Latest news with #ChristineLagarde
Yahoo
2 days ago
- Business
- Yahoo
Global chaos and looming trade wars set the stage for a ‘global euro moment' as trust in the EU surges
Trust in the European Union has soared to a nearly two-decade high, per the latest Eurobarometer poll released by the EU, as Europe emerges as a symbol of stability amid global trade chaos. The barometer results are a vote of confidence in Europe's standing against other major world powers at a time when many parts of the world are either ravaged by war or grappling with unprecedented trade tensions. It's also given the region's most prominent political figures a chance to toot Europe's horn, including Christine Lagarde, head of the European Central Bank. A raft of U.S. policy changes in recent months have spooked investors, leading to them limiting their exposure to the dollar. Instead, many have flocked to the euro and European markets more broadly. Days after President Donald Trump announced his initial tranche of tariffs, the euro rose to a three-year high against the U.S. dollar. 'The ongoing changes create the opening for a 'global euro moment',' Lagarde said earlier this week during a lecture in Berlin. She added that for the currency to leverage the status quo, Europe must build on its geopolitical, economic, and legal base. 'As a major actor in global trade, Europe already has a key ingredient of a strong geopolitical foundation, creating the potential for a virtuous circle of euro internationalization to unfold.' The British pound has also benefited from the volatility in the U.S. since the start of 2025. These rises are noteworthy as they follow several years of dollar strength, so much so that most metrics overvalue it, Goldman Sachs pointed out earlier in May. 'We're now seeing a bit of a reversal where people are more optimistic about the return and earnings prospects in Europe,' the investment bank noted. Months of erratic policies have dampened the U.S. dollar's status as a safe-haven currency, creating room for alternatives like the euro. A confluence of reasons explains the new injection of hope in the European region, including greater fiscal spending in Germany driven by new government reforms and defense outlays that will prepare Europe for the changing world order. Such forms of stimulus have helped European assets and the euro outperform their peers as they elevate the region's growth prospects. Europe's financial standing also feeds into its citizens' trust in the institution, versus declining trust in national governments, underscoring the bloc's importance even despite a marked growth in Euroscepticism recently. To be sure, the Eurobarometer survey involved over 26,000 interviews between March 26 and April 22 when concerns over Trump's tariffs and their fallout were highest. Since then, there have been flare-ups, adding to volatility—for instance, Trump threatened to impose 50% tariffs on the EU as their negotiations with the region were progressing slowly. He then delayed the deadline on the sharp levy to July 9 after 'a very nice call' with European Commission President Ursula von der Leyen. The EU is under pressure to strike a deal that will protect it from the harsh tariff impact while appeasing Trump into not jacking up duties in the future. It previously threatened reciprocal tariffs but postponed them after the American president suspended any charges for three months. The state of tariffs is uncertain at best. On Wednesday, a U.S. federal court blocked the Trump administration's sweeping tariff measures that will elevate the cost of imports. Economists aren't sure the buck stops here though. 'We haven't heard directly from President Trump on the matter yet, so it's unclear how the administration might respond going forward,' Deutsche Bank's Jim Reid wrote in a note Thursday. 'This could also have broader revenue implications, as they had been hoping to use tariffs as a source of revenue to fund other tax cuts.' The U.S. dollar jumped following the ruling, and Goldman Sachs' global foreign exchange strategist wrote in a note that 'it is likely to provoke broader relief across risk markets.' But given that the underlying reason for the dollar's pain this year has been oodles of uncertainty, that doesn't look like it's changing anytime soon. 'There's an initial reaction of a stronger dollar and weaker yen. However, considering judicial processes like appeals, I don't expect a continuous rise in the dollar,' said Hirofumi Suzuki, chief FX strategist at SMBC, according to Reuters. That gives Europe more opportunities to cash in on the moment and maybe, in time, seize the 'global euro moment' that Lagarde has identified. This story was originally featured on
Eyewitness News
2 days ago
- Business
- Eyewitness News
ECB's Lagarde pitches euro alternative to dollar in 'fracturing' world
