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.
April 28, 2011
Dollar Isn't in a Crisis, but a Rout Could Come Quickly
The dollar has yet to descend into a full-blown crisis but market watchers warn that ultra-loose U.S. monetary policy means that one could quickly materialize if the slide in the greenback gathers pace.
The dollar has dropped to new lows since Federal Reserve Chairman Ben Bernanke effectively slapped a sell sign on the currency Wednesday, with the greenback hitting historic lows against the Australian dollar and Swiss franc, and even to a major low point against the euro, which is hobbled by an ugly debt crisis.
The dollar has dropped to new lows since Federal Reserve Chairman Ben Bernanke effectively slapped a sell sign on the currency Wednesday, with the greenback hitting historic lows against the Australian dollar and Swiss franc, and even to a major low point against the euro, which is hobbled by an ugly debt crisis.
April 27, 2011
Euro crisis: “the EU is setting itself up for failure”
In a lengthy article posted at Crooked Timber, John Quiggin and Henry Farrell argue that
By concentrating on its economic problems but ignoring their political consequences, the EU is setting itself up for failure. The case for austerity does not make sense. And if the EU fails to deal with the political fallout of its own institutional weaknesses, it is going to collapse. No political body can force voters to repeatedly shoulder the costs of adjustment on their own and expect to remain legitimate. During the gold standard, nation-states tried this and failed—and they had considerably more authority than the EU has today. Hard Keynesianism offers a means to combine fiscal discipline with flexibility in order to cushion the political costs of adjustment in times of economic stress. EU leaders must institute it in a hurry.
By concentrating on its economic problems but ignoring their political consequences, the EU is setting itself up for failure. The case for austerity does not make sense. And if the EU fails to deal with the political fallout of its own institutional weaknesses, it is going to collapse. No political body can force voters to repeatedly shoulder the costs of adjustment on their own and expect to remain legitimate. During the gold standard, nation-states tried this and failed—and they had considerably more authority than the EU has today. Hard Keynesianism offers a means to combine fiscal discipline with flexibility in order to cushion the political costs of adjustment in times of economic stress. EU leaders must institute it in a hurry.
April 26, 2011
Mid-Day Report: EUR/USD Resumes Rally, Shrugs off News on Debt Crisis
EUR/USD breaks last week's high to resume recent rally as dollar weakness returns. USD/CHF dives to new record low of 0.8744 while AUD/USD is back pressing record high of 1.0773. Data from US saw S&P Case-Shill 20 city house price dropped -3.3% yoy in February. Consumer confidence beat expectation and improved to 65.4 in April. Euro is rather unbothered by news on the debt crisis. Sterling, though, was weighed down by much worse than expected CBI trends total orders, which dropped sharply to -11 in April. Swiss trade surplus narrowed to CHF 1.09b in March while UBS consumption indicator improved to 1.66.
April 24, 2011
Fareed's Take on America's debt crisis: why no problem is the problem
Everyone has been in a panic this week over America's impending fiscal collapse, but I think the reality is that America does not face an immediate debt crisis. Take a look at the simplest indicator, the day that Standard & Poor's raised its now famous warnings about America's debt, markets decided to lower America's borrowing costs and the dollar rose against its principal alternative, the euro.
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