Euro Currency Speculators Offer Trichet A “V” Shaped Salute

Politicians and economic bureaucrats should know better than to wave their hands about when describing the economic recovery. The letters ‘L’, ‘U’, ‘V’ and ‘W’ aren’t just less popular letters from the alphabet. They are commonly used descriptions of the pace and shape of an economic recovery. Investors like ‘V’ shaped recoveries - a relatively strong return to growth. Investors positively dislike the uncertainty created by ‘W’ shaped predictions as they indicate a false dawn of economic growth followed by a return to recession.

Jean-Claude Trichet should therefore keep his hands stapled to the desk next time he offers his wisdom on the economy. His latest speech regarding the prospects for Euro-zone economic recovery included the word “bumpy” together with wavy hand movements to which a legion of observing analysts commented “Did Trichet just draw a W”.

No big deal you may think. Unless of course you had interpreted recent Euro-zone data as pointing to a ‘V’ shaped bounce and have exposure to the 2nd most important global currency, the Euro, which fell on the uncertainty of Trichet’s less than precise hand gestures.

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