279 days ago • Posted by Charles-Henry Monchau
Mizuho remains bullish euro (Target 1.30) and Euro equities
Mizuho were very early on the bullish long Euro call. Here's why:
"The euro’s ascendancy, as a credible currency and safe haven, is now a given. We reiterate our 1.30 EURUSD 1y-ahead target and the asymmetry of € fixed income longs vs. USD assets.
Is it all in the price now? No. This is structural, and the FX regime change will play out over the coming quarters. It will likely be the deflationary impetus that prevents the ECB from even edging towards tighter policy, but will keep peripheral yields at sustainable levels. IG credit spreads will return to the tights.
European risk assets, and corporates more broadly, will benefit from inward investment, a more stable geopolitical outlook, and we expect to see the euro attracting significant safe-haven flows in the coming quarters. We look at the upside potential of European equities.
Inflows into Europe, more M&A, and generally a more vibrant economic bloc, will be positive for European banks. With the valuation of European Banks at the lows vs. US Consumer Discretionary, we add a long of the European Bank ETF vs. the S&P Consumer Discretionary ETF.