Monetary Policy

‘Why the devil is the euro still so strong?’

Published on 6 December 2013 at 13:43

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Following the final meeting of its board of governors to be held this year, on December 5 in Frankfurt, the the European Central Bank (ECB) has announced that all of its interest rates will remain unchanged, reports La Tribune.
The business daily explains that the ECB launched —

… a further cycle to soften its monetary policy last May [...] in a bid to halt deflation.
Given this context, La Tribune wonders why the euro has remained so strong, in spite of the “most accommodating monetary policy” in the ECB’s history, and concludes that the reason for its high value is “austerity” —
The strategy of internal devaluation […] has established an economic model based on the development of exports and a reduction in imports with the objective of an improved balance of trade. Since last year, the eurozone’s balance of trade has been in surplus territory. Logically, this has contributed to the demand for euros and reduced the demand for dollars.

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