Mario Draghi, ECB president, intervened in what some policymakers fear has the makings of a global currency war, sending the euro to its lowest level against the dollar in nearly two weeks.
The recent strength of the euro has alarmed European businesses and politicians, since a sustained rise could kill off early signs that the battered eurozone might return to growth this year as exports pick up.
Mr Draghi also issued a veiled rebuke to François Hollande, France’s president, who this week called for a managed exchange rate – comments that had little effect on the euro. “President Hollande. Well, we should always remember that the ECB is independent”, he said. “We heard all over the world now talking up, talking down currencies. The ultimate judgement of the effectiveness of this strategy is to see what markets make of these statements.”
Against the backdrop of a perception that the ECB is the only big central bank left that is in effect tightening – because it is shrinking its balance sheet by letting banks pay back some of the €1 trillion in cheap funding it offered last year at the height of the crisis – Mr Draghi also made at least 10 mentions of the bank’s “accommodative” stance. The ECB chief, recycling phrases he has used in previous months, said “risks surrounding the economic outlook for the euro area continue to be on the downside”. But the bank still sees a gradual recovery starting in the second half of the year with a reduction in financial market tensions and the financial fragmentation of the 17-nation bloc.
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