- Christian Noyer, ECB Governing Council member
Finally. Last week we predicted some of the European policymakers will start expressing their concerns about the strength of the single currency. French ECB Banker Christian Noyer warned that strengthening shared currency creates unwarranted pressure on the 18-nation's bloc's recovery. He also claimed that a stable exchange rate is vital for further economic and inflation development. Therefore, the ECB is not satisfied with the latest performance of the shared currency, as weak inflationary pressure was one of the biggest concerns over the last several months. Moreover, overstrong domestic currency will make exported products less competitive globally, reducing exporters' profits. Policymakers already claimed their readiness to use any tools necessary, including asset purchasing, in order to assure stable growth.
During the last year the Euro has risen 6.5% against the greenback, sapping demand for European exports. Moreover, due to this fact inflation stood at just 0.8% in February, well below the ECB's official target of 2%. Despite such developments, the ECB refused to act last week, citing improved economic conditions and abating risks of deflation.
On the back of Noyer's comments the Euro remained flat, inching 0.02% lower to 1.3875 against the U.S. Dollar. Some analysts currently expect another rally to 1.40 in the foreseeable future.
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