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On July 30th, the Information Office of the Fujian Provincial Peoples Government held a press conference on the financial operation of Fujian Province in the first half of 2026. The conference reported on the relevant situation of Fujians financial operation in the first half of 2026. In the first half of the year, the total social financing scale of Fujian Province increased by 580.04 billion yuan. At the end of June, the balance of various loans in local and foreign currencies of financial institutions in the province was 9.1 trillion yuan, a year-on-year increase of 2.9%. The balance of various deposits in local and foreign currencies was 9.6 trillion yuan, a year-on-year increase of 7.8%.1. Bailey: The Bank of England is not expected to adjust interest rates this year, and its assessment of quantitative tightening may be overshadowed by inflation guidance and voting disagreements. 2. ING: The Bank of England is expected to hold rates steady throughout the year, with the latest forecast showing inflation approaching 3% in the second half of the year to early next year. 3. BNY Mellon: The Bank of England is not expected to change its policy stance, with at most two dissenting voices. Bailey will continue to emphasize that wage growth is slowing. 4. Berenberg: The Bank of England is expected to keep interest rates at 3.75%, or threaten to tighten policy, but a rate cut seems more likely in the future. 5. UBS: The Bank of England is likely to keep interest rates unchanged at 3.75% by a 7-2 vote. The decision is unlikely to have a significant impact on the pound. 6. MFS Financial: The Bank of England is expected to keep interest rates unchanged, with a cautious stance likely to prevail, and it is likely to remain on hold for the next few months. 7. Reuters poll: The Bank of England is expected to keep interest rates unchanged this year, but the risk of inflation caused by the US-Iran conflict remains, and the slowdown is unlikely to be sustained. 8. InvestBank: Expects the Bank of England to not adjust interest rates this year; current policy is already in a restrictive zone, and there is no need for immediate action. 9. Bank of America: Expects the Bank of England to keep interest rates unchanged, but may leave the door open for future rate hikes. Pay attention to the assessment of quantitative tightening. 10. Commerzbank: The Bank of England will avoid raising interest rates; if the US-Iran conflict ends before the end of September and employment remains weak, the probability of a rate cut is greater than a rate hike. 11. Oxford Economics: Expects the meeting to emphasize the upside risks to inflation and hint at a willingness to raise the benchmark interest rate if a second round of effects occurs. 12. National Institute of Economic and Social Research: Although inflation is expected to rise sharply in the second half of the year, the Bank of England is expected to remain on hold until the end of 2027.July 30th - A World Gold Council report indicates that investment demand is expected to be the main driver of gold demand growth for the remainder of 2026, increasingly supported by over-the-counter (OTC) trading activity and Asian investment demand. Central banks will remain significant gold buyers. High gold prices will continue to suppress jewelry demand, but the response from gold mine production and recycled gold supply is expected to be relatively mild. Gold investment demand is projected to remain positive for the remainder of 2026. OTC trading activity and Asian investment demand are expected to play a greater role, while Western gold ETF flows may continue to be sensitive to US Treasury real yields, Federal Reserve monetary policy expectations, and the dollars performance. Although consumer spending remains relatively resilient, high gold prices will continue to suppress jewelry demand; demand for gold in the technology sector is expected to further benefit from artificial intelligence investment, although downside risks are accumulating.BMW CEO: We are reassessing what technologies, model variants, and powertrains we need for the future.On July 30th, Eckhard Schulte, Chairman of the Board of MainSky Asset Management, stated in a report that Federal Reserve Chairman Warshs avoidance of providing any form of forward guidance makes it extremely difficult for the market to form a coherent analysis of Fed policy. The market will have to adapt to this communication style; the resulting high level of uncertainty will drag down stocks, long-term bonds, and the dollar. Warsh clearly stated that the Fed is serious about its 2% inflation target and intends to achieve it. However, he did not provide a coherent explanation for why the Fed did not heed the opinions of three dissenting members who advocated for interest rate hikes.

How will the trend of EUR/USD in 2021?

Eden

Oct 25, 2021 14:05

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Since 2015, the international role of the euro has changed and it has become an important source of global liquidity supply growth, which has a greater impact on international capital flows and financial stability. Under the fundamentals of the European economy, unconventional monetary policies, and the wave of "de-dollarization", coupled with the weakening of the U.S. dollar under the epidemic in 2020, the European Union has reached a 750 billion euro recovery fund agreement. Various factors have pushed the euro from assets to liabilities. End, risk aversion and reserve functions are enhanced.


The role of EUR

Since the European debt crisis in 2009, the international status of the euro has been significantly impacted, and its share in global payment transactions, international investment and financing, and foreign exchange reserves has shrunk significantly. But since 2015, the international role of the euro has begun to change.


