30 Oct 2013
Flash: EUR derives support from ECB Nowotny comments - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ notes that the euro derived further support yesterday from comments by ECB Governing Council member Nowotny who stated that while monetary policy in the euro area will remain accomodative; it is unlikely that the ECB will lower further either the main refinancing rate or the deposit facility.
Key Quotes
“Nowotny stated that euro-zone policymakers will “have to live with” a strengthening euro. The strengthening euro was viewed as not “welcome” especially because of the negative impact on the “weaker euro-zone economies” and might therefore increase the “economic divergence”.”
“However, Nowotny did not “see any instruments we could use against it, while also not believing that “the problem has reached a dimension requiring a response”. It follows recent comments from ECB Executive Board member Asmussen stating that the euro is not a “specific worry”.”
“It appears that the ECB is not overly concerned by euro strength in the near-term which increases the likelihood of euro strength overshooting further unless tightening liquidity conditions in the euro-zone are addressed before they begin to lift euro-zone short rate more materially.”
“The weak and fragile nature of the economic recovery in the euro-zone was highlighted yesterday by the announcement that the Italian economy has unexpectedly contracted again modestly in Q3.”
Key Quotes
“Nowotny stated that euro-zone policymakers will “have to live with” a strengthening euro. The strengthening euro was viewed as not “welcome” especially because of the negative impact on the “weaker euro-zone economies” and might therefore increase the “economic divergence”.”
“However, Nowotny did not “see any instruments we could use against it, while also not believing that “the problem has reached a dimension requiring a response”. It follows recent comments from ECB Executive Board member Asmussen stating that the euro is not a “specific worry”.”
“It appears that the ECB is not overly concerned by euro strength in the near-term which increases the likelihood of euro strength overshooting further unless tightening liquidity conditions in the euro-zone are addressed before they begin to lift euro-zone short rate more materially.”
“The weak and fragile nature of the economic recovery in the euro-zone was highlighted yesterday by the announcement that the Italian economy has unexpectedly contracted again modestly in Q3.”