2012 Euro Forecast

The euro sank to a 15-month low against the dollar on Thursday as the European Central Bank (ECB) reportedly stepped in to prop up Italian bonds following an auction that revived fears Italy may be unable to refinance its huge €1.9 trillion  borrowings. For the first time since early May 2010 markets seem to see an existential  threat to the euro, pushing the sovereign debt crisis into its most dangerous  phase yet. Global deleveraging will aggravate downward pressure on the euro, and lack of  growth in the eurozone will make this difficult for financial institutions in euro area  countries.

Based on the blackbox graph it is likely that by April 2012 – if not before – the German  government and the ECB will have to relent and bring the latter’s balance sheet  fully to bear if a euro break-up is to be avoided.

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s