BERLIN - European Central Bank President Christine Lagarde on Monday said the global economic order backed by the US dollar was "fracturing" and made a pitch for the euro as a global reserve currency. "The global economy thrived on a foundation of openness and multilateralism underpinned by US leadership," Lagarde said in a speech at the Hertie School in Berlin. Washington's support for a rules-based international system and the dollar as a reserve currency had "set the stage for trade to flourish and finance to expand". The persistence of that US-led economic order over the past 80 years had "proved immensely beneficial to the European Union". "But today it is fracturing," she said in an apparent reference to global trade tensions fuelled by US President Donald Trump's threat to impose sweeping tariffs on key partners. "Multilateral cooperation is being replaced by zero-sum thinking and bilateral power plays. Openness is giving way to protectionism." The recent upheaval was also threatening "the dominant role of the US dollar", she said. The disintegration of the global economic order would "pose risks for Europe", Lagarde said. "Any change in the international order that leads to lower world trade or fragmentation into economic blocs will be detrimental to our economy," she said. But the retreat of the US dollar could also "open the door for the euro to play a greater international role". Increasing the international role of the euro would lower borrowing costs for EU member states, insulate the bloc from exchange rate fluctuations and would "allow Europe to better control its own destiny", Lagarde said. For that to happen, the European Union would need a "steadfast commitment to open trade" and to underpin its position with sufficient security capabilities. It would also need to strengthen its economy and defend the rule of law, she said. "This is not a privilege that will simply be given to us. We have to earn it."
Reuters
2 days ago
- Business
- Reuters
Lagarde's euro 'battle cry' emphasizes EU cash need
LONDON, May 28 (Reuters) - If the euro supplants the dollar as the world's main reserve currency, Europe might lose some currency competitiveness - but the related capital flows it's seeking more than compensate. European Central Bank President Christine Lagarde, opens new tab weighed in on the debate about the euro's global reserve status on Tuesday by reiterating the ECB's long-standing aim to boost the currency's wider use and position it as the logical alternative to the dollar. The euro has long been the clear second choice in reserve usage, both in the positive and negative sense. While its share of overall reserve coffers is still far behind the dollar's, the euro is way ahead of any other serious rivals to the greenback bar gold. But what was eye-catching about the very vocal ECB support for wider euro usage was the timing and thrust. Lagarde's statements come amid fresh doubts about the dollar's haven status, the U.S. economy's role in the world at large and America's fraying geopolitical alliances - as well as the Trump administration's perceived desire for a weaker, more competitive exchange rate. And Lagarde's speech clearly framed U.S. difficulty as Europe's opportunity. After noting that the dollar and U.S. financial markets had been effective global anchors for decades, she added that "when doubts emerge about the stability of the legal and institutional framework, the impact on currency use is undeniable." "These doubts have materialised in the form of highly unusual cross-asset correlations since April 2 this year, with the U.S. dollar and U.S. Treasuries experiencing sell-offs even as equities fell," the ECB chief explained, referring to market ructions after U.S. President Donald Trump's 'reciprocal tariff' gambit last month. "The EU has a legitimate reason to turn its commitment to predictable policymaking and the rule of law into a comparative advantage," Lagarde added, underscoring the need for political and internal capital market reforms in the EU that would enable the bloc to seize this opportunity. Clearest of all was her plea for joint debt issuance to boost the scale of 'safe' euro assets, a move that is still controversial within Europe due to persistent German pushback. "Economic logic tells us that public goods need to be jointly financed," she said, re-upping the ECB's preference for expanding the pool of jointly issued euro assets. And she also pointedly underlined the attraction of Europe's military rearmament to official investors who "seek geopolitical assurance in another form: they invest in the assets of regions that are reliable security partners and can honour alliances with hard power." The frank speaking caught everyone's attention. Rabobank strategist Jane Foley said the speech had a 'battle cry' element to it. It's still anyone's guess what the outcome will be of the bilateral U.S.