EU’s Donohoe: Europe does not risk fresh sovereign debt crisis

Dhwani Mehta FXStreet

Paschal Donohoe, chief of the pan-eurozone group of finance ministers, said in an interview with the Financial Times (FT) on Monday, Eurozone is not at risk of a sovereign debt crisis seen a decade ago, as the bloc’s economies are in ‘completely different’ shape at present.

Key quotes

The current circumstances were “completely different from the kind of crisis environment we were in” when the bloc was gripped by a spiraling sovereign debt sell-off in the early 2010s.

The euro area now had “stronger architecture” and “deeper foundations for our common currency.”

“We are all confident about our ability to navigate through the changes that are taking place.”

“The starting positions for member states in terms of their debt and deficit levels is now very, very different to where we were before Covid hit us.”

“We will continue to need to have plans that reduce borrowing in a careful way. The plans to do it will have to be credible. They will have to reflect the fact that we are in an inflationary environment.”

The FT reports that Donohoe’s remarks come as ECB president Christine Lagarde prepares to face questions from MEPs at the European Parliament on Monday over its recent contrasting messages.

Market reaction

EUR/USD is holding the renewed upside above 1.0500, adding 0.28% on the day. The optimistic comments from Donohoe will only aid the rebound in the shared currency against the US dollar.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

EUR/USD accelerates losses, focus is on 1.1800

EUR/USD’s selling pressure is gathering pace now, opening the door to a potential test of the key 1.1800 region sooner rather than later. The pair’s pullback comes on the back of marked gains in the US Dollar following US data releases and the publication of the FOMC Minutes later in the day.

GBP/USD turns negative near 1.3540

GBP/USD reverses its initial upside momentum and is now adding to previous declines, revisiting at the same time the 1.3540 region on Wednesday. Cable’s downtick comes on the back of decent gains in the Greenback and easing UK inflation figures, which seem to have reinforced the case for a BoE rate cut in March.

Gold picks pace, flirts with $5,000

Gold is back on the front foot on Wednesday, shaking off part of the early week softness and pushing higher towards the key $5,000 mark per troy ounce. The move comes ahead of the FOMC Minutes and is unfolding despite an intense rebound in the US Dollar.

Fed Minutes to shed light on January hold decision amid hawkish rate outlook

The Minutes of the Fed’s January 27-28 monetary policy meeting will be published today. Details of discussions on the decision to leave the policy rate unchanged will be scrutinized by investors.

Mixed UK inflation data no gamechanger for the Bank of England

Food inflation plunged in January, but service sector price pressure is proving stickier. We continue to expect Bank of England rate cuts in March and June. The latest UK inflation read is a mixed bag for the Bank of England, but we doubt it drastically changes the odds of a March rate cut.

Sui extends sideways action ahead of Grayscale’s GSUI ETF launch

Sui is extending its downtrend for the second consecutive day, trading at 0.95 at the time of writing on Wednesday. The Layer-1 token is down over 16% in February and approximately 34% from the start of the year, aligning with the overall bearish sentiment across the crypto market.