The European Central Bank's decision-makers are concerned about the recent rise in the euro's exchange rate and warn that if the euro continues to rise, it will lower prices and weaken exports, the Financial Times has reported.
Several members of the council told the FT that the rise in the exchange rate could halt the recovery in the eurozone, and one of them added that this was a source of growing concern. The concerns are not huge yet, but this will probably require the European Central Bank to lower its inflation forecast next week. The stronger the currency, the cheaper imported products become, which could affect price pressure and inflation, while on the other hand, a stronger currency could mean less profits from exports, which could have a negative impact on exporters and economic growth.
Hence, the currency war between the United States and the Eurozone is already very close to being waged, but other countries may also join in. Everyone wants to have the weakest currency possible, which is not possible in practice. In recent years, this has been possible because the US dollar has been very strong and the powerful American economy has been able to cope with it. Currently, other economies are not strong enough not to complain about the weakness of the USD strengthening their currencies.
The United States, on the other hand, is in a position to have a weak dollar when the world economy has been reset because they could get an even bigger share in foreign markets. On the market side, on the other hand, it is said that the EUR/USD declined after profit-taking and after better data from the US and statements from the ECB. According to ABN Amro, the September correction may reach 1,1500.
It should also be remembered that the outflow of capital from the eurozone is somewhat equivalent to the outflow of capital from CEE countries (due to strong economic connections with the eurozone), including Poland. Hence the possible depreciation of the zloty yesterday.
This morning, the EUR/USD exchange rate fell below 1.1800, the USD/PLN rate rose to 3.74 and the EUR/PLN rate to 4.41. With the strengthening of the USD, oil, gold or silver seems to fall. Only the US stock market, setting new records, pays no attention to anything, climbing further upwards.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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