-EU trade talks come July's deadline and as a host of disagreements remain. Trump's jarring stop/start EU tariff announcements this past weekend make it difficult to sketch out a possible resolution, and many experts suspect Washington is intent on talking to individual countries to split the group. The tone of the ECB's stance suggests it's bracing for the risk of harsher standoffs ahead. What's more, Lagarde's statement comes as the euro's nominal broad exchange rate has soared to record highs, up almost 20% over the past decade. While that won't please many exporters in the bloc, it does suggest that the ECB - unlike the U.S. administration - is comfortable with its currency's structural strength and thus may be willing to ease policy accordingly. And that will help with the additional debt financing needed of Europe's ambitious new projects - most notably in defense, green energy and tech. On that financing need, central and private sector bankers tend to agree with former ECB chief Mario Draghi about the scale of what is needed, as outlined in his recommendations last summer., opens new tab For example, BNP Paribas economist Laurent Quignon, opens new tab wrote on Tuesday about the total sums needed, as he made a pitch on what Europe can do this year to boost financing via changes to regulation, securitization and the banking union. Adding Draghi's call for annual energy and tech investments of up to 800 billion euros to an almost 200 billion euros of new defense spending and on top of ongoing commitments, he calculated an additional annual EU financing requirement of 1.5 trillion euros through 2028 and 1.4 trillion from then to 2030. That would be more than double the flows observed in the decade through 2024 - and about the same as the total amount of European money that has flowed into the U.S. equity market since 2012. Whatever the implications for exchange rate competitiveness, Europe now has a big bill to pay. Some 'exorbitant privilege' would help. The opinions expressed here are those of the author, a columnist for Reuters
Irish Times
3 days ago
- Business
- Irish Times
US trade policy will have ‘lasting impact' on global economy
A majority of economists believe US trade policy will have a 'lasting impact' on the global economy. That's according to the World Economic Forum's latest survey of chief economists. The snapshot of opinion recorded in early April just after U S President Donald Trump's Liberation Day tariff announcement found most economists (77 per cent) were anticipating 'weak or very weak growth' through 2025 in the US, alongside high inflation and a weakening dollar. 'By contrast, they were cautiously optimistic about Europe's prospects for the first time in years, mainly because of expectations of fiscal expansion, notably in Germany,' the report noted. READ MORE The outlook for China remains muted with chief economists divided over whether the Asian powerhouse will reach its target of 5 per cent GDP (gross domestic product) growth this year. Overall economists see Washington's protectionist pivot and on-off tariff threats as delaying strategic business decisions and increasing recession risks, the report said. [ Christine Lagarde said to have discussed leaving ECB early to head WEF Opens in new window ] A strong majority (79 per cent) said they viewed current geoeconomic developments 'as signs of a significant structural shift for the global economy rather than a temporary disruption.' Nearly all the chief economists (97 per cent) flagged trade policy among the areas of highest uncertainty, followed by monetary policy (49 per cent) and fiscal policy (35 per cent). Ford Chief Lisa Brankin on accelerating the switch to EVs Listen | 41:35 A majority (87 per cent) anticipate that businesses will respond to this uncertainty by delaying investment. Debt sustainability was also pinpointed as a concern, cited by 74 per cent of respondents for both advanced and developing economies. An overwhelming majority (86 per cent) said they expected governments to meet rising defence spending needs through increased borrowing, potentially crowding out investment in public services and infrastructure. Artificial intelligence is expected to drive growth, but 47 per cent of economists anticipate will result in 'net job losses'. 'Policymakers and business leaders must respond to heightened uncertainty and trade tensions with greater co-ordination, strategic agility and investment in the growth potential of transformative technologies like artificial intelligence,' said Saadia Zahidi, managing director, World Economic Forum. 'These steps are essential for navigating today's economic headwinds and securing long-term resilience and growth,' she said.
