Central Banks

The ECB fears that a rising euro may hold back the economic recovery

Several ECB policymakers have reportedly told the Financial Times that the rise in the euro poses risks that could hold back the Eurozone economic recovery, adding that:

“In the last few weeks there has been an appreciation of the euro, which is always worrisome when you have weak demand, especially as the euro area is the most open economy in the world and unusually dependent on global demand.”

One policymaker also made mention of last week’s strategy change by the Fed, saying that it puts pressure on the ECB to complete its own strategy review – which is expected to be completed some time next year.

But you can imagine they would want to communicate something more concrete to the market in trying to keep pace with the Fed in the race to the bottom.

Other policymakers cited in the report say that the euro’s rise isn’t too big of a concern now but it could be should the trend persist moving forward.

The full piece by the Financial Times can be found here (may be gated).

I reckon if anything else, just be mindful of any mention to the euro currency going into next week’s ECB meeting. This sets up expectations that Lagarde may potentially make a mention or two about the situation via her press conference.

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