Strong Euro Rhetoric from Davos
The World Economic Forum meeting in Davos has correctly had the European debt crisis on the agenda. This European issue has the potential to throw the world back into recession, should an inability to repay debts cause global confidence to fall.
We are hearing some very strong language from Europe. The euro has ‘turned a corner’ according to Christine Lagarde, the French finance minister. ‘Never will we turn our backs on the euro. Never will we abandon the euro’ said Mr Sarkozy. This is all very encouraging but what will it actually entail? Summit statements are soon blurred once attempts to translate the promises into action are pursued.
I personally foresee further crisis up ahead for the euro. The ECB and Finance ministers do appear to be adopting a more aggressive stance but is it enough? Is it too little too late? For now the GBPEUR rate is in the mid teens. This is partly due to the worrying signs for the British economy in the form of shrinking GDP, rising inflation and high unemployment. EURUSD is still trading in the high 1.30′s, altough as the uncertainty in Egypt continues, we may see the dollar gain on risk aversion. Expect the euro to hold steady as the political situation is shown to be being managed, but don’t be suprised to see weakness once the Davos summit is confined to history…