The reason is presumed to be the opposition of President Recep Tayyip Erdogan to a rate hike
That is a political decision. “” But it is absolutely clear that we cannot agree to any debt relief that would include the Greek bonds held by the ECB. This is impossible for legal reasons, “” said the ECB director.
Tsipras is now pushing for a swift government to be formed. On Monday he wanted to sound out a possible cooperation with the right-wing populist Independent Greeks, said a representative of the Left Party.
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Warning voices came from Brussels and Germany urging Greece to comply with the commitments it had made in return for financial aid.
The Turkish lira is on the downside: on Tuesday, one euro was worth more than 10 lira at times. A new low has thus been reached. A recovery of the currency is not in sight.
The decline of the Turkish lira is becoming more and more dramatic. On Tuesday, the currency fell again to historic lows against the dollar and the euro. For the first time, more than 8.5 lira had to be paid for one dollar. For the first time, one euro was worth more than 10 lira at times.
Turkey’s currency has long suffered from a toxic mix of economic and political stressors. Economically speaking, the high inflation in the country speaks against the lira.
The central bank is fighting against it, but rather half-heartedly. The real interest rate, which is important for a currency – the key rate minus the inflation rate – is still negative. So the bottom line is that investors lose money when they invest in the lira.
Political conflicts continue to weigh on Lira
On the political side, the numerous military conflicts in which Turkey is involved, such as in Syria or Libya, are a burden. In addition, Turkey’s diplomatic relations with numerous Western partner countries, such as the USA, France and Greece, are strained.
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Vacationers from the USA and the EU can look forward to the devaluation of the lira. The weakness of the lira gives them more for their money. For the native Turks, the devaluation means above all that they have to pay more money for imports into the country. In addition, they can afford less even abroad.
Sources used: own research news agency dpa
The euro is still under pressure: On Monday morning the currency temporarily fell below 1.0750 US dollars. That is the lowest level since January this year.
The most important reason is the current strength of the American dollar, not just against the euro. The European Central Bank (ECB) set the reference rate on Friday at $ 1.0904.
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Since Donald Trump’s election victory, contrary to what was expected, the US dollar has risen sharply after a brief dip against many currencies. Analysts explain this with the election program for the future president, which provides for tax cuts and higher government spending.
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It is conceivable that this will boost the economy and inflation, at least temporarily. Such expectations are reflected in the capital market, where US bond rates have risen sharply. The dollar benefits from this.
Growing economic concerns are increasingly causing problems for the euro. But other currencies are even more affected. The Turkish lira collapsed on Friday.
After very weak economic data from the eurozone, the euro went downhill. On Friday afternoon, the European common currency cost 1.1281 US dollars.argumentative essay on to kill a mockingbird In the morning, the common currency was traded just below the $ 1.14 mark. The European Central Bank (ECB) set the reference rate at 1.1302 (Thursday: 1.1387) US dollars. The dollar cost 0.8848 (0.8782) euros.
Corporate sentiment in the euro zone deteriorated more than expected in March. The purchasing managers’ index compiled by the market research institute Markit has fallen sharply in industry. At 47.6 points, it reached the lowest value since the sovereign debt crisis in spring 2013. “” Such a low value can usually only be observed in times of recession, “” commented Christoph Weil, an economist at Commerzbank. Developments in German industry, which are suffering from falling global demand, were particularly weak.
Turkish lira is big loser
The currencies of almost all emerging markets came under pressure. The signs of a slowdown in the global economy have intensified. One of the biggest losers was the Turkish lira. It lost more than 4 percent against the dollar. In return, the Japanese yen in particular rose.
The British pound has largely recovered from its losses the previous day. During the night, a chaos Brexit was averted for the next week. At the meeting of the EU summit it was possible to agree to postpone the exit until at least April 12th.
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For other major currencies, the ECB set the reference rates for one euro at 0.85890 (0.86650) British pounds, 124.60 (125.92) Japanese yen and 1.1243 (1.1309) Swiss francs. The troy ounce of gold (31.1 grams) was trading at $ 1,312 in the afternoon. That was a good two dollars more than the day before.
Sources used: dpa news agency
Before the eagerly awaited decision on possible government bond purchases, the markets received a first hint on Wednesday. According to a person familiar with the situation, the European Central Bank (ECB) will decide tomorrow, Thursday, on a bond purchase program worth 50 billion euros per month. The prices of stocks, currencies and gold twitched violently at times in the afternoon.
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The insider told the Reuters news agency that a corresponding proposal by the ECB board of directors would be discussed at the interest rate meeting of the ECB council in Frankfurt. The bond purchases should therefore not start before March 2015 and run until the end of 2016. The “” Wall Street Journal “” and the agency “” Bloomberg “” had previously reported similar. The ECB did not want to comment.
DAX and euro up, bonds down
According to the speculation, a total volume of more than one trillion euros (22 months times 50 billion) is available, with which the economy in Euroland should be stimulated. That would be more than many experts expect. The financial markets reacted with relief. The German share index DAX rose from a daily minus of one percent to a new all-time high above the 10,300 point mark, the euro exchange rate temporarily improved by one cent to 1.1670 dollars, while the gold price slipped back below 1,300 dollars Brand and the Bund-Future bond barometer fell significantly.
