Euro Soars On Improving Business Activity
The euro approached a seven month high on Wednesday, trading at $1.3919 at 6:50 GMT.
The common currency was buoyed by positive economic data and expectations that the European Central Bank was planning to maintain its current monetary policy at its upcoming meeting.
The eurozone’s final Purchasing Managers Composite Index for April came in at 54.0, far above the 50 point mark that denotes expansion, and a jump from March’s reading of 53.1.
The increase in business activity confirmed that the region’s recovery was picking up speed, even in struggling bailout nations like Spain and Ireland.
Although ECB President Mario Draghi warned that the bank was planning to take the euro’s strength into consideration when making policy decisions, most are not expecting the bank to step in just yet. The region’s low inflation figures remain a concern, but April’s modest improvement to 0.7 percent from 0.5 percent in March has taken some of the pressure to intervene off of the bank.
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However, according to CNBC, French Finance Minister Michel Sapin has called for an open debate about the common currency’s strength, saying that the bloc’s policymakers need to discuss the ramifications that the high exchange rate could have on the economy.
He, along with several other eurozone leaders, have said that the euro’s strength has the potential to drag inflation lower and could hinder the bloc’s exports as a stronger currency makes the region less competitive.
Sapin also said that bank’s assessment that an overly strong euro could weigh on prices and cause low inflation is in line with his own views and that if the common currency continues to rise, the bloc could see its fragile recovery collapse.
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