The case for being bullish on the Euro is flourishing

With the economic global outlook, it's hard to be bullish on the EUR. However, the fact is that inflationary pressures must be alleviated via stronger supply lines and in general, more expenditures from national governments as well as the private sector in the Euro-zone.

A hesitant take on aiding Ukraine has left our hopes for expansion by military spending falling off a cliff. Germany's domestic frictions have prevented the promised boost to the Ukraine effort against Russia and may have delayed hopes for forcing a negotiation by establishing a strongly armed force. Nevertheless, Russia's war has been a greater slap to decades of integration with China, now perceived as a country that cannot be fully counted on going forward.

The ambitions of a more unified European continent clash with those of an aggressive, and violent, Russia. Losing trusted energy partners has led to stubborn inflation as energy prices, more than the ECB's tightening monetary policy, have led to blurry outlooks that have crippled investment. We believe the situation has bottomed a bit though, and the challenges are clear for the euro-zone, who must deviate from their interdependence with Chinese manufacturing as well as services.

In accordance with the U.S., technology is seen as a key component of a foreign policy that must deny China access to Europeans' data. A new push to "nearshore" and foster relationships with more like-minded nations may be a way. Ultimately though, in the unclear short term, Euro prospects for appreciation are likely to improve as the China push for stimulus and "goodwill" influence the global-growth narrative that we believe will prevail in knocking the buck off of its high horse. As a reminder, a year ago, the euro fell to its weakest point since its inception. It has recovered by 14.0% ever since, and that is with contractionary conditions.?

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