For those following the euro, here’s a quick reminder that there are two different species of “hawks” in the Eurozone.Jean-Claude Trichet was sounding “hawkish” last week when he hinted that he could raise rates very soon. That sent the euro higher for the obvious reasons. Trichet is one kind of hawk.
Then there’s a different kind of hawk embodied by Bundesbank chief Axel Weber. He also would like to hike rates, but he’s also hawkish on the bailout mechanism, and some commentary from him today about not continuing the ECB’s ongoing support for the periphery is sending yields sharply higher and the euro lower.
The euro’s big run this year has been fuelled by the fantasy that the ECB would get hawkish on rates, while staying dovish on debt monetization.
Today that fantasy scenario is being sharply called into question.