Euro Reverses Gains As ECB Proves It Means Business

This week, comments from the European Central Bank helped reverse some of the euro's recent gains, something many say is responsible for the region's improved economic performance.

The bank has been injecting cash into the struggling eurozone economy for months now, but rhetoric from the region's central bankers suggested that the bank is planning to up its involvement in the coming weeks.

Front-Loading

On Monday evening, ECB board member Benoit Coeure remarked that the bank is planning to front-load its bond purchases in May and June in anticipation of a summer lull in July and August.

In doing this, Coeure said, the bank will be able to maintain its monthly bond purchase average of €60 billion even as most Europeans head out for holiday and markets quiet down.

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Going Above And Beyond

Coeure's remarks were followed by French Central Banker Christian Noyer's comments that the bank would consider stepping up its involvement to boost inflation if necessary.

Noyer reassured investors that the bank would extend its bond-buying program beyond September 2016 if need be, something that further devalued the euro and gave European equity markets a boost.

Why Now?

Most believe that the timing of the ECB's comments was no accident. The euro's recent recovery could stall the bloc's forward progress, as the currency's decline has helped make eurozone exports more appealing abroad.

Additionally, increasing bond purchases in May and June could help offset some of the panic that would ensue if Greece is unable to meet its loan payment deadlines. While most expect the nation to reach a deal with its creditors soon, some analysts say the ECB could be preparing a safety net for markets in the case of a default.