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EUR On the Rise After ECB’s Conference

EUR On the Rise After ECB’s Conference

11 September 2020

Euro exchange rate rose on Friday for the second day in a row, after the European Central Bank’s press conference on Thursday. Exchange rate of EUR/CHF also went up.

Euro’s Exchange Rate Keeps on Rising

              On Friday the euro’s exchange rate rose by 0.4% to 1.1863 dollars, as the previous day it hit 1.1917 dollars, the highest point in eight days. Additionally, the EUR/CHF rose to 1.0787, by 0.3%. The index measuring USD performance against other major currencies was down by 0.2% to 93.12. Generally, this year euro is surging by 6% so far, and the highest point it reached was 1.2014 dollars. Both Thursday and Friday’s good exchange rates of euro is contributed to the aftermath of the press conference held by the European Central Bank on Thursday. On Thursday euro rose sharply, but on Friday correction back from 1.19 came, which might mean selling of dollars hit its limits.

ECB’s Press Conference

              According to ECB chief economist strong euro might further dampen price pressures. Overvalued euro can also have bad impact on export, on which eurozone economy very much rely. Still the ECB doe not target the exchange rate of euro. During the Thursday Press Conference, the President of the ECB, Christine Lagarde, stated that while the bank is observing euro’s exchange rate, it won’t intervene in any way in it, as it is not a monetary policy tool. Markets understood from her comments, that the ECB is not likely to take any measures to weaken price of euro, even its latest gains might not be so good for the economy. This can give motivation for investors to buy euros, which can further pump its exchange rate. Experts think Lagarde’s comments mean the ECB had decided to look into the constant rise of euro’s exchange rate, and after analysis it came to conclusion this appreciation was in line with economic situation. Thus no need to take any measures.

Rates Kept Unchanged

              Additionally, on Thursday, as expected, the ECB kept its interest rates on the same level. When it comes to economic outlook for 2020 for eurozone, it has been slightly raised. New forecast sees contraction of GFP of 8% in 2020 instead of previous forecasted 8.7% decrease. Estimated data for 2021 and 2022 were just slightly revised.

What Makes Euro So Strong?

              Euro is going strong for all right reasons, that is why the ECB shows no concerns in its appreciation. Impacting the good exchange rate of the single currency are: improving economy growth, progress in fiscal stimulus region, as well as relatively contained COVID-19 pandemic. Also it has to be pointed, that there is not much the ECB can do to weaken the price of euro. As rates as low as they can possibly be, lending program is in force, as well as quite sizeable asset purchase program, what else can be done to intervene – the ECB has no other measures.

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