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If Legarde Leads the IMF, Is that Bullish for the Euro?

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Dominique Strauss-Kahn has resigned as managing director of the International Monetary Fund, amid accusations of sexual misconduct. Christine Lagarde, current French finance minister, is seen as a likely replacement.

If Lagarde--another French politician--ultimately succeeds Strauss-Kahn, should traders anticipate a bull-market for the euro?

The IMF works to lend money to economically troubled nations. Ireland, Portugal, Spain and especially Greece are facing major concerns over their debt. These concerns may be driving down the euro against other currencies. Would a European politician be more inclined to use the power of the IMF to support European countries?

VOA News has reported that South Africa's finance minister has called for the next IMF director to be from a developing nation.

Still, the focus remains on Lagarde. Italian, German and Swedish leaders have all endorsed her, and while the U.S. has thus far been tight-lipped on the subject, Lagarde spent much of her life working in Chicago for powerful law firm Baker & McKenzie.

Traders anticipating that Lagarde will replace Strauss-Kahn, and thereby keep the focus of the IMF on Europe, may wish to consider a long euro play. One option is iPath EUR/USD Exchange Rate (NYSE: ERO). ERO may do well in a bullish euro environment.

Even if Lagarde does not get the position, it will be interesting to see what direction the IMF decides to go in.

 

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