April 29, 2011

Is EMU Debt Crisis Morphing Into a Euro-Positive Force?

We argue that a key driver lifting the euro has been the divergent monetary policies of the Federal Reserve and the ECB. When investors perceive the European debt crisis becoming acute, it has eclipsed the main driver and weighed on the euro episodically in recent months. However, the increased speculation (and therefore risk) that Greece restructures its debt may be transforming the debt crisis into a more immediately euro-positive direction.