Market Overview

Euro's Strength Makes Some Nervous

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However, the currency's recent strength could pose a challenge to the region's fragile recovery.

A strong euro means the region's exports are less competitive and could have a negative effect on the eurozone's inflation rate. Despite these risks, European Central Bank President Mario Draghi has made it clear that the bank's initiatives do not include the exchange rate.

Related: Market Primer: Wednesday, October 23: Fed Taper Outlook Looking Cloudy

The European Central Bank has historically been firm on its decision not to intervene with the eurozone's exchange rate. However, the bank could begin to express concern at its upcoming November policy meeting if the euro's strength has begun to affect the region's inflation rate.

French Industrial Minister Arnaud Montebourg spoke out against Draghi's hands off policy on the exchange rate, saying the bank should follow suit with its peers in other nations and help adjust the interest rate.

CNBC reported that Montebourg said the euro had become too German, and that the region would benefit from a currency that was "more French" or "more Italian".

France is currently struggling with high unemployment rates and subdued growth prospects. Just a 10 percent drop in the euro's value would decrease French debt by 12 billion dollars and create 120,000 new jobs.

Posted-In: News Eurozone Commodities Forex Global Federal Reserve Pre-Market Outlook Markets Best of Benzinga

 

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