Euro Steady As Eurozone Banking Union Becomes A Reality
The euro remained steady at $1.3822 at 5:40 GMT on Wednesday morning.
The common currency gained strength early in the week after the European Central Bank hinted at further easing. Despite the situation in Ukraine and uncertainty about the region’s recovery, the euro has held on to the buoyancy.
However, an upcoming speech from Federal Reserve Chair Janet Yellen could reverse some of the dollar’s losses. Yellen is due to speak at the Economic Club of New York later on Wednesday, which many are hoping will provide more insight into the bank’s future plans.
Among other things, Yellen is expected to address the labor market and how it will affect the Fed’s decision making, inflation concerns and regulatory issues.
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In the eurozone, the region’s Parliament approved banking rules which will govern the upcoming banking union and provide a structure for unwinding failing banks. The region’s banking union has been two years in the making as lawmakers argue on the best way to sever the link between governments and banks.
The Wall Street Journal reported that European Commissioner for Internal Market and Services Michel Barnier said the decision in Parliament has made the region’s banking union a reality. He verified that the new rules would help keep taxpayers from shouldering the burden of a failing bank.
However, not everyone has been positive about the banking union’s structure. Many analysts believe that too much authority is given on a national level, and that the banking union’s supervisor, the ECB, should take on more responsibility to oversee operations more closely.
In any case, the new law will require state governments to build up cash reserves which can be used to guarantee deposits of up to $138,000. In order to create the funds, EU states will collect levies from their banks.
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