{"id":33057,"date":"2025-07-03T04:41:26","date_gmt":"2025-07-03T04:41:26","guid":{"rendered":"https:\/\/financialrush.com\/?p=33057"},"modified":"2025-07-03T04:41:26","modified_gmt":"2025-07-03T04:41:26","slug":"ecb-officials-question-whether-euro-has-strengthened-too-much","status":"publish","type":"post","link":"https:\/\/financialrush.com\/?p=33057","title":{"rendered":"ECB officials question whether euro has strengthened too much"},"content":{"rendered":"<p> \n<\/p>\n<div>\n<p>Unlock the Editor\u2019s Digest for free<\/p>\n<p class=\"article__content-sign-up-topic-description o3-type-body-base\"><span>Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=d9ecb4b4-5056-4182-8163-c54b41e35a0b\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Just weeks after European Central Bank president Christine Lagarde hailed a \u201cglobal euro\u201d moment and said the common currency could rival the dollar, some inside the central bank are wondering if the euro\u2019s strength could become too much of a good thing. <\/p>\n<p>The <a href=\"https:\/\/www.ft.com\/euro\" data-trackable=\"link\">euro<\/a> has soared 14 per cent against the dollar in 2025 to reach its highest level in nearly four years as investors pile into European assets to shelter from US policy volatility, upsetting predictions it would hit parity with the greenback this year.<\/p>\n<p>The rise came despite a mounting divergence in interest rates between the US and the much lower rates in Europe, an upending of the usual market dynamics. <\/p>\n<p>At the ECB\u2019s three-day annual conference in Sintra, Portugal, its vice-president Luis de Guindos was most outspoken, telling Bloomberg TV on Tuesday that \u201cwe should try to avoid any sort of overshooting\u201d.<\/p>\n<p>While the ECB could look past the current exchange rate of around $1.18, levels beyond $1.20 \u201cwould be much more complicated\u201d, he said. <\/p>\n<p><a href=\"https:\/\/www.ft.com\/content\/4d5dea18-bc4b-4ccf-94d3-1973fd1467cc\" data-trackable=\"link\">A stronger currency<\/a> makes imports cheaper and drags down inflation, while sales abroad become more expensive and weigh on growth, particularly for export-dependent Europe. With the Eurozone already threatened by a trade war with the US, some central bankers are uneasy.<\/p>\n<p>One senior European central banker, speaking on the condition of anonymity, said the ECB might need to signal more strongly that it does not like an overly strong euro, as it increases the risk of inflation undershooting targets. A second senior official said the strong euro could \u201cbecome an issue\u201d.<\/p>\n<p>Tomasz Wieladek, chief European economist for fixed income at T Rowe Price, said \u2018\u2018policymakers likely expected a slow euro appreciation over time\u2009.\u2009.\u2009. but this is not what is happening in practice\u201d.<\/p>\n<div class=\"n-content-layout\" data-component=\"flourish\" data-component-id=\"24048253\" data-component-type=\"flourish-in-article\">\n<figure class=\"n-content-picture n-content-layout__container\"><a href=\"#24048253\"><picture data-asset-type=\"flourish\" data-flourish-id=\"24048253\" data-flourish-type=\"visualisation\">\n<div id=\"24048253\" class=\"cp-message o-message o-message--inform o-message--notice\" data-o-component=\"o-message\">\n<div class=\"o-message__container\">\n<div class=\"o-message__content\">\n<p class=\"o-message__content-main\">Some content could not load. Check your internet connection or browser settings.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<p><\/picture><\/a><\/figure>\n<\/div>\n<p>The rise has been \u201ctoo fast for comfort\u201d, Wieladek said, adding that it was \u201clikely because private sector portfolios are also pivoting to Europe and at much larger speed than anticipated\u201d. <\/p>\n<p>If the euro appreciates further to hit $1.25 this year \u2014 a rise of 6 per cent from the current level \u2014 the ECB could cut rates by half a percentage point to mitigate the effects on inflation and the economy, he said. <\/p>\n<p>While the ECB has halved borrowing costs to 2 per cent since June 2024, the Fed has kept them higher at more than twice that rate. Historically, higher US yields attracted capital inflows into the US, strengthening the dollar. <\/p>\n<p>The stronger euro has helped to make life easier for the ECB as it reduced fears that a potential trade war with the US could drive up inflation in the currency bloc.<\/p>\n<p>Investors were seeking alternatives to the dollar, as this year\u2019s news flow could translate \u201cinto a general lack of confidence that will be further fuelled by more uncertainty\u201d, Lagarde said in Sintra. <em>\u201c<\/em>There is clearly something that has been broken,\u201d she said about the <a href=\"https:\/\/www.ft.com\/content\/5bc02699-3eda-465b-bd73-f5e8b9573ae8\" data-trackable=\"link\">dollar\u2019s weaknesses<\/a>, adding that it was unclear if \u201cit is fixable\u201d.