FXStreet (Mumbai) – China’s stunning move to weaken its currency held a warning for Europe; that it cannot endlessly rely on exports and must instead generate domestic demand, European Central Bank (ECB) Executive Board member Benoit Coeure told a German paper on Friday.
Key Quotes:
“The depreciation of the renminbi can be seen as a symptom of a slowdown in the Chinese economy, at least in the export sector.”
“That is a reminder of the major global uncertainty that we face. Here in the euro area, we should see this as a warning about the importance of strong domestic demand.”
“That would make us totally dependent on global growth, particularly growth in emerging market economies. Euro area countries must strengthen domestic demand, and above all private investment, in order to make themselves more resilient.”
Speaking further, he observed several headwinds in the global economy – and the yuan’s recent depreciation was only one of them. Here, he pointed to overall sluggish global growth and falling commodity prices.
On Fed rate hike, “If the Federal Reserve comes to the conclusion that it can raise interest rates, that means that the US economy is strong. That would be good news for the global economy, and therefore also good news for the euro area.”
(Market News Provided by FXstreet)