30.05.201916:25 Forex Analysis & Reviews: The appointment of Jens Weidmann as head of the ECB will cause a rally of euro

As soon as the elections to the European Parliament were over, the struggle for the highest posts of the European leadership began.

It is assumed that the main opposition will unfold between Germany and France, which seek to occupy a leading position in the block.

The fate of the euro will depend on who will head the ECB, the protege of Angela Merkel or Emmanuel Macron.

One of the potential candidates for this position is Jens Weidmann, the President of the German Federal Bank, who is known for his "hawkish" views.

Previously, he openly opposed the ECB's stimulating measures, purchases of sovereign bonds by the regulator and called for the normalization of monetary policy (an increase in interest rates).

Such a candidate represents the most striking contrast with the policy of the current ECB President Mario Draghi.

According to experts, the appointment of J. Weidmann to the position of President of the ECB will help strengthen the euro.

Moreover, the very presence of a German at the helm of the European Central Bank can help prevent the main risk to the stability of the euro – the confrontation between Rome and Brussels over the budget deficit and the level of debt. On Tuesday, Deputy Prime Minister Matteo Salvini announced his intention to make the ECB a guarantor of public debt. Most likely, this initiative will break up about the team of Jens Weidmann and former Spanish Minister of Finance Luis de Guindos, who is now the vice-chairman of the ECB. In his previous position, he proved willingness to take unpopular austerity measures.

Thus, if the post of head of the ECB will take J. Weidmann, then the mood of the "bulls" on the euro will seriously improve.

However, it is unlikely that the regulator will sit idly until October of this year, when Mario Draghi resigns. In June, the Central Bank should announce the details of the long-term refinancing program (LTRO). If the loan rate is set at -2%, which is actually an effective subsidy of banks, interest in the program can be very high. At the same time, the ECB may raise the rate on deposits from the current -0.4% in order to attract investors. Such a policy seems to be more effective than quantitative easing (QE).

Even a hint at an earlier time for increasing the deposit rate than the market expects will be a catalyst for the growth of the euro.

In the meantime, the EUR/USD pair is forced to retreat to the south due to the resuscitation of political risks in the EU and disappointing statistics for the eurozone.

For the third time in the last month, EUR/USD is testing support at 1.113. It is assumed that the success of the "bears" in this event will open the way for the pair to 1.1, and failure will allow it to develop consolidation in the range of 1.113-1.1265.