Breaking: EU leaders nominate Christine Lagarde for European Central Bank president

European Union leaders have chosen Christine Lagarde for European Central Bank president. There has been a package of appointments that have also included the foreign policy chief, the head of the EU parliament as well as the president of the leaders’ council. Furtehr down, we look into what this could mean for the ECB policy and euro.

Key Developments:

• IMF Chief Christine Lagarde chosen for European Central Bank president.
• Germany’s Ursula von der Leyen chosen for the commission presidency.
• Spain’s Josep Borrell chosen for the foreign-policy chief position.

What does this mean for the Foreign Exchange market?

Well, the markets have not been sure what to make of the choice, and after all, Draghi will still be at the helm until October and this may not change the landscape for the immediate nor the medium term future at the ECB with respect to monetary policy which governs the direction in the nation's currency.

However, what is striking is that this is the first person to take in the role of the ECB without being a career central banker. She’s really a political figure, much more so than an economist. Until this weekend, the main contenders for the ECB job were central bankers and who were current or former members of the Governing Council who had all previously participated in decisions on monetary policy. What is refreshing to see is that she is also the first women to take on the role and her political, sales and marketing skills could help repair the image of central bankers.

In her career, she thrived as French finance minister during the financial crisis before graduating to the IMF in Washington. Clearly, she has not been chosen to simply carry on the old ways of the ECB and it feels like there is going to be a real shake-up within the ECB's staff, as she will need to depend on them to come up with some imaginative stuff in order to find solutions to the euro zone's economic challenges. We will need to dig deeper and pay very close attention to how closely she supported Draghi's approach for clues as to how she might intend to fulfil her role at the helm. As Yohay Elam, Senior Analyst at FXStreet, advised earlier, "The French politician is significantly dovish. As head of the IMF, she has advocated monetary and fiscal stimulus, calling on both central banks and governments to keep helping the economy."

Conclusion

Will she wrap-up the stimulus programme as to give the ECB some ammunition should the economy deteriorate further, (for the euro is already sinking to the bottom and interest rates can't go any lower), or will she stick to the programme and continue along with a dovish rhetoric? That is where the FX play will be.

Extra reading:

• EUR/USD technical analysis: Euro within its daily range dips below 1.1300
   
• Christine Lagarde as ECB President? – EUR/USD could reach new lows