AUDIO: Is the European Monetary Union bound to fail?


"The key issue on the market's mind is the eurozone debt crisis and whether the EMU is bound to fail," says Beecroft. "But it is important to understand the rules of engagement and that politicians will do everything that is expedient to get through the crisis."

He says Italy's negative outlook downgrade by Standard & Poor's and the growing risk that Spain will be drawn into the maelstrom of the crisis are key hurdles, but that they will be overcome.

"We see a gradual descent in EUR/USD over the next six months to 1.35, which might be exacerbated by a pause in rate hikes by the European Central Bank," says Beecroft. "But eventually the tide will turn and either in Q4 of this year or Q1, 2012, we expect to see a third round of quantitative easing in the US as unemployment will not have decreased rapidly enough and inflation will have peaked and be coming down again."

He adds it is also possible the market will begin to look through the present risks in the eurozone and see a stronger northern Europe. He expects growth in Germany, France, Belgium, Netherlands, Finland and Luxembourg will bring strength to the euro in 2012 to beyond 1.50.

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