Tag: Euro

Why China’s Yuan, not the Euro, could become the dominant global currency

Why China’s Yuan, not the Euro, could become the dominant global currency

David talked about why the Euro hasn’t challenged the Dollar as an international currency, despite being used by more people than the American currency.
So surely that should mean that the Euro becomes a dominant currency, right?
After all, both trading blocks are made up of very big spenders indeed.
What we have seen is the Euro when it was launched, was launched as a currency that represented a very disparate range of countries with very different fortunes.
That meant because you had to have one interest rate to represent all those countries what you saw was their economies doing wildly different things.
You had an interest rate that was set to suit the economies largely of the largest countries like Germany and France.
In fact, many central bankers when the Euro was launched around the turn of the millennium did express openly their concerns that this could threaten the Dollar’s position.
Will the Euro last?
It has lasted so far and it has been through a pretty major test over the last decade.
If you look at the what happened with the financial crisis If you look at the what happened with Greece, in particular, and the way Germany and the richer neighbours had to turn around and say “Well, what are we going to do about this crisis?”

Greece gets green light for 6.7 billion euro bailout batch

Greece gets green light for 6.7 billion euro bailout batch

Europe’s bailout fund on Tuesday approved a 6.7 billion euro ($8.32 billion) loan installment to Greece as part of its third international rescue program, with payment of the first 5.7 billion euros expected this week.
The European Stability Mechanism said the approval came after the Greek government completed a series of required reforms. “Today’s decision … acknowledges the hard work by the Greek government and Greek people in completing an extensive set of reforms,” said ESM head Klaus Regling.
The reforms were in tax policy, privatizations and the resolution of non-performing loans, among others.
The ESM said the initial 5.7 billion euros are to be disbursed Wednesday.
The remaining 1 billion euros, to be used for clearing arrears, may be disbursed after May 1 if the country “makes progress in reducing its stock of arrears.”
In exchange for the money, successive governments have had to implement often painful economic and structural reforms, including tax increases and severe cuts to pensions and public spending.
Regling said he was “confident that Greece is on track to successfully exit the ESM program in August 2018, provided that the remaining reforms are implemented by the Greek government.”
Greece’s financial crisis has wiped out a quarter of the economy and led to persistently high unemployment, which continues to hover above 20 percent.
The frequently unpopular reforms have also led to street protests.

CharlemagneWhy Germany’s new government is not about to go soft on the euro

CharlemagneWhy Germany’s new government is not about to go soft on the euro

It might also serve as a warning for foreigners who expect the SPD to inject a dash of vigour into Germany’s European policy.
The red lines outsiders had come to expect from Germany on matters like risk-sharing in the euro zone seemed conspicuously absent.
On the euro zone, Mr Macron’s dreams of whopping budgets and an all-powerful finance minister have already been shelved, at least for now.
Instead difficult, grinding negotiations lie ahead on matters like reforming the euro zone’s bail-out fund and creating automatic mechanisms to restructure the debt of troubled countries.
Even completing the banking union, a project that EU officials once thought was straightforward, looks tricky.
Nor did the SPD’s bigwigs see it as a way to mobilise support for the coalition deal they were pressing on their members.
Put this to EU or German officials, and they say they are used to Italian caprice.
Investors seem to agree; Italian bond yields shrugged after the election.
Italy’s banks are weak and its debt burdensome.
A second is that Italy will be excluded from Franco-German talks.

Euro slides after populist parties make strong showing in Italian election

Euro slides after populist parties make strong showing in Italian election

The ICE U.S. Dollar Index DXY, -0.02% rose 0.2% to 90.089, rebounding from a 0.4% loss on Friday.
The dollar, which had been in focus over Trump’s comments on impending steel and aluminum tariffs late last week, has stepped back out of the spotlight, as traders focused on political developments in Europe.
The buck fell for two days late last week after Trump revealed the new levies, adding in a tweet that “trade wars are good, and easy to win.” On Monday, the president tweeted about the tariffs with respect to Canada and Mexico, indicating neither would be exempted unless a renegotiated Nafta deal is signed.
Tariffs on Steel and Aluminum will only come off if new & fair NAFTA agreement is signed.
Also, Canada must.. — Donald J. Trump (@realDonaldTrump) March 5, 2018 Meanwhile, the euro declined as it became clear the Italian election had produced no clear winner, but showed a surge in support for antiestablishment, euroskeptic parties.
The far-right Lega Nord was expected to come in third, just behind the ruling Democratic Party.
The result suggests a coalition will be needed for a government to formed, but none of the potential coalition groups appear to have enough support to avoid a hung government.
“Sweeping gains by antiestablishment, euroskeptic parties, such as the 5 Star Movement and the Lega Nord, highlight the discontent felt by Italians over high levels of immigration and unemployment in Europe’s third-largest economy.
• “A broad grand coalition would be well received by markets, as it could result in political stability and fiscal discipline.
“An antiestablishment alliance of M5S and Lega, the worst-case scenario for markets, looks unlikely due to different programs,” he added.

