Breaking News

ECB’s Lane Urges Attention To Euro Swings

By Market Pulse (Dean Popplewell)ForexMar 13, 2018 09:52AM ET
ECB’s Lane Urges Attention To Euro Swings
By Market Pulse (Dean Popplewell)   |  Mar 13, 2018 09:52AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items

The European Central Bank must keep its guard up against the risk of a sudden appreciation in the euro, according to Governing Council member Philip Lane:

“There’s no concern about the current level,” Lane, who heads Ireland’s central bank, said in an interview in Dublin. “But if it moves a lot within a short time interval then you have to think about the implications.”

The ECB has stepped up warnings against exchange-rate volatility in recent months as policy makers prepare the ground for ending their bond-buying program. The euro has gained almost 16 percent versus the dollar over the past year and while that’s partly due to the region’s economic expansion, a stronger currency also puts downward pressure on inflation and potentially saps the competitiveness of exporters.

The euro briefly spiked to the highest level since March 8 on Lane’s comments, before paring gains to trade little changed on the day at $1.2328 at 12:01 p.m. Frankfurt time.

Three years since starting the asset-purchase program, which is set to run until at least September and top 2.5 trillion euros ($3.1 trillion), the ECB remains well short of its inflation goal of just under 2 percent.


Marking Up

Lane said progress on reaching that goal looks promising. The 48-year-old, who last month dropped out of the race for the ECB’s vice presidency and is among the favorites to become its next chief economist, said wage settlements are showing improvement and companies are raising their markups.

“As these factors convert into higher inflation readings, our confidence that inflation will converge to the target over the medium term improves,” he said.

Reflecting that confidence, the ECB last week dropped its pledge to expand the monthly pace of bond purchases if needed. At the same time, President Mario Draghi stressed that buying will continue until inflation is firmly back on track toward the target. Updated economic projections showed price growth still undershooting two years from now.

Meanwhile, traders are bracing for an appreciation of the single currency. Based on a measure known as the implied volatility surface, the euro is more likely to trade above $1.27 than below $1.20 in six months. Analysts predict the currency to end the year at $1.26.

The ECB’s policy statement last week also reiterated a pledge to keep interest rates unchanged until “well past” the end of net asset purchases. That commitment has become too vague for some policy makers including Bundesbank President Jens Weidmann, who argue the Governing Council should be more explicit about when it plans to end purchases and tighten borrowing costs.


Baked In

Officials are scheduled to hold their next policy meeting on April 26, though economists don’t expect another significant step toward unwinding stimulus until the following gathering in June.

For Lane, the current guidance on interest rates “makes clear” that there will be no immediate shift in policy, and the accumulated stock of purchases will be maintained by reinvesting proceeds from maturing bonds.

“Whenever net asset purchases come to an end, there will still remain considerable monetary accommodation baked into the system,” he said.


Original post

ECB’s Lane Urges Attention To Euro Swings
ECB’s Lane Urges Attention To Euro Swings

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email