ForexNewsNow – While most forex analysts expected US President Barack Obama’s speech on job stimulus on Thursday to be the main economic event of the week, it seems it had almost no effect on the markets because of a completely different news flash: European Central Bank Chief Economist Juergen Stark announced his resignation on Friday.
Volatility hit the euro hard on Friday following Stark’s announcement. The single currency collapsed to a more than 6-month low vis-a-vis the US dollar, reaching an appalling low of $1.3628. It was quite a slap in the face to all of the European leaders who keep on trying to minimize the euro crisis in the media.
During a speech last week, French President Nicolas Sarkozy repeated once again that “the euro remains strong.” When will European leaders such as Sarkozy and German Chancellor Angela Merkel finally admit that the Euro zone is in very serious danger?
Both Stark’s resignation and the euro’s free fall on Friday should put the record straight for European economic leaders. Greece is still in a disastrous situation which hasn’t improved despite the much-touted second bailout plan and all other European efforts on its behalf.
Earlier this week, ForexNewsNow also published a study of 3 possible scenarios in case a country such as Greece, Spain, Italy or Portugal were to abandon the euro. The main conclusion is the fact that European federalism will be the only cure to Europe’s economic diseases.
The main economic releases for this week, such as the French Consumer Price Index on Tuesday or the US CPI on Thursday, could accentuate the trend seen on Friday for EUR/USD. In other words, this heavily traded pair could sink even further this week in the absence of serious evidence that increased European federalism is being advanced by European leaders – France and Germany in particular.