FUNDAMENTAL ANALYSIS
with a common migrant deal forged by all EU states. The reforming of the block is underway and the hegemony of Germany in France in
making
i m p o r t a n t decisions is now basically over.
Too Little Too Late?
With Germany and France coming to the same page for a
matter is quite irrelevant, be that migration, trade policies,
EU
budget discussions or the banking union. As long as there is unity,
FX
prepared traders got surprised. The initial squeeze lower in the euro was contained, however the timeline for the end of asset purchases and rate hikes provided by the central bank
warrants
caution for euro bears. If we look back at the previous
cycle
when the euro got dramatically s t r on g e r between
common
E u rop e a n budget, the rest of the block is far from certain to follow. The stabilisation
of
the euro above 1.15 hinges
on
further signs of commitment to a unified position on key matters across the EU. The European banking system is still far from healthy with the Italian banks being the most fragile component of
the newly
Macron and Merkel finally proposed a common Eurozone
budget, but can a consensus be built across the wider block? the political capital of crafted
European banking union. Hungary, Italy and Austria appear to be uniting on a common footing, looking to oppose traditional establishment politics from Germany and France.
The main issues facing the euro in the
coming months are centered around forging unity. The subject the single
European currency will be growing and its value will be more or less stable. The coming months will see many more discussions on a European level and what traders should be looking for is “consensus”.
Is Monetary Policy Boring?
Te ECB’s June meeting was so full of detail about the future course of monetary policy that even the most
and 2008, the relentless
2005 rise
of the single E u rop e a n currency against the US
dollar
started just after then governor Jean Claude Trichet signaled the start of a
rate-rising
cycle. Between the 10th of December 2005
and the 9th of July 2008, the ECB raised rates a total of nine times, leading to an increase in the value of the euro roughly from 1.17 to 1.60.
Yet let’s not forget that Draghi’s
ECB is way different from Trichet’s leadership. The market will most likely test the commitment of the European monetary policy masters to its predefined tightening path in the coming quarters. The uncertainty about the global
FX TRADER MAGAZINE July - September 2018 27
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