ECB: Any comments on Euro strength to be scrutinised by markets
|Excerpt
Some ECB members have touched on the exchange rate in recent communications, suggesting that there’s at least a faction within the Governing Council that is attentive to these developments. French central bank governor Francois Villeroy de Galhau stated last week that the exchange rate will be among the factors guiding ECB policy. In a similarly recent interview with the FT, Austrian central bank governor Martin Kocher stated that ‘if the euro appreciates further and further, at some stage this might create of course a certain necessity to react in terms of monetary policy’.
This echoes similar comments from Vice President de Guindos from last year, who also signalled that the 1.20 level in EUR/USD may be the pain threshold for the bank. While Lagarde will likely be tight-lipped, we think any musings from her on the impact of exchange rate appreciation will be among the key things to watch on Thursday.
Don’t expect any strong rhetoric, but the degree of acknowledgement may give some indication of how important the strong euro issue is. Beyond that, we expect the communications to largely mirror the December meeting.
Lagarde will no doubt emphasise that monetary policy is in ‘a good place’ with investors unlikely to find a lot of novelty in the statement or the press conference. Perhaps the main difference is that there will be no new economic projections this time around – these will be released next month. Steady as she goes, still.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.