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“Global standard” gauge of currency misalignment has GBP 22% undervalued against the USD

  
Analysis, Forex
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Here’s a bit of (useful) fun, The Economist’s “Big Mac index” to gauge whether currencies are at their “correct” level against the US dollar.

Its based on the currency valuation model of purchasing-power parity (PPP), i.e. that “in the long run exchange rates should move towards the rate that would equalise the prices of an identical basket of goods and services (in this case, a burger) in any two countries”.Says the magazine (link here, may be gated(

  • Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of dozens of academic studies. 

Some of the results (more at that link)

The Economist's "Big Mac index" currencies US dollar

Ifo economist says that German economy faces a turbulent time ahead

  
  Analysis
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Comments by Ifo economist, Klaus Wohlrabe, following the data earlier

Germany
  • Sees a slightly positive growth rate in 2H 2019 for Germany
  • But notes that recession is spreading in all important sectors in German economy
  • Says risk of disorderly Brexit has increased
  • Doesn’t believe that the ECB will loosen policy today
The early signs for Q3 haven’t been encouraging for Germany with the manufacturing sector in freefall as the recession in that area deepens. As that continues, the risk of spillover to the services sector will intensify and that won’t bode well for the economic outlook.
As for his comment on the ECB, I’m also leaning more towards that as the governing council may likely see fit to only change its forward guidance as they will only release their latest staff projections in September. That said, they will be skating on very, very thin ice in the mean time in managing the euro and inflation expectations.

A Visual Timeline Of The Endless Greek Crisis Through The Economist's Covers

  
Analysis, Education
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It all started in April 30, 2010, days ahead of the first Greek bailout , when the Economist shocked the world with its first Greece-themed cover, the infamous Heart of Eurodarknessreprise, “Acropolis Now.”

Ever since then it has been a veritable cornucopia of content for the Economist’s cover designer. As the London-based publication itself says, “for a relatively small country it is a rare distinction (or misfortune) to make the cover of The Economist. Greece, however, has managed the feat no less than seven times over the past five years. It first made the grade in May 2010 as its sovereign-debt crisis spiralled out of control. Frequent trips back to the brink of disaster have been responsible for repeat cover performances, as has the occasional bail-out or election”

Here is a quick stroll through memory lane of how the Greek fiasco unwound over the past 5 years, as summarized by cover art:

June 25, 2011:

  (more…)

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