The euro turned to the debt side and became the main financing currency. From the perspective of the international bond market.The scale and proportion of yuan-denominated financing reversed and rebounded, showing an overall upward trend. In the first three quarters of 2019.


The scale of issuance of yuan-denominated international bonds was US$1.64 trillion, an increase of 0.6% year-on-year and an increase of 10.4% year-on-year.In contrast, the U.S. dollar and other currencies’ international bond issuance amounted to US$2.22 trillion and US$0.90 trillion respectively.It contracted 6.3% and 2.9% year-on-year. On the whole, the utilization rate of dollar-denominated prices has declined, and the amount of euro-denominated issuance has increased relatively.


As of the end of the third quarter of 2019, the euro accounted for 33.5% of the total international bond issuance, which was the lowest level three years ago(25.5%) rebounded by 8 percentage points; the US dollar accounted for 49.2%, a contraction of 8.3% from the same period in the three-year period.


Reasons for the changing role of the euro


The European Central Bank's monetary policy has promoted the euro interest rate and exchange rate to a certain extent

The low interest rate and exchange rate of the euro have reduced the income of the euro as an investment currency on the one hand, and also reduced the cost of the euro as a financing currency on the other hand. In the international financial market chasing interest rates, the euro is more and more favored by international borrowers, and more and more issuers have begun to borrow euro bonds or replace high-yield bonds with euro bonds in order to reduce financing costs. In addition, the financing cost of borrowing currencies such as the US dollar through the euro has been greatly reduced, or even negative. To a certain extent, this has contributed to the increase in the scale of euro financing.


De-dollarization

With the normalization of the Fed’s monetary policy and the strengthening of the US dollar exchange rate, especially in an environment of weak global growth, emerging economies are facing huge US dollar debt pressure. Not only do they have the need for diversified financing, but they are also unable to continue to borrow US dollar debt. The euro has become the primary Alternative currency.


Under the continuous loose monetary policy of the Eurozone, the interest of emerging economies in the liquidity of the euro has increased substantially, and the liquidity of the euro in emerging markets has maintained high growth for four consecutive years. Taking the Asia-Pacific region as an example, the dollar liquidity growth rate in the first three quarters of 2019 was -1.1%, -1.1%, and 0.3%; in comparison, the euro liquidity growth rate was 23.2%, 25.0%, and 9.9%. . This shows that emerging market economies seek diversified financing to reduce dollar risk exposure.


On the other hand, geopolitical risks have caused some countries to reduce dollar trading and holdings and begin to switch to the euro.


After President Lampe came to power, the United States has attacked all sides in the political and diplomatic fields, deepening its suspicion with traditional allies. Take Russia as an example. Since the implementation of a new round of sanctions by the United States in early 2018, Russia has sold approximately US$100 billion worth of US dollar reserve assets and purchased nearly US$90 billion worth of Euro assets. As of the third quarter of 2019, the shares of Russian dollar-denominated assets and liabilities were 57.4% and 55.3%, respectively, a decrease of 14 percentage points and 16 percentage points from their 2015 highs, while the share of euro-denominated assets and liabilities rose by more than 8%. Percent and 1 percent.

U.S. dollar is difficult to be replaced

It is difficult for the euro to recover to the pre-crisis level in the short term, and the trend towards international financing and reserve currencies will continue during this period of time. Although the euro’s international liquidity has maintained rapid growth since 2015, it is still more crisis.


There is a certain gap between the former status and the dollar share. Except for Europe and Canada, the euro’s balance of international bonds less than 16% of China’s domestic use; the U.S. dollar occupies an absolute dominant position in the international bond market, especially the Middle East and offshore financial centers.


Leading position, its share is close to 90%, which is in line with the U.S. dollar as a commodity denominated currency and the core currency of financial transactions.Commensurate. Based on Europe’s weak economic situation and divided political game, it is difficult for the euro to return to crisis in the short term.The former has the same position as the U.S. dollar, which will remain an important choice for international financing and hedging under the loose monetary policy item.


2021 ：Be alert to the risk of Euro liquidity reversal

Be alert to the risk of Euro liquidity reversal. At present, the euro has become an important source of global liquidity supply growth.It has a greater impact on international capital flows and financial stability. However, international organizations such as the IMF and marketThe focus of attention has always been on dollar financing analysis, and the focus on the euro is much lower than the dollar. Recently, global public health incidents have intensified market concerns, the new crown epidemic in Europe has become increasingly severe, the European Central Bank is expected to further cut interest rates, and the international financial and arbitrage traders have borrowed in euros, and European investors have to use the euro issued by emerging market borrowers.


(Editor's note: This article is adapted from the Bank of China Research Institute "Renminbi Internationalization Observation", Issue 5, 2020: The change, reasons and prospects of the international role of the euro, the title is prepared by the editor)

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