The divergence between the European Central Bank (ECB) and the U.S. Federal Reserve (which may raise short-term interest rates at some point in 2015) makes it very difficult to argue for a stronger euro versus the U.S. dollar.
Recently, Professor Jeremy Siegel and I sat down with Brown Brothers Harriman currency strategist Marc Chandler. Given the European Central Bank’s (ECB) recent activities, most of the discussion centered around the euro.
In an article published January 31, 2013, Bernard Arnault, the chief executive of LVMH, was quoted as saying, “The cloud on the horizon … is the evolution of currencies, [and a strong euro] would have an impact on French exporters and for our group …”
Europe has been one of the most exciting equity markets in 2015. With the S&P 500 Index up 2.30% through February 17, 2015, euro-area stocks in local currency are up 10.32%. It’s important to note that these same stocks in U.S. dollar terms are only up 3.92%, due to the significant depreciation of the euro that we’ve witnessed.
One of the most exciting developments thus far in 2015 has been Mario Draghi’s announcement of an open-ended quantitative easing program at the European Central Bank (ECB) to stimulate economic growth and stem deflationary risk to the eurozone.