Commerzbank's Thu Lan Nguyen says the ECB is expanding its EUREP facility to include all eligible non-Euro central banks. This move is meant to increase the amount of Euros available worldwide and help the Euro play a bigger role in international trade and reserves. But she also points out that people still don't want as much Euro money as they do Dollars, which makes it hard for the Euro to take a bigger share of the global financial scene from the Dollar.
The European Central Bank has increased the EUREP rate, but the demand for it is still not keeping up.
The ECB said over the weekend that it will allow all non-euro central banks to use its euro liquidity facilities in the future, unless there's a reason they can't. This means the Eurosystem's repo facility, called EUREP, which was mainly used by central banks in nearby regions, will now be available to more banks. The goal is to make sure there's enough euro liquidity available outside the euro area, especially when financial markets are unstable and need more support.
This step needs to be understood in light of the recent strong actions by EU leaders to make the euro more important in international trade. The message is straightforward: people should have access to euros whenever they need them. However, the main issue is that so far, there hasn't been much demand for euros.
When you look at how the ECB's euro liquidity lines have been used so far, it's easier to understand the difference compared to the US Federal Reserve's approach. One key time when the Fed's liquidity lines were really important was in 2020 during the coronavirus pandemic, when there was a lot of fear about lockdowns. At the highest point, the amount of money the Fed sent to foreign central banks through its USD lines reached about 450 billion US dollars.
The Fed's network is actually much bigger. The US Federal Reserve has ongoing swap lines with the five biggest central banks in the world, which are the European Central Bank, the Bank of Japan, the Bank of England, the Swiss National Bank, and the Bank of Canada. However, the key idea is that when there's stress in the global financial markets, people around the world tend to want US dollars instead of euros.
The goal of the European monetary authorities is simple: they want the euro to become so appealing that more companies start using it for payments between different countries. But to take over from the dollar, the euro needs to become a more widely used currency for trade between countries that aren't part of the eurozone.
The European Central Bank has increased the EUREP rate, but the demand for it is still not keeping up.
The ECB said over the weekend that it will allow all non-euro central banks to use its euro liquidity facilities in the future, unless there's a reason they can't. This means the Eurosystem's repo facility, called EUREP, which was mainly used by central banks in nearby regions, will now be available to more banks. The goal is to make sure there's enough euro liquidity available outside the euro area, especially when financial markets are unstable and need more support.
This step needs to be understood in light of the recent strong actions by EU leaders to make the euro more important in international trade. The message is straightforward: people should have access to euros whenever they need them. However, the main issue is that so far, there hasn't been much demand for euros.
When you look at how the ECB's euro liquidity lines have been used so far, it's easier to understand the difference compared to the US Federal Reserve's approach. One key time when the Fed's liquidity lines were really important was in 2020 during the coronavirus pandemic, when there was a lot of fear about lockdowns. At the highest point, the amount of money the Fed sent to foreign central banks through its USD lines reached about 450 billion US dollars.
The Fed's network is actually much bigger. The US Federal Reserve has ongoing swap lines with the five biggest central banks in the world, which are the European Central Bank, the Bank of Japan, the Bank of England, the Swiss National Bank, and the Bank of Canada. However, the key idea is that when there's stress in the global financial markets, people around the world tend to want US dollars instead of euros.
The goal of the European monetary authorities is simple: they want the euro to become so appealing that more companies start using it for payments between different countries. But to take over from the dollar, the euro needs to become a more widely used currency for trade between countries that aren't part of the eurozone.
