FRANKFURT (MNI) – The recent drop of the euro is good for the
competitiveness of Eurozone suppliers but is not completely favorable
from a long-term perspective, the Bundesbank argued Thursday.
Germany’s central bank also argued that hawkish data from the
United States and expectations of a rate rise by the Federal Reserve
contributed to downward pressure on the euro earlier in the year.
“The price competitiveness of Eurozone suppliers vis-a-vis
important trade partners improved as a result of the euro depreciation
to be sure,” the bank observed.
“But from a longer-term perspective [the euro's drop] is, all in
all, still not to be seen as completely favorable,” it cautioned.
Earlier in the year, favorable economic news from the United States
and the expiry of some of its special monetary policy measures led some
to believe that a rate hike there was imminent. “This also contributed
to the fall of the euro,” the bank said.
Yet, when the Fed told Congress at the end of February that it
would maintain low rates for an extended period of time, referencing
citing labor market data, the euro/USD exchange rate stabilized at that
point in time at $1.36, the Bundesbank noted.
–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com
[TOPICS: MT$$$$,M$X$$$,MGX$$$,M$G$$$,MFX$$$,M$$FX$]