Friday, 15 september 2017 | Redacción CEU
The European Central Bank faces a new challenge, the euro appreciation. What at first glance seems a good sign, the economy recovers from the post-crisis malaise that has been subjected to during the last years, it is also a difficult defiance. The European unit currency strengthening can change the course of the current economic scenario. How does the European bank confront this situation? What consequences brings the appreciation of this currency?
Currency is our value pattern. With it we make exchanges, buy goods, carry out transactions, accumulate wealth and also incur debts. It has cancelling power and represents our purchasing power. The euro not only reflects our national economy state, it sets the course of macroeconomic policies. Its vitality is a recovery symbol, also the sign of the beginning of a change. The finance future will depend, to a large extent, on how its growth is managed.
Why does the euro keep rising?
Before analyzing the consequences that the euro robustness can bring, it is convenient to review how we have got to this situation and what is the point at where we are. At the present time, our euro reaches the highest level against the dollar since 2015. The past ECB press conference of President Mario Draghi, where prudence reigned, only served to underpin the euro rise and even serve it as a catalyst. But, what are the main reasons that have led to the currency appreciation?
The euro area economy recovery
Calm comes after the storm. The accommodative monetary policy has marked the European agenda in recent years. Its results are tangible now, with the first symptoms of recovery. In the second quarter of 2017, the real eurozone GDP grew 0.6%, the first quarter was 0.5%. The projections point to a broad and sustained growth in the future.
The dollar and pound sterling weakness
Low expectations on a tax drop, the Hurricane Harvey consequences on the rising oil prices, the lack of support to renegotiate the US debt ceiling, Irma's arrival in Florida, the escalating geopolitical tension with North Korea.,... The dollar is not at its best. In turn, Brexit and the pound depreciation continue forming an unbreakable binomial. The uncertainty about the UK departure from the European Union and the weakness of the Theresa May government have led to this currency deterioration.
The Spanish and French push
France has experienced the largest economic growth period since 2011. In Spain, the economy recovers and, since 2015, it grows to a faster pace. These good results also contribute to the euro appreciation.