Stephen Brown, European Economist at Capital Economics, on EU economy
The ECB kept its monetary policy unchanged. Though, strong economic recovery may encourage policymakers to start tight-ening monetary conditions. Do you share this point of view?
At this point, we agree that the Euro zone’s economy is strengthening. We have recently revised our forecast for this year, though I think the key point here is that the ECB has not really seen any reasonable signs of an economic recovery. We have seen a little bit stronger inflation earlier in the year due to energy effects; however, inflation is probably going to be lower this year than we thought six months ago. Even if the Euro zone economy is picking up steam, we certainly do not expect the ECB to start raising interest rates until 2019.
Experts suggest that new banking regulations will not weaken economic growth; however, EU bankers argue against new banking policies ahead of Brexit. In your point of view, what consequences will the EU financial industry face after the UK quits the bloc?
It is difficult to say at the moment, because that is probably a little bit beyond what we look at. Certainly, policymakers will keep an eye on financial conditions, however we do not really see any big dislocations to the financial system in the wake of Brexit, but what we do expect from the EU-divorce negotiation is that the transitional agreement will be reached before the estimated two-year period is up.
In your point of view, what could be the hurdles for the Euro in the long run?
Most of the experts expected the French Presidential Election to be one of the main factors that could hit the Euro badly, though we were not really concerned about the threat of the French Election. Instead, we are more concerned about the Italian Election which is due to take place early in 2018, because one of the parties in Italy has also pledged to hold a referendum on the Euro membership.
This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.
Recommended Content
Editors’ Picks
EUR/USD holds gains near 1.0650 amid risk reset
EUR/USD is holding onto its recovery mode near 1.0650 in European trading on Friday. A recovery in risk sentiment is helping the pair, as the safe-haven US Dollar pares gains. Earlier today, reports of an Israeli strike inside Iran spooked markets.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD is rebounding toward 1.2450 in early Europe on Friday, having tested 1.2400 after the UK Retail Sales volumes stagnated again in March, The pair recovers in tandem with risk sentiment, as traders take account of the likely Israel's missile strikes on Iran.
Gold price defends gains below $2,400 as geopolitical risks linger
Gold price is trading below $2,400 in European trading on Friday, holding its retreat from a fresh five-day high of $2,418. Despite the pullback, Gold price remains on track to book the fifth weekly gain in a row, supported by lingering Middle East geopolitical risks.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Geopolitics once again take centre stage, as UK Retail Sales wither
Nearly a week to the day when Iran sent drones and missiles into Israel, Israel has retaliated and sent a missile into Iran. The initial reports caused a large uptick in the oil price.