ECB Executive Board Member Juergen Stark resigned on Friday, apparently because of opposition over the central bank’s bond-buying program. “That makes ECB policymaking more difficult,” said one analyst.
The euro extended losses against the dollar [EUR=X 1.3732 -0.0149 (-1.07%)] following the news.
“It’s a sign that ECB policymaking is controversial even within the board. Clearly the German representatives have a position that differs from other central bankers. That makes ECB policymaking more difficult,” Lothar Hessler, analyst at HSBC Trinkaus told Reuters.
A former finance ministry official and Bundesbank vice-president, Stark, known for his tough, no-frills style, has been a member of the ECB executive board since June 2006. His eight year term was due to run until May 31, 2014.
Manfred Neumann, economics professor at the Bonn University said: “This is remarkable. Stark held the same view of the bond-buying as Axel Weber and the current Bundesbank president. It is a position that all the Germans have. This is a sign of huge problems within the central bank. The Germans clearly have a problem with the direction of the ECB.”
From Eurocalypse, one of the resident BoomBustBlog traders:
The ECB is expected to make a UTURN and cut rates, that will add fuel to the fire. At the time of writing EURUSD was 1.41 and oversold, we sold even more to 1.40 then sawbriefly 1.42 on the EURCHF unwinding. That bounce proved the opportunity to sell as the oversold condition was removed… and now were down to 1.38. This move can go much further, EURUSD is headed for 1.20 rather quickly I think.
Only the technicals (which one should always respect) kept it bid, the fundamental story is horrible.
It’s a total mess in Europe…beware though of massive govt intervention at some stage which could/will squeeze this markets fiercely…even if in the long (or not so long) run Euro is doomed.
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And on that note, the French banks who’re so at risk due to Italian contagion are dropping like flies – 4% to 7% in a matter of minutes after NY opening. The US banks on the hook for all of that French exposure look set to follow suit as well, with puts starting to fatten on higher IV. For those who just don’t know…
Reggie Middleton is an entrepreneurial investor who guides a small team of independent analysts to uncover truths, seldom if, ever published in the mainstream media or Wall Street analysts reports. Since the inception of his BoomBustBlog, he has established an outstanding track record