The debate regarding the impact of the Euro’s strength on ECB policy is intensifying, according to Francesco Pesole from ING. Concerns have been raised by ECB members about the potential for lower inflation and looser policy due to the Euro’s strength. The report suggests that while a recovery in the Dollar is anticipated, it may not significantly affect EUR/USD unless a break below 1.190 occurs.
ECB policy and Euro strength concerns
“The latest EUR/USD rally has already caused two members, Martin Kocher and Francois Villeroy, to express concerns that currency strength could prompt lower inflation and, in turn, looser policy.”
“Another move past 1.20 today could trigger further upside volatility, with the 1.208 Monday high quite possibly being tested.”
“We’ll instead need to see a significant break below 1.190 before we can conclude the tide is turning on the pair.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Source: https://www.fxstreet.com/news/eur-ecb-members-flag-euros-strength-as-risk-to-inflation-and-policy-ing-202601291002