Yahoo
3 days ago
- Business
- Yahoo
Morning Bid: Spotlight back on Nvidia
By Mike Dolan LONDON (Reuters) - What matters in U.S. and global markets today By Mike Dolan, Editor-At-Large, Financial Industry and Financial Markets After weeks of trade and debt anxiety, the spotlight has shifted back to the artificial intelligence theme on Wednesday, as investors wait with rare trepidation for Nvidia's quarterly earnings. I'll dive into all of today's other market news and then explain the significance of the timing of ECB President Christine Lagarde's recent call for the euro to replace the dollar as the world's reserve currency. Today's Market Minute * Demand at an auction of 40-year Japanese government bonds on Wednesday fell to the lowest since July, during a selloff in super-long debt this month. * Oil prices settled 1% lower on Tuesday as investors worried about a supply glut after Iranian and U.S. delegations made progress in their talks and on expectations that OPEC+ will decide to increase output at a meeting this week. * President Vladimir Putin's conditions for ending the war in Ukraine include a demand that Western leaders pledge in writing to stop enlarging NATO eastwards and lift a chunk of sanctions on Russia, according to three Russian sources with knowledge of the negotiations. * If the United States is to significantly reduce or eliminate its trade deficit, the dollar will have to weaken a lot. How much is unclear, as history shows large dollar declines are rare and have unpredictable consequences for trade. Check out Reuters columnist Jamie McGeever's latest piece. * U.S. President Donald Trump's sweeping tax and spending bill calls for drastic cuts to clean energy tax credits that have been major drivers of the recent boom seen in utility-scale renewable power and battery capacity. In Reuters columnist Gavin Maguire's latest piece, he outlines the potential implications of this in six charts. Spotlight back on Nvidia The inevitable levelling off of Nvidia's explosive growth is already underway, but the chip designer also faces investor worries about AI overspend and questions about how much U.S. chip curbs on China will cost the company going forward. Nvidia's stock price - which is basically unchanged in 2025 to date - climbed anew on Tuesday along with the broad market rally. That was helped by reports that the company will launch a new chipset for China at significantly lower prices than the currently restricted H20 model. Meanwhile, the overall market mood improved considerably, with the S&P 500 jumping 2% on relief over temporarily defused U.S.-European trade tensions, a retreat in long-term government debt yields, and positive U.S. consumer confidence readings for May. However, there were mixed takes on the May household survey, capital goods orders data for last month was soft, and edginess in long bond markets is already coming back. So the main driver of the rally was likely the U.S.-EU trade news after Trump backed down from Friday's 50% tariff threat against the European Union, delaying its implementation until July 9. EU officials have asked leading European companies and CEOs for details of their U.S. investment plans, according to two sources familiar with the matter, as Brussels prepares to advance trade talks with Washington. Tensions on long-dated government debt resurfaced today, meantime, with another tepid sale of Japan's ultra long bonds, reinforcing speculation that Tokyo may be forced to trim sales of debt of such long maturities as fiscal worries grow. The Ministry of Finance sold about 500 billion yen ($3.46 billion) of 40-year bonds with a bid-to-cover ratio of 2.21, the lowest since a sale in July last year and well below the historical average of 3. That saw 30-year JGB borrowing rates jump back about 5 basis points from Tuesday close, drawing long-dated yields higher around the world. The yen strengthened slightly on the day. With its own home-grown fiscal concerns, the U.S. saw 30-year yields also back up about 5 bps to just under 5%. Some $70 billion of 5-year Treasury notes come under the hammer later. Meanwhile, investor attention has also turned to a Financial Times report that European Central Bank President Christine Lagarde considered stepping down before her term ends in 2027. The ECB responded by saying Lagarde was determined to complete her eight-year term. Elsewhere, the New Zealand dollar held firm even after the country's central bank cut its benchmark rate by 25 bps to 3.25% and flagged a slightly deeper easing cycle than it forecast three months ago. And Shein is working towards a listing in Hong Kong after the online fast-fashion retailer's proposed initial public offering in London failed to secure the green light from Chinese regulators. Now to today's column, where I look into this week's combative speech from ECB boss Lagarde on the status of the euro. Lagarde's euro 'battle cry' emphasizes EU cash need If the euro supplants the dollar as the world's main reserve currency, Europe might lose some currency competitiveness - but the related capital flows it's seeking more than compensate. European Central Bank President Christine Lagarde weighed in on the debate about the euro's global reserve status on Tuesday by reiterating the ECB's long-standing aim to boost the currency's wider use and position it as the logical alternative to the dollar. The euro has long been the clear second choice in reserve usage, both in the positive and negative sense. While its share