While all eyes were on the Federal Reserve’s latest interest rates indecision but, anticipating an anti-climax, we look at Europe with the help of Jonathan Loynes, Chief European Economist of Capital Economics. 

Although a largely forgotten story this week, Europe remains integrally involved in all the major themes.  Emerging markets are struggling to compete due to the higher dollar but specifically because the dollar is higher relative to the likes of the yen and the euro.  The consensus is for these markets to ease further in the future.  If that’s the case then it naturally caps the extent to which US and UK rates can rise without provoking negative consequences.

In this podcast we consider the near term outlook as Greeks go to the polls for the second time this year (third if you include the shambolic referendum). Looking further out we consider whether any outcome will address the structural problems faced by the European economy and Greece’s debt load in particular.

In anticipation of Europe losing momentum over the coming quarters Capital Economics expect more QE to follow and so we discuss the efficacy of the policy. 

Finally we consider the risks associated with efforts to renegotiate the UK’s membership of the European Union.

 

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