Rabobank’s Global Daily report highlights the European Central Bank’s decision to allow all non-Eurozone central banks to borrow Euros against Euro-denominated collateral as an attempt to bolster the Euro’s global role. The report stresses that this implies larger Euro-denominated asset markets, a bigger European trade deficit, and a stronger Euro exchange rate, which would be politically sensitive across member states.

ECB liquidity step and Euro implications

"The ECB played its part by announcing “all central banks" outside the euro area would be allowed to borrow euros against collateral denominated in that currency."

"This is an attempt to boost the global role of the euro alongside the political noises made in Munich."

"The key issues are: (1) is the supply of euros globally an issue or the demand for them?; (2) it implies a much larger number of euro-denominated assets and a much larger European trade deficit; and (3) a much higher euro exchange rate, which wouldn’t be welcome in all member states to put it mildly."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)