The Fed may start in the third round of quantitative easing policy (QE3) and a reverse force in Europe under the debt crisis, currency markets view of reproduction of differences.
Even if the Federal Reserve may increase the spread money efforts to pressure or let the dollar, the European sovereign debt crisis for some large financial institutions or a substantial reduction of the expected 2011 euro. But most financial institutions still wait and see attitude towards the euro.
Only a month ago, the euro climbed to 1.4282 against the U.S. dollar has also the highest point during the year, when the currency traders started the second quantitative easing in Fed policy in the context of dumped U.S. dollars; and now, the market is more worried that the European governments have take urgent measures to reduce the budget deficit, will make the European economic slowdown next year, while some European government officials said the eurozone government bond holders or commitments for future assistance program will be part of the loss caused by, resulting in the bond market investors to avoid the far from it.
Debt crisis erupted again in Europe has led to Spain and Italy compared to benchmark German bond yields spreads climbed to the highest since the birth of the euro in 1999, while the European Central Bank last week announced the extension of the full allocation for the supply of liquidity to 2011 a quarter, and accelerate the process of buying euro zone government bonds.
Standard Chartered in Singapore, head of global foreign exchange research, said Callum Henderson, Ireland, Portugal, Spain and other European countries will continue to sovereign debt problems, the fundamental problem is that these countries have huge debt, huge budget deficits and large current account deficit, so do not own funds, can not cut interest rates to solve the problem, so the only way to have only experienced a serious economic recession.
According to the EU in the latest data released by the end of November 2010, Ireland s budget deficit will account for 32 of GDP, the proportion is far more than Greece, the Spanish government s budget deficit this year will account for 9.3 of GDP.
BNP Paribas senior foreign exchange strategist Ian Stannard also believe that debt with the highest rate of the euro zone countries have to reduce the deficit, the region will need a weak euro to help support economic recovery, it is expected that the euro against the U.S. dollar will continue to fall into the middle of next year 1.25, and the end of the third quarter of next year, continued to decline to 1.2 position.
The world s largest currency hedge fund FX Concepts LLC President John Taylor pointed out recently that the debt problems of Europe will take a long way to go , which means that the market will continue to be shocks. Taylor is also expected that some countries might leave the euro zone, while Spain and Italy may be the risk of a sovereign debt issue will make the Euro is very weak.
BBVA is the emerging market analyst, told reporters that the bond purchase plan and other measures for the role of monetary expansion is only to resolve the debt crisis in Europe for more time. From the source of the problem only through the establishment of a permanent mechanism for debt restructuring in order to achieve the debt crisis of the future European permanent settlement, which will ease the current tension in the market to provide the necessary credibility.
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