The mandate of Mario Draghi, the most powerful governor in the history of the European Central Bank, has come to an end. The savior of the euro, which will go down in history for his famous “whatever it takes” pronounced on July 26, 2012 in London, which marked a turning point in the monetary policies of the eurozone, will officially leave his position to Christine Lagarde, the strong woman of the international financial establishment and of the French entourage, who comes directly from the presidency of the International Monetary Fund, where she was known more like a hawk than a dove, unlike Draghi.
Lagarde said her presidency will be in continuity with that of her predecessor, based on pro-growth policies. But many economists have serious doubts about this. Lagarde, in fact, was put in charge by the Franco-German axis, by Angela Merkel and Emmanuel Macron. Germany and France have traditionally always had different visions regarding monetary policies. The Germans are orthodox, stubborn opponents of inflation, always opposed to any form of use of money for growth purposes, opponents of Draghi through the Bundesbank, the powerful German central bank, while the French are softer, having a more socialist vision and a more moderate view.
And yet, recently, something suggests that even France has moved away from Draghi’s super-expansive politics and its top officials are approaching the positions of the German hawks: Villeroy, Cœuré, Hannoun, de Larosière by surprise have taken a position against the QE2, aligning with the position of the German Sabine Lautenschlager, member of the Executive Board and of the Governing Council of the ECB, which resoundingly resigned two years in advance of the natural expiry of her mandate, in full disagreement with Draghi’s policies.
Finally, it is worth remembering that D raghi often entered the speeches of the U.S. president Donald Trump, who, accused him of being a manipulator of the euro-dollar exchange rate but also a central banker to follow as example for the Federal Reserve.
Draghi has always divided. Also on the forex markets. Did he really want to depreciate the euro against the greenback despite having always denied the possibility (by statute) of doing it? It’s difficult to say. Certainly the euro has undergone a major devaluation over the last months, although it is not easy to separate the causes, which are the ultra-expansive monetary policies of the ECB and the negative performance of the European economy.
Will the EURUSD exchange rate change under the Lagarde presidency? It is likely, if indeed the new governor were to be discontinued immediately with his predecessor. We will see it from the first board meetings. A reduction in the quantitative easing program preceded by a hawkish revision of forward guidance could strengthen the single currency over the medium term. What is certain is that traders place very high expectations on the new Lagarde agenda, ready to take advantage of it.