The euro remains in a narrow trading range as speculation about a new ECB bond-buying scheme increases. A raft of depressing economic data and negative sentiment, the latest gloomy sign being the Sentix Business Investor Confidence survey of 2,800, which showed a drop to -5.8 points.
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The ECB interest rate currently sits at 0.00% although markets have been pricing in a 0.25% cut, perhaps as early as September. Although, many do not believe the ECB see this as a sufficient remedy and think the ECB are poised for a reintroduction to quantitative easing, which would likely weaken the single currency.
IMF Managing Director, Christine Lagarde will become the European Central Bank’s next president in October, as she takes over from Mario Draghi, but few see a significant change in policy. Lagarde will rely on the advice of those around her as she is not an economist and may take a cautious, dovish approach.
There’s a sense of déjà vu with these latest echos from the ECB. In order to survive, the eurozone must look at structural reform with a central budget to couple monetary union or risk stumbling along with minimal growth and mounting debts. The block needs to recognise that long-term growth and success is in the form of a United States of Europe.
Elsewhere, the EU is still struggling to tame the Swiss as the EU looks to bring to the Swiss economy under its regime. The EU wants one framework to replace the 120 bilateral agreements currently in place but as one would expect, the framework that has been put forward by the EU does not favour the current Swiss model. The unwillingness of the Swiss to cooperate means the EU will now look to gradually shut down the 120 bilateral agreements as they expire, pushing the Swiss away from the EU market until they submit and accept EU legal and regulatory control. A message is not only being sent to the Swiss but also the pending new UK Government, the EU will not compromise on its terms.
For more information on how pending political and economic events could potentially affect your transfer, please do not hesitate to call your account manager at FCD.
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