1. Such rapid changes in the effective exchange rate would only damage US exports.

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