Just seven months after ending QE, the ECB recently hinted a rate cut. Germany, Europe’s largest economy, has been contracting and for the first time ever sold 30-year bonds at a negative interest rate. Negative interest rates is where the lender gets paid back less than they’ve loaned. Yet investors bought those bonds that won’t pay any coupon interest because they feel global growth and inflation will continue to deteriorate and that yields will go even lower.
Than you have Denmark and Switzerland. Banks in Denmark and Switzerland are now charging customers to hold deposits…that’s what negative interest means. Get get this in Denmark, mortgages with negative rates are available, so if you take out a mortgage, the bank pays you each month. This sounds great, but this isn’t a good situation. And I haven’t even talked about Brexit yet.
Thus, the Euro is in really deep trouble and continues to be negative overall. At this point, it is going to go down to the large, round, psychologically level of 1.10.
But if investors around the world favor the prettiest, ugly dude in the room, the US dollar, the Euro is going even lower.
But it even could go lower after filling the gap fill and possible make its way to the weekly demand at 1.05500.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.