Market strategist Robert Halver from Baader Bank said that when buying government bonds, the ECB was obviously following the approach of the US Federal Reserve, which also bought bonds on a monthly basis. This creates transparency as well as clarity and predictability.
Don’t mess, just plop
Economist Thomas Gitzel from VP Bank added: “” The ECB is not messing up, it is “”. Since there are already concrete figures today, the surprise potential on Thursday tomorrow is limited.
Dealer Andreas Lipkow from asset manager Kliegel Hafner said that the financial markets could live with the looming solution. Now the question is still open which bonds or assets can be bought by whom.
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The monetary policy decision-makers of the ECB will already meet this Wednesday for their interest rate meeting. The result will be announced on Thursday afternoon.
The Turkish currency has lost another four percent and is thus approaching its historic low. Since the beginning of the year, the lira has lost over 40 percent of its value.
The Turkish lira lost more than four percent of its value against the dollar on Thursday. The lira was trading at 6.71 against the dollar in the afternoon, approaching its all-time low three weeks ago when it briefly crossed the seven threshold. Since Monday alone, the lira has lost more than ten percent of its value and has lost around 44 percent since the beginning of the year.
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The downward trend is being driven by concerns about a recession in Turkey and the inaction of the central bank, which, despite the urging of many economists, has not raised key interest rates in recent weeks in order to stop the currency decline and inflation of almost 16 percent under control to get. The reason is presumed to be President Recep Tayyip Erdogan’s opposition to a rate hike.
The currency crisis is also exacerbated by the dispute with the US over the imprisonment of US pastor Andrew Brunson, in the course of which US President Donald Trump imposed sanctions on two Turkish ministers and doubled tariffs on Turkish steel and aluminum imports. On Tuesday, the rating agency Moody’s downgraded the creditworthiness of 18 Turkish banks because of the financial risks.
Sources used: AFP
The European Central Bank has announced that it will adhere to its zero interest rate policy and its bond purchase program for the time being.
In March 2016, the ECB lowered the central interest rate to the historically low value of 0.0 percent in order to stimulate the economy and inflation with cheap capital. The European Central Bank wants to decide in the coming months about a possible change of course in its monetary policy and inform about the further procedure for its billion dollar bond purchases.
Decision on monetary policy probably in October
“Most of the decisions will probably be made in October,” said Fed President Mario Draghi after the Governing Council meeting in Frankfurt on Thursday. The central bank’s highest decision-making body will hold its next monetary policy meeting on October 26th.
The ECB is striving to reduce purchasing power by just under: less than two percent. Recently there have been increasing demands on the ECB to abandon its loose monetary policy because of the increased price level. For 2018 year, the ECB forecast inflation of 1.2 percent on Thursday, and inflation of 1.5 percent for 2019. Most recently, the ECB assumed an inflation rate of 1.3 percent and 1.6 percent.
Speculations boost the euro exchange rate
Speculation about tighter reins in the monetary policy of the European Central Bank gave the euro a boost on Thursday. The common currency rose 1.1 percent (from 1.1970 dollars to 1.2051 dollars) during a press conference by ECB boss Mario Draghi. Draghi called the euro rise in recent months a “” source of uncertainty “”.
The comments on the exchange rate would not come as a surprise, said Commerzbank strategist Thu Lan Nguyen. “Investors are concentrating on the positive picture that Draghi paints of the economy in the euro zone.” “That justifies an entry into the exit from the ultra-loose monetary policy. It stands to reason that the ECB has a pain threshold with the euro. “” It’s difficult to say where it is. I think Draghi would row harder if he jumped over $ 1.25. “”
Dollar at its lowest level since 2015
The euro has gained around 13 percent against the dollar since the beginning of the year. A strong euro makes goods from companies in the currency area more expensive on the world market and thereby worsens their competitiveness.
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The dollar index, which measures the value of the US currency against other major currencies, slipped one percent to 91.40 points on Thursday. That was the lowest level since January 2015. The sentiment of dollar investors was also depressed by the increased number of initial jobless claims in the USA
Greece wants to keep the euro, the euro zone wants to keep Greece. That sounds easy. But the front lines in the debt dispute between the EU and Athens have hardened. A “” Grexit “”, a withdrawal of the Hellenes from the common currency area, is discussed more and more frequently. That still seems unlikely, but the banks are already playing through what could happen with a Grexit. The euro would be the first to suffer.
The US bank Morgan Stanley, for example, sees the Grexit risk increasing. “” Our scenario analysis suggests a euro exchange rate of $ 0.90 for a Greek exit, “says a current report. This corresponds to a crash of around 20 percent of the current price level at a good 1.13 US dollars.
Fear of a chaotic exit from the euro
The British government is already playing through the consequences of leaving the euro at the highest level. Fear of a chaotic exit from the euro grew on the stock exchanges on Monday: shares in Europe slipped. The Tsipras government warned that destabilization of the country would have serious consequences for all of Europe, for example on security issues.
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In the debt dispute, the Greek government and creditors are racing towards each other unchecked.