The euro has steadily weakened against a basket of major currencies since December.. 2020, the tipping point coincides with the surge in gold prices and the Fed’s rate hike expectations are creeping up. Federal Reserve Signals Finish Adding Covid-Inspired Stimulus Measures
It should come as no surprise that the Fed’s openly tightening efforts in June 2021 marked the beginning of the deepest decline along this downtrend. Markets predict ultra-strict ECB will not follow US lead as quickly as lots other leading central bank, push Yield vs. Euro
Euro downtrend stalled as ECB rate hike bets surge (weekly chart)
Then, in the second quarter of 2022, European officials finally signaled their readiness to serve as a record high level of regional CPI inflation. It will reach an attractive rate of 8.1 percent in May. The euro hit a bottom and started moving higher as expectations of a rate hike began to be absorbed into prices.
Euro debt crisis fears return as ECB prepares to fight record inflation
Speculation ended June 9 as the ECB officially raised interest rates. The central bank previously said it would stop buying bonds, a non-standard form of stimulus, in July. less than a week later The emergency meeting was interrupted and ordered. provided to create a new tool against ‘Fragmentation’.’
That stopped the euro’s rise in its tracks. The ECB’s tight expectations have revived concerns about high levels of debt in some eurozone countries. The spread between Italy and German 10-year government bond yields rose sharply to a two-year high of 242 basis points (bps) after a policy meeting in June.
‘Distribution’ management – that is, different lending rates. cross Eurozone States – It seems it now has to make the ECB more stringent compared to the rest of the world, putting the single currency at a huge disadvantage. This indicates that the downtrend is due to the resume.
Fiscal reforms could fire the ECB, but it probably won’t happen anytime soon.
The scheme of structural reforms needed to retaliate by the ECB – creating “euro bonds” or eventually reducing debt levels in southern Europe – seemsS At best, if only because of the French-German vital momentum needed for progress is a high order. Berlin and Paris tend to focus on other matters.
The war in Ukraine and its impact on geopolitical and economic stability in the region The most urgent is The challenge is to secure energy supply at a reasonable cost without Russia. is clearly in front of trade with keys Market in China amid COVID-19 lockdown of that country is another concern.
Tight administration in the eurozone’s second-largest economy complicates finances. french president Emmanuel Macron has won another term. But his coalition lost a majority in the legislature.. means that The fragile government will struggle to achieve it over the next five years.