Week in FX Europe – Protests Deflate EUR

September 28, 2012 Share Print 4

Europe is facing an austerity backlash. Protests in Portugal, Spain and Greece speak volumes about what the citizens in those countries think of proposed measures to comply to European Union agreements. Germany continues to be the strongest economy and this week Angela Merkel has renewed her support of the eurozone. This happened during an event honoring former Chancellor Helmut Kohl the German political figure who was instrumental on the creation of the euro. Germany has ratified the European Stability Mechanism (ESM) but has capped German contribution to 190 billion euros.

Portugal has a 15.7% unemployment rate by official figures and up to 20% if people who have stopped looking for work are accounted for. At times 10% of its population has marched on the streets protesting the tax hikes and other austerity measures.

Spain has proposed a 39 billion euro austerity package with its 2013 budget. Unemployment rate in Spain is well above 20%. Protests have gotten violent and 5 regions have asked the goverment for financial aid. The austerity measures include unpopular items such as wage freezes for public sector workers, tax increases and spending cuts.

Speaking of unpopular decisions. The French goverment has confirmed that there will be a new tax rate of 75% for people earning over 1 million euros. This is part of an effort to reduce the deficit by 10 billion euros.

WEEK AHEAD

USD ISM Manufacturing
AUD Reserve Bank of Australia Rate Decision
GBP Bank of England Rate Decision
EUR European Central Bank Rate Decision
USD Fed Releases Minutes from Sept. 13 FOMC Meeting
JPY Bank of Japan Rate Decision
USD Change in Nonfarm Payrolls
USD Unemployment Rate
CAD Unemployment Rate

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Alfonso Esparza

Senior Currency Analyst at Market Pulse

Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.