Credit Agricole: Does the ECB really want a strong euro? ...Middle East

Key Points:

ECB’s Mixed Messaging:Some ECB officials emphasize the benefits of a stronger EUR, such as improved financial conditions and internationalization.However, the risks to competitiveness and inflation are being underplayed.

Fair Value and Policy Limits:Credit Agricole’s short- and long-term fair value estimates also hover around 1.10, implying EUR/USD is not overvalued, but warns ECB tolerance is not limitless.

Conclusion:

While the ECB appears comfortable with the current EUR/USD level, Credit Agricole doubts the central bank would remain passive in the face of continued appreciation, especially if it begins to threaten inflation targets or growth recovery.

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This article was written by Adam Button at www.forexlive.com.

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