Euro slides after populist parties’ show of strength in Italian election

Euro slides after populist parties’ show of strength in Italian election

Reuters The euro moved sharply lower on Monday, after initial projections in Italy’s general election showed euroskeptic parties did surprisingly well, indicating that none of the mainstream parties will be able to form a government.
That would be a major political upset, analysts said, raising concerns that Italy may now face months of political uncertainty and a fresh election.
What are currencies doing?
The euro EURUSD, +0.0649% dropped to $1.2288 from $1.2321 late Friday in New York.
Against the pound, the shared currency EURGBP, +0.0560% slipped to £0.8919, from £0.8927.
That move came as traders worried that President Trump’s plans for aluminum and steel tariffs will lead to a global trade war.
The 5 Star Movement — one of Europe’s largest populist parties — looked set to emerge as the biggest party, with around one-third of the vote.
The far-right Lega Nord was expected to come in third, just behind the ruling Democratic Party.
The dollar rebounded on Monday after falling for a second straight day on Friday.
• “A broad grand coalition would be well received by markets, as it could result in political stability and fiscal discipline.

Europe: is a fiscal and political union needed?

Europe: is a fiscal and political union needed?

Monetary union required political union.
Of course, Schäuble and Varoufakis had different ideas regarding the ends that political union would serve.
Schäuble saw political union as a means to impose strong fiscal discipline on member states from the centre, tying their hands and preventing “irresponsible” economic policies.
What needs to be done instead is to delink private finance from public finance, insulating each from the malfeasance of the other.With this separation, private finance can be fully integrated at the European level, while public finance is left to individual member states.
This way, countries can reap the full benefit of financial integration while national political authorities are left free to manage their own economies.
“With banking union, there is no need for fiscal union,” he argues.
Advocates of cutting the Gordian knot between private and public finance recognize that governments’ approach to banks must change radically if this separation is to work.
Sovereign states can always change the rules ex post, which means full financial integration is impossible.
Because they retain sovereignty, they cannot make similarly credible commitments not to interfere with financial markets.
So the risk remains that a severe enough financial shock in the EU will affect all other borrowers in the same country in a self-fulfilling manner.

CURRENCIES: Pound Rallies To 6-month High Against Euro After Brexit Breakthrough

CURRENCIES: Pound Rallies To 6-month High Against Euro After Brexit Breakthrough

U.S. jobs data likely to drive dollar later on Friday The pound rallied against all other major currencies on Friday morning, scoring a six-month against the euro, after the U.K. and the European Union came to terms on issues that were holding up the next stage of Brexit talks.
The gains for the U.K. currency come after days of tense negotiation between London and Brussels.
Those ended early Friday, with Jean-Claude Juncker, president of the European Commission, saying there had been a breakthrough in Brexit talks (http://www.marketwatch.com/story/breakthrough-on-brexit-terms-opens-way-to-next-phase-of-talks-2017-12-08).
U.K. Prime Minister Theresa May needed to resolve one last issue — the Irish border — to satisfy the Brussels negotiators.
The question of whether to have a “hard” or “soft” border between Northern Ireland and the Republic of Ireland had already scuttled a potential deal on Monday (http://www.marketwatch.com/story/british-pound-volatile-after-reports-of-no-brexit-deal-monday-2017-12-04). “While the hard part (trade talks) is still to come — and a realization of this may keep GBP/USD capped at 1.36 in the near-term (EUR/GBP around 0.87) — we do ultimately believe that there is more upside left in GBP over the next 3 months,” he said in a note.
The breakthrough reduces the risk that the U.K. will crash out of the EU in 2019 without an agreement on issues such as trade.
Beyond the Brexit news, the main event on Friday is likely to be the release of the closely watched U.S. nonfarm payrolls for November, scheduled for 8:30 a.m. Eastern Time.
Economists polled by MarketWatch expect 200,000 jobs were added to the U.S. economy (http://www.marketwatch.com/story/jobs-boom-likely-carried-over-into-november-2017-12-07) last month and that the unemployment rate stays at a 17-year low of 4.1%.
The euro bought $1.1744, down from $1.1774 on Thursday.

