Kudos to George Saravelos at Deutsche Bank for calling out Europe’s euroglut problem more than a year ago — because, as Saravelos was keen to point out on Tuesday, what was once a thesis is now a reality.
As he notes:
The Eurozone has experienced a historically unprecedented shift in portfolio flows, with net fixed income outflows running at a staggering 500bn EUR over the last twelve months, the largest on record. These flows are mostly directed towards US bond markets and have exceeded the Eurozone’s current account surplus. They have pushed the basic balance into deficit over the past year contributing to EUR/USD weakness.