Will COVID-19 Put An End To The Euro Zone???

“Super” Mario Draghi, Italian economist who served from 2011 to 2019 as president of the European Central Bank (ECB), the financial institution responsible for making monetary decisions within the Euro Zone, finally passed the keys to the car to Christine Madeleine Odette Lagarde in October. But before passing the keys he lowered the deposit rate to minus 0.5%, resume quantitative easing and give banks easier terms on long-term loans.

Christine Madeleine Odette Lagarde is a French politician, economist and lawyer Lagarde was the first woman to become Finance Minister of France and is now the first woman to head the ECB.

According to a Bloomberg survey of economists a several months ago, the ECB was done cutting interest rate and felt that monetary policy woulkd be left alone for the next couple of years with the first predicted interest rate hike happening in the first quarter of 2022. But then COVID-19 kicked into full gear. That was when the Christine said that Europe's top monetary authority was ready to take “appropriate and targeted measures” if necessary to support the economy against the headwinds from the new coronavirus.

George Soros became one of the most famous currency traders in the world based on his bet against the Bank of England in 1992 on what became known as Black Wednesday, where he made over $1 billion on the trade.

George Soros suggested Europe should issue debt that would never have to be paid back as a way to finance the costs of the Covid-19 crisis.

As the European Union faces the deepest economic crisis since the Great Depression, the billionaire investor said the 27-nation group should issue “Perpetual Bonds” — meaning the principal amount would never be repaid, only the annual interest payments. They are also known as consols.

“A 1 trillion-euro bond would cost 5 billion euros a year, assuming an interest rate of 0.5%. The consols would not need to be sold all at once; they could be issued in tranches and they would be snatched up by long-term investors like life insurance companies,” Soros said in an interview with the Dutch newspaper De Telegraaf published Friday.

The EU has been at odds over the last few months on the best way to deal with the shock from the coronavirus. The region’s economy is expected to contract by more than 7% this year, but because the countries have very different debt piles, the members have clashed about whether financial stimulus should be done via loans or bonds.

This past week, France and Germany, the two largest EU countries, joined forces to propose a Franco-German plan for a €500 billion Recovery Fund to help the Eurozone economy recover from the impact of the coronavirus pandemic.

However, the European Commission is set to propose their own plan later this week, so until some type of plan is finalized, there might be downside risk in the Euro.

So where might the Euro head next, the big picture suggests price is slowing down and losing momentum.

Thus, the next level at which price should as least pull back is at the weekly demand at 1.05500

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

Posted Using LeoFinance