This week in charts
Homeowner equity
Home equity withdrawals
Leveraged loans
High yield default rates
Price to free cash flow outperformance
Entry price dictates return
Probability of negative returns – equities and oil
Active vs. passive
S&P 500 Index ownership, by institution type
Large-cap performance – growth vs. value
Trading portfolio of large banks
The double-edged sword of a strong euro
Europe is getting a little taste of a high-class problem: the downsides that come with operating a world-beating reserve currency.
For now, the continent is not quite in this luxury spot. The euro accounts for a far smaller slice of the stashes of cash maintained by central banks and similar entities around the world than the dollar, and its prevalence in global trade is puny in comparison.
The euro has been one of the biggest beneficiaries of Donald Trump’s drive-by on the dollar this year. All major currencies have appreciated against the buck, but the euro more than most, up by over 13 per cent in 2025 so far.
In part this is because of the European renaissance trade, encompassing both European Central Bank president Christine Lagarde’s “global euro moment” and the possibility of a long-awaited economic growth revival stemming from Germany’s decision to stop worrying and ramp up fiscal spending.
It has another curious cause, though. Stocks investors around the world are unusually keen to shield themselves from further weakness in the dollar — a risk they had quite reasonably previously ignored. For fund managers based in small economies, this can be expensive and awkward in their fiddly home currency. A shortcut is just to buy euros, and analysts say that is precisely what they are doing, regardless of where those investors are based.
This is all well and good for those fund managers in stocks, but in financial markets, we cannot have nice things. Someone has to feel the pain. In this case, it is corporate Europe, exporters in particular, who are stung by the euro’s ascent against the dollar and renminbi, which makes European exports appear more expensive overseas.
Researchers at Barclays point out that strength in the euro is one of the main reasons why analysts have been slashing earnings expectations for listed European companies this year. Outlooks for growth in earnings per share have dropped from 9 per cent all the way down to 2 per cent, and exporting companies lag far behind their domestic-focused peers in their share-price performance so far this year.
Officials at the ECB are also getting a little twitchy. An overly strong euro depresses import prices while also hampering exports, dragging down inflation. This puts rate-setters in a bind. They don’t want to aim for specific exchange rates, which puts a target on their back and in any case is a mug’s game given the volatility of currency markets. But they do often want to gently massage the currency lower with a series of winks and nods. This is an awkward path, as the central bank found in the years following the great financial crisis of 2008, when the euro bobbed around between $1.30 and $1.60.
Right now, conditions in the currencies markets are orderly, the dollar is drifting lower rather than crashing, and the euro’s exchange rate is annoying rather than outright alarming. Cracking the next big round number — $1.20 — will almost certainly turn up the temperature. It feels like a question of when rather than if.
This week’s fun find
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Looking for ways to embrace the heat of summer? We found it. From passionfruit to mango, these two hot sauces bring a fun mix of bold flavours and serious heat.
Blazing passion (The Botanist Alchemy)
- Bright, fresh and the perfect accompaniment to BBQ chicken
Ghost Pepper Mango Flavour (Tun Up)
- Perfect consistency for a chicken wing
- Surprisingly well balanced for a sauce that's as hot as it is
An Inside Look at the Best Snack Trends at the Summer Fancy Food Show
The Specialty Food Association’s Summer Fancy Food Show is basically a grand-scale grocery run, only it’s buyers from the grocery stores themselves, not consumers, doing the shopping. Brokers scout items to stock shelves, and start-ups sample hot new products with hopes of striking a deal. The trade show attempts to anticipate what grocery shoppers will want to eat and drink; it can also reflect the changing tastes of American shoppers.
