Mixed signals show euro is in limbo

Euro sign1The future of the euro hangs in the balance as seemingly contradictory comments from EU officials contribute to continued unease among investors in European markets.

Ewald Nowotny, a council member at the European Central Bank, told an Austrian magazine that he expects member states will not push through changes to the EFSF (European Financial Stability Fund) bailout plan by the end of October, as planned.

However, German finance minister Wolfgang Schaeuble said in a radio interview that the euro is a stable currency and claimed downward movement in the markets has been exaggerated.

Clive Lennox, head of foreign exchange trading at boutique brokerage Clear Currency, argued that the confusion shows the euro is lacking direction. It is now in “limbo”, he said.

Some analysts believe there may be more turmoil to come. David Miller, a partner at Cheviot Asset Management, which manages £3.5bn (€4bn), said the global economy is still working through the credit bubble.

“There are great tensions in the world’s economy – politicians are scrambling to find growth to pay off the debts and it isn’t working, there are tensions emerging between developed and emerging economies and the financial system continues to be volatile.”

©2011 funds europe