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The Future of the Euro

  • ,  Chief Executive |
  • 06 Sep 2018
  • Updated 15 Oct 2018

European Dynamics and Foreign Exchange Considerations

Invesco’s paper, A Map for the Future of the Euro, walks the reader through the historical underpinnings of the intricacies of European geopolitics. From the amorphous dynamics of the critical relationship between Germany and France, to the differences between present day European populist movements, this work serves as the cornerstone for a series that delves deep into the European economic and political environment.    

Other papers below discuss the outlook for foreign exchange, FX hedging issues, currency risk management, and problematic carry trades.

Euro future and foreign exchange

A Map for the Future of the Euro - Navigating Political Conflicts
This is the first in a series of five papers discussing Europe's past, present, and future, co-authored by Arnab Das of Invesco's Global Thought Leadership team and former Polish deputy PM and finance minister Jacek Rostowski.

The fate of the euro (Vanguard, Jul 2018)
Progression towards a fiscal and banking union is considered necessary in order to avoid breakup of the euro, but if these reforms are rushed, it could also lead to a negative outcome. 

CIO View Special: The Dollar Dialectic (DWS AM, Jun 2018) 
(For compliance reasons, this paper is only accessible in the United Kingdom)
Are foreign-exchange traders the most far-sighted players in the capital market? Can the almost $5 trillion traded in and out of the dollar on a daily basis be wrong?

Central Bank Foreign Currency Reserves Management: Opportunities to Expand Investment Horizons (Invesco)
(For compliance reasons, this paper is only accessible in certain geographies)
Central banks with large foreign currency holdings have increasingly faced negative or diminished returns on their traditional reserve assets, causing them to come under financial pressure.

Exchange Rate Predictability in Emerging Markets (Amundi AM, Jul 2018)
This paper by Amundi Asset Management uses financial and macroeconomic variables (such as commodity prices, equity prices, and the domestic risk premium) to predict currency returns, by using a two-step procedure.

The portfolio currency-hedging decision, by objective and block by block (Vanguard, 2018)
Vanguard presents the case for investors to make the currency hedging decision at the portfolio level, depending on the particular strategic asset allocation. 

Foreign Exchange Outlook for Q3 2018 (BBH)
This quarterly report by Brown Brothers Harriman examines the foreign exchange outlook for Q3. It focuses specifically on geopolitics, emerging markets and currency forecasts.

Getting a Grip on FX: Insights on currency hedging and risk (BlackRock, Sept 2017)
How can investors deal with currency risk? BlackRock describes methods of identifying risk, managing FX risk via specific medium to long term hedging strategies, and accepting short-run FX risk. 

Currency Hedging: An introduction (Meketa Investment Group, 2017)
Meketa Investment examines currency risk hedging via a discussion of methods for establishing hedges, currency overlay programs, and the costs of hedging for both developed and emerging market currency exposures.

Currency Hedging for Global Equity Portfolios: Historical Performance (Peregrine Securities, 2017)
Peregrine Securities discusses a particular dynamic currency hedging strategy that focuses on generating superior risk-adjusted returns within global equity portfolios.

When Carry Goes Bad: The Magnitude, Causes, and Duration of Currency Carry Unwinds (Financial Analysts Journal, 2017)
This 24-page paper looks back at the most significant recent instances of currency carry loss, including duration of drawdowns, causes, attribution, and timing.