Chart of the day

A spooky sight for EU FIs?

Happy Halloween to all!

The chart below could make for scary reading for European financial institutions, with the Euro currency seemingly falling out of favour among global payment systems. Perhaps we’re seeing ‘de-EURization’, rather than the ‘de-dollarization’ that several capital markets publications have alluded to in recent months.

Source: Steno Research, Bloomberg and Macrobond via ‘X’

Several factors could help to explain the declining use of the Euro in the SWIFT payments system.

Greater capital flight to the dollar, with the current Fed fund rate sitting at 5.33% — a higher figure than the EU’s current 4% deposit rate, could help to explain the drop in use of the Euro.

Additionally, migration to the new ISO20022 standard for domestic and cross border payments from SWIFT in March 2023 could be a telling factor. With a near three-year transition period from the start of the implementation phase to go live, this lag may now be evident from the data.

Or, could it simply be that more payments in the EU are done via SEPA, and not SWIFT?

Is the Euro falling out of favour? Let us know what you think below.