Weakening Euro Eases Pressure On the ECB
The euro traded steadily at $1.3528 at 7:45 GMT after poor data and concerns from the European Central Bank pushed the currency lower. A weak euro eases pressure on the ECB to engage in further stimulus policy measures. Though the ECB has been adamant that the exchange rate is not a policy target, it has admitted that the currency’s strength has been hurting the eurozone’s economy. Earlier in the week, ECB President Mario Draghi said the bank would consider further easing in the form of a large-scale quantitative easing package if need be. For the moment, however, the ECB intended to wait to see the results from its latest round of stimulus.
Remaining patient should be easier for the ECB with the euro on the decline.
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A weaker euro is particularly helpful to the ECB given the string of indicators suggesting the region’s economy is stalling. The latest bad data came from Germany and showed that investor confidence declined for the seventh consecutive month in July. The nation’s ZEW survey showed that sentiment was down to 27.1 points in July from 29.8 in June.
The bloc did see some good news on Wednesday when the European Union’s Statistics office released a report showing that the region’s trade surplus grew in May. Reuters reported that the eurozone’s annual trade surplus increased to 15.4 billion euros in May, a jump from last year’s 14.6 billion euro surplus. The figure suggested that eurozone trade likely helped the economy expand in the second quarter.
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