of overall reserve coffers is still far behind the dollar's, the euro is way ahead of any other serious rivals to the greenback bar gold. But what was eye-catching about the very vocal ECB support for wider euro usage was the timing and thrust. Lagarde's statements come amid fresh doubts about the dollar's haven status, the U.S. economy's role in the world at large and America's fraying geopolitical alliances - as well as the Trump administration's perceived desire for a weaker, more competitive exchange rate. And Lagarde's speech clearly framed U.S. difficulty as Europe's opportunity. After noting that the dollar and U.S. financial markets had been effective global anchors for decades, she added that "when doubts emerge about the stability of the legal and institutional framework, the impact on currency use is undeniable." "These doubts have materialized in the form of highly unusual cross-asset correlations since April 2 this year, with the U.S. dollar and U.S. Treasuries experiencing sell-offs even as equities fell," the ECB chief explained, referring to market ructions after Trump's 'reciprocal tariff' gambit last month. "The EU has a legitimate reason to turn its commitment to predictable policymaking and the rule of law into a comparative advantage," Lagarde added, underscoring the need for political and internal capital market reforms in the EU that would enable the bloc to seize this opportunity. Clearest of all was her plea for joint debt issuance to boost the scale of 'safe' euro assets, a move that is still controversial within Europe due to persistent German pushback. "Economic logic tells us that public goods need to be jointly financed," she said, re-upping the ECB's preference for expanding the pool of jointly issued euro assets. And she also pointedly underlined the attraction of Europe's military rearmament to official investors who "seek geopolitical assurance in another form: they invest in the assets of regions that are reliable security partners and can honour alliances with hard power." WHATEVER IT TAKES The frank speaking caught everyone's attention. Rabobank strategist Jane Foley said the speech had a "battle cry" element to it. It's still anyone's guess what the outcome will be of the bilateral U.S.-EU trade talks come July's deadline and as a host of disagreements remain. Trump's jarring stop/start EU tariff announcements this past weekend make it difficult to sketch out a possible resolution, and many experts suspect Washington is intent on talking to individual countries to split the group. The tone of the ECB's stance suggests it's bracing for the risk of harsher standoffs ahead. What's more, Lagarde's statement comes as the euro's nominal broad exchange rate has soared to record highs, up almost 20% over the past decade. While that won't please many exporters in the bloc, it does suggest that the ECB - unlike the U.S. administration - is comfortable with its currency's structural strength and thus may be willing to ease policy accordingly. And that will help with the additional debt financing needed of Europe's ambitious new projects - most notably in defense, green energy and tech. On that financing need, central and private sector bankers tend to agree with former ECB chief Mario Draghi about the scale of what is needed, as outlined in his recommendations last summer. For example, BNP Paribas economist Laurent Quignon wrote on Tuesday about the total sums needed, as he made a pitch on what Europe can do this year to boost financing via changes to regulation, securitization and the banking union. Adding Draghi's call for annual energy and tech investments of up to 800 billion euros to an almost 200 billion euros of new defense spending and on top of ongoing commitments, he calculated an additional annual EU financing requirement of 1.5 trillion euros through 2028 and 1.4 trillion from then to 2030. That would be more than double the flows observed in the decade through 2024 - and about the same as the total amount of European money that has flowed into the U.S. equity market since 2012. Whatever the implications for exchange rate competitiveness, Europe now has a big bill to pay. Some 'exorbitant privilege' would help. Chart of the day 'Nvidia day' has become a moment of great excitement for markets in recent years, as the AI darling's stellar earnings and stock gains have typically impressed Wall Street. But investors are approaching today's announcement with caution. That's because Trump's administration, in a fresh effort to limit Beijing's access to cutting-edge technology, last month put export limits on Nvidia's H20 chip, a move the company said would result in $5.5 billion in charges. While the company is expected to report first-quarter revenue surged an annual 66.2% to $43.28 billion, analysts put the quarterly revenue hit ahead from the China chip curbs at anywhere from $3-$4.5 billion. Today's events to watch * Richmond Federal Reserve's May business surveys (10:00 AM EDT); Dallas Federal Reserve May service sector survey (10:30 AM EDT) * Federal Reserve releases minutes of last policy meeting; New York Fed President John Williams and Minneapolis Fed chief Neel Kashkari speak * U.S. Treasury sells $70 billion of 5-year notes, $28 billion of 2-year floating rate notes * U.S. corporate earnings: Nvidia, Agilent, Salesforce, Synopsys, Nordson Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (By Mike Dolan; Editing by Anna Szymanski) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
