I advise my clients to sell the CNH as well. My answer to your question about the other trades, given the tariffs and China, is to sell European equities/ buy US equities, and buy EMU rate receives in the front end as the ECB will need to cut rates aggressively.
The market is missing the link between Germany and China. Germany made a bet on growing by exporting to China. Germany's growth from exporting to China became the growth driver for the rest of Europe. The recession in Germany in the last few years reflects the failure of that model as China imports slowed and China started exporting to Germany/Europe what Germany used to sell to them, e.g., EVs. Trump tariffs will keep Germany in a recession even with their increased spending on defense. Tariffs will slow China's growth on top of the slowdown driven by the collapse of their property market. This will push China to export even more to Europe and import even less from Germany. In addition, US tariffs will slow Germany/Europe growth, forcing them to produce more cars in the US.
Hi Alan, I agree. EU politicians really want to tell Trump to stuff it, but they simply can't. They will need to put up a wall to the tsunami of inventory liquidation coming from China or EU industry will get wiped out. As in bye bye German auto industry.
I'm short EWG on a relative basis as well. Also, the EURUSD rally will have to snap back like a rubber band at some point. Either US/EU makes a deal or Europe gets hit with a wave of deflation that renders a strong Euro untenable.
I advise my clients to sell the CNH as well. My answer to your question about the other trades, given the tariffs and China, is to sell European equities/ buy US equities, and buy EMU rate receives in the front end as the ECB will need to cut rates aggressively.
The market is missing the link between Germany and China. Germany made a bet on growing by exporting to China. Germany's growth from exporting to China became the growth driver for the rest of Europe. The recession in Germany in the last few years reflects the failure of that model as China imports slowed and China started exporting to Germany/Europe what Germany used to sell to them, e.g., EVs. Trump tariffs will keep Germany in a recession even with their increased spending on defense. Tariffs will slow China's growth on top of the slowdown driven by the collapse of their property market. This will push China to export even more to Europe and import even less from Germany. In addition, US tariffs will slow Germany/Europe growth, forcing them to produce more cars in the US.
Hi Alan, I agree. EU politicians really want to tell Trump to stuff it, but they simply can't. They will need to put up a wall to the tsunami of inventory liquidation coming from China or EU industry will get wiped out. As in bye bye German auto industry.
I'm short EWG on a relative basis as well. Also, the EURUSD rally will have to snap back like a rubber band at some point. Either US/EU makes a deal or Europe gets hit with a wave of deflation that renders a strong Euro untenable.