"This is the final building block of the whole banking union. We make the banking sector responsible for their own risks and their own losses. That is an economically healthy way to approach the banking business."
- Ralph Solveen, head of economic research at Commerzbank AG
The tapering announcement by the Fed was supposed to move EUR/USD strongly downwards; however, welcoming signs from Europe have almost outweighed Bernanke's decision, with the most traded currency pair falling to just 1.3649. The main reasons behind the support of the single currency is the long-anticipated banking deal by the European finance ministers and a massive widening of the Eurozone current account in October.
Before a summit in Brussels EU finance ministers have finally broke a deadlock on how to deal with region's failing banks, and agreed on a pact that will create a 55 billion euros fund, which will be financed by the banking industry during the next 10 years. This deal is a vital part of wider efforts by the bloc's economies towards creating of a banking union in order to avoid taxpayer-funded bank bailouts in the future. Nonetheless, there are still disagreements over how these banks will be wounded up or re-capitalised in the foreseeable future, until the new arrangement are still taking shape.
Also Friday, the Euro has received an additional lift from the ECB report, showing the Eurozone current account surplus widened to 21.8 billion euros in October, following a 14.9 billion surplus a month earlier. The report suggests Eurozone members have continued to export more goods and services than they import.
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