Jobs growth in eurozone at ‘highest since dotcom era’

Jobs growth in eurozone at ‘highest since dotcom era’

Chris Williamson, the firm’s chief business economist, said business across the eurozone is “booming,” and noted jobs are being created at the fastest rate since the dot.com era in the early part of the new century.
France, the eurozone’s second-largest economy, was one standout.
Its index rose above 60 for the first time since 2011 and hiring has picked up pace.
Also, its growth, according to the survey, outpaced Germany, the eurozone’s number one economy, for only the fourth time in over five years.
Earlier this month, the European Union upgraded its growth forecast for the eurozone this year to 2.2 percent, which would be the highest since 2007.
The scale of the eurozone recovery this year, which is broad-based across countries and sectors, has caught many economists by surprise.
Though uncertainty over Brexit remains, the Greek crisis seems contained and populist politicians failed to make the breakthrough many economists feared during those elections, notably in France. “The broad-based nature of the upturn, and the rate at which rising demand is feeding through to the labor market, suggests the eurozone will see a strong end to 2017 and enter 2018 on a firm footing,” said Williamson.
The strong growth and falling unemployment should in time help fuel price increases in the economy.
However, IHS Markit said the faster pace of growth and jobs creation is helping to boost underlying inflation, with firms’ selling prices for goods and services rising by more than at any time since June 2011.

Eurozone unemployment falls to lowest since 2009 as strong growth run continues

Eurozone unemployment falls to lowest since 2009 as strong growth run continues

Unemployment in the Eurozone fell to its lowest in almost nine years in September as the bloc continued its strong run of economic growth.
The proportion of the labour force out of work fell to 8.9 per cent, one percentage point lower than a year ago and the lowest since January 2009, according to the European Commission.
The economy in the single currency area expanded by 0.6 per cent during the third quarter of 2017, a slight slowdown compared to the second quarter.
The latest data adds to a raft of data over the course of the last year “indicative of a sustained Eurozone economic recovery”, said Oliver Kolodseike, senior economist​ at the Centre for Economics and Business Research.
He said: “With the unemployment rate inching down further and wage growth outstripping inflation, consumer spending should continue to support the Eurozone economy in the coming months.” The European Central Bank (ECB) will welcome the signs of continued momentum in the Eurozone recovery as it prepares to gradually scale back stimulative asset purchases in the new year.
The ECB will buy €30bn (£26bn) in bonds per month after December, down from €60bn.
Read more: New data suggests growth will continue in the Eurozone but ease in the UK While tightening monetary policy through its asset purchases, the ECB has remained committed to an extraordinary degree of accommodation in its interest rates “well past the horizon of the net asset purchases”.
Raj Badiani, director of economics at IHS Markit, said: “The ECB still reluctant to unwind its monetary policy supports too hastily, with the latest inflation data pointing to core inflation retreating to 0.9 per cent in October, which will underpin continued central bank caution.” He added: “In addition, a tame outlook for oil prices will limit upside for inflation in 2018/19, and be less damaging to household purchasing power.” The fall in inflation weighed on the euro, amid a slew of otherwise positive data.
The euro failed to regain losses of 0.15 per cent over the course of the day against the US dollar at the time of writing, near its lowest point since July.
Read more: Ranked: These are the world’s largest money managers

Eurozone economy steams on, unemployment near 9-year low

Eurozone economy steams on, unemployment near 9-year low

An illustration picture shows Euro coins, photographed in Warngau April 3, 2013.
World shares, the euro and German bonds barely moved on Wednesday as investors turned cautious before this week’s policy decisions by the Bank of Japan and European … (Reuters) LONDON (AP) — The eurozone economy is enjoying its strongest and most sustained period of growth since a short-lived bounce-back following the global financial crisis.
Official figures released Tuesday showed that the single currency bloc, which is made up of 19 countries, was 2.5 percent bigger in the third quarter of 2017 than it was the year before.
That’s the highest annual growth rate since the first quarter of 2011, when the eurozone, like other major economies around the world, witnessed a temporary rebound from the deep recession caused by the global financial crisis.
While the recovery in the United States slowly gained momentum, the eurozone’s was undermined by persistent debt problems in countries like Greece.
The update from Eurostat provides further confirmation that the eurozone has gained momentum this year after sidestepping a series potential risks, notably through the defeat of populist, euroskeptic parties in elections in major economies like France.
Though no country-by-country breakdown was provided, it’s clear from a series of surveys that the eurozone economic growth is more broad-based both across sectors and countries — it’s no longer heavily reliant on its powerhouse economy, Germany.
Eurostat found that the eurozone expanded by a quarterly rate of 0.6 percent during the July-September period, way above its average since the global financial crisis first flared up a decade ago.
More from FOX Business The robust growth has helped unemployment fall consistently over the past year, and in September the number of jobless declined by a further 96,000, which helped the unemployment rate drop to 8.9 percent from 9.0 percent the previous month.
The main reason why inflation fell further away from the European Central Bank’s goal of just under 2 percent was that the core rate, which strips out volatile items such as energy and food, unexpectedly fell to 0.9 percent from 1.1 percent.