ECB’s executive board member Bini-Smaghi says that financial markets are more optimistic about growth than the forecasts would imply. Low rates and the return of risk appetites may push investors into speculative positions, he says. National banking regulators need to address the reliance of some banks on ECB finance, he warns. (Many are concerned that European banks will begin to fail once the ECB cuts off unlimited funding at 1%…). Excess forex volatility is a risk to the recovery, the banker said.
EUR/USD is taking it all in stride, though Bini-Smaghi appears to be trying to deflate the asset balloon. It trades at 1.4907.