OVERVIEW 11/07/2013 Recently Draghi mentioned that the current level of interest rate would be left unaltered for a long period of time. It contributed to the Euro fall over last few days before an abrupt reversal overnight. Besides, further downgrading hadn’t been excluded. The period of low interest rates might exceed the period of one year. More over the regulator doesn’t remove from the agenda the possibility of new round of cheap credits for bank sector. The ECB gave banks around 1 trillion Euro of 3 year credits. It cooled down a bit the situation on the debt markets. But later on the profitability of Eurobonds started growing anyway. So only well-known Draghi’s phrase about “readiness to do anything necessary” saved the Euro zone. The rapid pattern of Euro decline is a reflection of differences in monetary policies of the FRS and the ECB. The FRS has started the process of ceasing the QE3. Recent statement about a new round of credits’ allocation, which is also called a “QE through the back door”, can also reflect negatively on the Euro. Cheap Euro can become one of the main drivers of European economic recovery. First of all, exporters will receive support from the favorable rate. Secondly, inner market in Europe will receive an incremental protection from import. As a reminder former French president Sarkozy even called for an active interference in currencies’ market in order to lower the Euro rate. This idea didn’t receive further development, as it contradicted current principal of markets’ functioning. But everyone understands that in order to overcome the crisis a cheaper Euro is needed. As was mentioned above, overnight markets reacted to the FOMC meeting and Bernanke comments in particular. As a result Euro skyrocketed reaching the peaks of 25th of July, after which the currency was stably going down until the aforementioned rebound.
Posted on: Thu, 11 Jul 2013 07:37:19 +0000
Trending Topics
Recently Viewed Topics
© 2015