In various parts of the euro area, firms’, households’ and governments’ future income expectations had become disconnected from underlying growth, leading to an accumulation of excess debt. Those over-optimistic expectations were in turn reinforced by this renewed, yet complacent sense of economic prosperity.
Note: Latam 5 FX Index is computed using an equally weighted average of the returns in the Mexican Peso, the Brazilian Real, the Chilean Peso, the Colombian Peso and the Peruvian Sol.