Why China’s currency reserve managers must pay attention to the euro in 2020
- The euro could be a major winner in the currency markets this year, as world trade and the German economy get back on track
- If the euro rallies against the dollar, there are important implications for China’s currency reserve management
This could all change very soon though, and euro bears should be on the alert for a quick turnaround in the currency’s fortunes this year. The euro could be one of the major winners in the currency markets in 2020 as short positions are closed out and punters take a more upbeat attitude towards the currency. A stronger European economy is an opportunity for Chinese exporters.
Many of the negatives which have plagued the euro in the past few years could soon vanish. With Britain’s imminent departure from the European Union looking less of a future shock, many of the associated risks of a hard exit have receded.
Although there’s still plenty of hard work to be done in negotiating a less-damaging divorce, there seems to be some prospect of getting back to business as usual, albeit on different terms, and therefore avoiding the calamitous economic fallout many have feared.
And with the United States and China finally signing the first part of a tentative trade deal, world trade flows have a chance of rising back to normal levels in the next few years.
Europe’s biggest economy, Germany, should be doing a lot better this year as global business activity returns to normal. Thanks to the trade war, German growth slowed to 0.6 per cent last year, the weakest rate since 2013, but at least the economy escaped recession.