Ecb vs Bundesbank Riddle, How to Kill Recovery

Euro shooting up and rates on peripherals on an upward slope after Bundesbank reiterated its opposition to loose forward guidance by ECB. As a result European central bank is now perceived by speculators as the most hawkish among the big four. Euro is now by far best performing currency among majors since beginning of the year. Any possible recovery, apart from Germany, would instead pass through a substantial correction in currency overvaluation. Germany is achieving better rates of growth at the expense of weaker economies: on an aggregate basis, a strong currency works against euro rebalancing, crippling, in our opinion, any chance of sustainable recovery for second part of the year.

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