<\/p>\n<aside aria-labelledby=\"aside-label\" class=\"n-content-recommended--single-story n-content-recommended--inset\" data-component=\"recommended\">\n<p class=\"n-content-recommended__title o3-type-body-highlight\">Recommended<\/p>\n<div class=\"o-teaser o-teaser--article o-teaser--small o-teaser--stacked o-teaser--has-image js-teaser\" data-id=\"88f47b5b-c12c-49f1-ad3b-61545510c80d\">\n<div class=\"o-teaser__image-container js-teaser-image-container\"><a href=\"https:\/\/www.ft.com\/content\/88f47b5b-c12c-49f1-ad3b-61545510c80d\" data-trackable=\"image-link\" data-trackable-context-story-link=\"image-link\" tabindex=\"-1\" aria-hidden=\"true\"><\/p>\n<div class=\"o-teaser__image-placeholder\" style=\"aspect-ratio:2289\/1287\"><img decoding=\"async\" class=\"o-teaser__image\" src=\"https:\/\/www.ft.com\/__origami\/service\/image\/v2\/images\/raw\/https%3A%2F%2Fwww.ft.com%2F__origami%2Fservice%2Fimage%2Fv2%2Fimages%2Fraw%2Fhttps%253A%252F%252Fd1e00ek4ebabms.cloudfront.net%252Fproduction%252F1589020c-02ad-43d9-92db-3b81c86869b6.jpg%3Fsource%3Dnext-article%26fit%3Dscale-down%26quality%3Dhighest%26width%3D700%26dpr%3D1?source=next&amp;fit=scale-down&amp;dpr=2&amp;width=240\" alt=\"A one euro coin sits on top of a one pound coin in this arranged photograph in London\"\/><\/div>\n<p><\/a><\/div>\n<\/div>\n<\/aside>\n<p>Lagarde did not address the implications for ECB policy, but stressed: \u201cWe take it into account for purposes of our projections.\u201d <\/p>\n<p>As inflation hit the ECB\u2019s medium-term 2 per cent target in June, and is projected to temporarily fall to 1.6 per cent next year, there is increasing unease among Europe\u2019s top central bankers \u2014 especially if the stronger euro coincides with higher US tariffs.<\/p>\n<p>\u201cA stronger euro would weigh on exports and so can be disinflationary,\u201d said Pooja Kumra, a rates strategist at TD Securities. \u201cThe euro area at this stage really doesn\u2019t want to enter the deflation era seen in the 2010s.\u201d<\/p>\n<p>The challenge for the ECB is that any attempts to tamper with the exchange rate could easily backfire. <\/p>\n<p>\u201cThere is a long-standing etiquette among global central banks that unilateral action on the exchange rate is off-limits,\u201d one influential policymaker told the Financial Times.<\/p>\n<p>Uncoordinated attempts to tamper with currency markets are either doomed to fail or could even trigger a currency war, they said, adding that the situation was further complicated by some Trump allies arguing in favour of a <a href=\"https:\/\/www.ft.com\/content\/55b57937-47fa-42bf-9be1-ba9f5e847689\" data-trackable=\"link\">weaker dollar.<\/a><\/p>\n<p>Some investors are sanguine. Mike Riddell, a fund manager at Fidelity International, pointed to the EU\u2019s large trade surplus, which is typically an indication that a country\u2019s currency should appreciate.<\/p>\n<p>\u201cI don\u2019t think policymakers have a leg to stand on when complaining about the euro being strong,\u201d he added. <\/p>\n<p>Boris Vuj\u010di\u0107, governor of the Croatian central bank and one of the 26 members of the ECB\u2019s governing council, was similarly unfazed.<\/p>\n<p>The euro is at the same level as when it was introduced and has traded more strongly in many of the past 25 years, he told the FT. \u201cCurrent levels are far from being exceptional.\u201d <\/p>\n<\/div>\n\n<br \/><a href=\"https:\/\/www.ft.com\/content\/d9ecb4b4-5056-4182-8163-c54b41e35a0b\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this&hellip;\n","protected":false},"author":6,"featured_media":33058,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23],"tags":[],"class_list":["post-33057","post","type-post","status-publish","format-standard","has-post-thumbnail","category-us","cs-entry","cs-video-wrap"],"_links":{"self":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/33057","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=33057"}],"version-history":[{"count":0,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/posts\/33057\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=\/wp\/v2\/media\/33058"}],"wp:attachment":[{"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=33057"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=33057"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financialrush.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=33057"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}