Thursday, January 23, 2014

an EKG in Deflation

The chart below contrasts the performance of two currencies (the yen, circa 02-03' & the euro - circa 12-14') - subsequent to the initiation of extraordinary monetary policies. Broadly speaking, although the policy measures were unique for each period, they were both implemented to stem the greater deflationary forces working against their respective economies. 

We continue to expect that similar to the yen in 2003, the euro will breakout of the consolidating range it has been in since the fall.