The euro dropped from a 2 1/2-year high in May
as officials unveiled a medley of stimulus
measures. It consolidated below $1.30 when
Draghi cut rates this month and signaled a
willingness to grow the ECB’s balance sheet by
as much 1 trillion euros ($1.3 trillion). Details of
a plan to buy assets will probably come this
week after the Governing Council meets in
Naples, Italy .
“When Draghi mentioned expanding the size of
the balance sheet, I think he was secretly
thinking of the exchange rate ,” said Martin Van
Vliet, senior euro-area economist at ING Groep
NV in Amsterdam. “I’m sure he’s happy to see
that the euro has been going down. He’s well
aware that one important channel of policy
transmission is the exchange rate.”
Since the last meeting, Governing Council
members have joined a chorus of officials
highlighting the role of the euro, while Draghi
said the devaluation reflects a divergence
between Federal Reserve and ECB policy. Such
remarks evoke language used in competitive
devaluations, where nations try to boost exports
by driving their currencies down.
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