According to Citigroup (NYSE:C) strategist Steven Englander the euro could surge above $1.35 as the possibility of a Greece bailout bringing more stability to Europe could drive up the beleaguered currency.
Englander thinks investors may have over-responded to the euro and the crisis. He said in a note to clients: “As confidence gathers that the terms are being respected, we could drift north of $1.35. But it will be difficult to move north of $1.40, unless there is some perception of success on the euro-front and renewed dollar- specific concern.”
I have two immediate problems with what Englander suggests. First, many consider it doubtful Greece has the will or ability to implement the austerity measures required by the countries bailing them out. Second and more important, this is no longer a Greece bailout issue, but a multi-country bailout circumstance which can’t be contained.
Even Englander states a couple of things that show where this will probably lead to, which is to not really dealing with the depths of the problem in Greece at all. He says the austerity measures aren’t that stringent and Greece’s response doesn’t need to be “perfect” for the euro to regain some strength.
In other words, this sounds like bailout-light, where it’s just enough to satisfy those countries bailing them out without pushing Greece too hard.
But even in these circumstances citizens of Greece have called the austerity measures “savage,” to give an idea of how differently things are viewed from different sides of the issue.
I can’t see how Citigroup can view the euro positively in these circumstances, or how it can be considered an over-response to the euro in a situation that will only get worse.
