ECB Minutes Show Growing Concern About Trade and Currency Strength

European Central Bank policymakers gathering last month expressed concern over the risk of a full-fledged trade war with the United States and fretted over the potentially harmful impact of the euro’s strength, the minutes of meeting showed.

With the euro zone economy growing for five straight years, policymakers are now debating how to wean the bloc off easy money and prepare investors for normalizing policy a decade after the global financial crisis sent central banks into crisis mode.

The ECB has so far moved by increments to dial back support. In March, it gave up a largely outdated pledge to raise asset buys if needed, a symbolic move that kept it on course to end its 2.55 trillion asset purchase program by the end of this year.



While the euro’s firming in recent months, partly due to fears over U.S. protectionism, has not significantly curtailed demand, policymakers called the exchange rate a “significant source” of uncertainty with some predicting a more negative impact on inflation.

“It was remarked that the recent movements in the euro exchange rate seemed to relate more to the relative monetary policy shocks, including communication, and less to improvements in the macroeconomic outlook,” the minutes showed.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza