Euro trades higher in a new range: Nick Parson

Nick Parson of National Australia Bank, says that no news is indeed good news for European markets. He says in the news free markets he is seeing the euro currency and the European stock markets moving up.

Also read: Goldman Sachs expects RBI to cut rates by 25 bps Below is the edited transcript of his interview to CNBC-TV18. Q: We are not seeing much news coming out of Europe so what is Europe trading on, fiscal cliff issues?
A: The best thing we can say about Europe is that no news is indeed good news. We mainly need the absence of any news at all and as long as – and its very interesting that in quiet markets, in news-free markets we are seeing the euro currency and European stock market moving up. That is a trend which has still got further to run. Q: Could this be the lull before the storm because every time we have paused and had a temporary reprieve in Europe and heaved a sigh of relief thinking that the bad news is maybe out of the system we are hit by some more. We are still awaiting that bailout proposal from Spain, if it does come in the early part of next year?
A: The history of Europe over the last 18 months has been one step forward and two steps back, but there are some genuine hopes for encouragement in Europe, not only because of investor positioning, because we had bad news out of Europe, investors were reducing their exposure, they were underweight relative to their own benchmarks or they were outright sellers of the European assets and the European currency.
Many investors are significantly underweight relative to their benchmarks and if they avoid some difficult conversations with their end clients then they will not keep this underperformance for a very long, and the only way they can get from underweight to neutral is by increasing their purchases of European assets and currency. Q: You mentioned the strength that we have seen in the euro especially in the last two days almost all the way up to 1.32 levels, how sustainable is this level? Do you think we stayed these levels for at least the month to come?
A: Yes, I think the euro is going higher. We are telling our clients that the euro is not yet high enough for them to be forced to buy it. But if euro trades 1.3260-1.3270 then it will break some important technical levels and they will have to participate on the upside. Between November and December; in November the euro only spend two day above 1.30, in December it has only spend three days trading below 1.30. So, we are clearly in a new trading range and we believe that we will extent the topside of that trading range, initially to 1.3260 but we think 1.35 is visible in the first quarter of next year. Q: What is that to – for more money moving into equities as people move from underweight to neutral? Is that an encouragement or a discouragement?
A: Its positive for risk assets, it's also to the extent negative for the US dollar, its also good for emerging market currencies and emerging market assets too because whether you are in India, New Zealand or in Latin America you have been told over the last two years that you must worry about the European sovereign debt crises even if you are not quite sure why you need to worry. So, if those worries are lifting, fears dissipating then it ought to be good for risk assets more generally right across the world but especially in emerging market asset.