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Foreign exchange mt4 MT5 Euro forecast, in-depth analysis

发布时间：2022-08-25 浏览：129

Financial news agency, June 21 (editor Malan) inflation in the euro zone is rampant. The European Central Bank said last week that it will take more active policy contraction measures, and plans to introduce new tools to deal with the increasingly divergent debt problems in the euro zone.

However, this move did not receive praise. Many professionals believe that this tool has limited effect, and some even believe that the real test of the eurozone has come.

Richard Cookson, a professor and financial analyst at the University of York, wrote in his latest article: this year may be the critical moment to test the success or failure of the euro.

Crisis looming

According to the disclosure of the European Central Bank, it will introduce a flexible way to reinvest the redemption of the emergency bond purchase plan (PEPP), and will inject cash into countries with heavy debt in the pandemic support plan, such as Italy.

This move triggered some opposition within the EU. Christian Lindner, German finance minister, believed that the current trend of bond yields in the euro zone did not show special risks, and strengthening the regulation of inflation was the top priority.

"Our task is to return to sustainable public finance and stop the expansionary fiscal policy during the epidemic," he said

However, Lagarde, the president of the European Central Bank, obviously has a larger goal, and defended the European Central Bank at the emergency meeting last Thursday: "we must address the risk of differentiation in order to enable monetary policy to be implemented throughout the eurozone."

She stressed that once the borrowing costs of weaker countries rise too high or too fast, such as the bond spreads between different countries expand beyond a specific threshold, or the market fluctuates abnormally, the European Central Bank will adopt new tools to fight the division of the eurozone.

The details of the new tool have not been disclosed, and the market is expected to announce it at the next regular meeting, that is, July 21.

Since the European Central Bank changed its monetary policy attitude, euro zone bonds have been selling off, especially countries with large debt and poor economies.

Italy, whose debt accounts for more than 150% of GDP, is a clear target. Its 10-year Treasury bond yield once reached 4.188% on June 14, the highest since 2014. This level of interest rate is likely to cause a huge impact on Italy.

Last week, the 10-year bond interest rate gap between Germany and Italy once widened to 2.47%, the widest in two years, further intensifying the risk of the collapse of the eurozone.

This is also the significance of PEPP's existence. When necessary, it will inject liquidity into weaker euro countries to ensure that they will not be dragged down by debt and evolve into another European debt crisis.

One after another

Although the European Central Bank proposed a new tool, the outside world is not optimistic about the effectiveness of this PEPP.

Olli Rehn, President of the Central Bank of Finland, said that the measure would only help prevent "unwarranted" market fluctuations, but it would not help much when major problems really occurred.

Markus Ferber, a German member of the European Parliament, believes that the European Central Bank may extend its professional field too far. The subtext of this sentence is that the European Central Bank's hand is too long.

He said, "the job of the European Central Bank is to achieve price stability, not to ensure favorable financing conditions."

Cookson also said: "although the main goal of the central bank is to maintain low inflation, European regulators seem to have different goals - to prevent the weakest EU Member States from exiting the eurozone."

He wrote in an article: "in the past 10 years, the goal of monetary policy is not inflation, but to prevent the weakest member countries from withdrawing from the monetary union. Frankly, it is no longer an inflation targeted central bank."

He also pointed out that the soaring inflation rate in most countries is an example of the failure of the European Central Bank's policy. "When the inflation rate is low, the European central bank can hide its true intention, but when the inflation rate rises and keeps rising, its intention cannot be hidden... Although there may be risks in targeting inflation by raising interest rates, trying to subsidize weaker borrowers is a worse policy."

"The ECB should have nothing to do with it (subsidized borrowers)... In the final analysis, it should not be up to the ECB to decide who is in the eurozone and who is not."