In recent times, there has been a resurgence of unease in Europe that has started to impact the Euro currency. Ulrich Leuchtmann, the Head of FX and Commodity Research at Commerzbank, has pointed out that nervousness is not good for the EUR. In fact, if the anxiety levels reach a point where the European Central Bank (ECB) is unable to continue with its interest rate policies, it will have to reverse its position urgently. This will not only be a huge setback for the bank but may also cause damage to the Euro.
While it is not the Commerzbank’s view that this will happen, it is wise to note that any perceived slightest increase in risk to the currency can lead to a drop in its value. This is precisely what is happening with the Euro at present.
So, why the renewed nervousness? Is there any cause for concern or is this merely an overreaction?
One reason could be the uncertainty surrounding the global economy’s recovery from the COVID-19 pandemic. The pandemic has dealt a severe blow to the world’s economies, and Europe has not been spared. The uneven pace of recovery and the spread of new variants of the virus have led to fluctuations in the stock markets and an overall sense of uncertainty among investors.
Moreover, the political landscape in Europe is undergoing some significant changes. The rise of right-wing parties in various countries, Brexit, and political upheavals in countries like Italy and Spain have contributed to the region’s instability. These issues have caused some investors to view Europe as a less desirable destination for investments, which is undoubtedly impacting the Euro.
Another factor to consider is the ongoing negotiations between the EU and the UK over Brexit. The United Kingdom has officially left the European Union, and as negotiations continue over new trade arrangements, there is a sense of unease about the potential impact on the European economy. Additionally, the UK government’s decision to break international law by reneging on parts of the withdrawal agreement may have further unsettled the markets.
Furthermore, there has been speculation that the ECB might announce some changes to its monetary policy in the near future. Such a move would undoubtedly catch investors off guard, leading to increased uncertainty and market volatility.
In conclusion, it is evident that there are various reasons for the current nervousness in Europe. The global coronavirus pandemic, political instability, Brexit, and potential changes to the ECB’s monetary policies are all weighing on investors’ minds. As a result, nervousness is impacting the Euro. However, it is essential to note that the currency’s value fluctuates regularly, and there is no cause for alarm yet. Nonetheless, investors should keep a close eye on the situation and be ready to adjust their positions as needed.
