ECB comes to the euro defence
The fall in the single European currency has paused after briefly touching the 0.99 level earlier this month. As in July, the momentum of the EURUSD decline has sparked a resurgence of verbal interventions. Judging by the tone of recent comments, the ECB is reassuring the markets that it is soon ready to raise rates more aggressively.
This sentiment supports interest in the single currency hovering around parity with the dollar. We recently heard from Lane that September would mark the start of a new phase of ECB policy.
As clearly as possible for central bankers, Rehn and Kazaks say that euro weakness worries the regulator and will influence the next rate decision.
The euro's 15% fall against the dollar over the past 12 months is an additional pro-inflationary factor on top of skyrocketing energy prices, broken supply chains and a tight labour market.
