Euro fans in the ECB memorandum | opinion

    Euro weakness on ECB agenda |  opinion

That the euro falls below parity against the dollar, [como sucedió ayer], marks a symbolic beginning for observers of the history of popular money. However, for the president of the European Central Party, Christine Lagarde, the craze for the currency is both an implicit criticism of the monetary policy of the central headquarters and another source of annoyance.

The contemporary euro craze can initially be taken as an indication of dollar strength. The Federal Reserve has been aggressively raising interest rates and President Joe Biden’s agency launched a massive fiscal stimulus last year.

But the relative strength of the dollar is also partly the work of the ECB. By contemptuously backing its narrative rate (it has been below 0.5% since September 2019 before the pandemic), the ECB has encouraged investors to dump euro assets in hopes of higher dollar returns. This despite inflation climbing to 6.8% for the year.

Even though it uses the official mantra of not targeting exchange rates, the ECB cannot ignore the contemporary pastime. The flawed single currency not only harms the ethics and reputation of European central bank governors and finance ministers, but also makes it harder to fight inflation. A strong dollar makes dollar-denominated imports more expensive, including energy and raw materials. Therefore, the euro buff is likely to fuel disagreements within the ECB over the desirable pace of rate hikes and whether to start with a 0.25% hike on July 21 or a one-month hike. little more aggressive.

There is a burst of economic hope: the enthusiasm for the euro favors exporters by making their products more competitive on world markets. But with global goods on track to slow and supply issues continue to hamper trade, this small buff from the ECB is unlikely to make life any more obvious.

Original Spanish content

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