ECB’s Schnabel Says Prospect of Faster Recovery Bolstering Euro

An improving outlook for the world economy is one reason why the euro has strengthened over the past weeks, according to European Central Bank Executive Board member Isabel Schnabel.

“Our analysis shows that several factors have been behind the recent appreciation of the euro, including prospects of a faster global recovery,” Schnabel said in a Q&A on the ECB’s Twitter account.

Rapid currency gains can pose a problem for the ECB as they threaten to weaken inflation by cutting import prices, while making exports from the euro area less competitive. Schnabel’s comment suggests she is taking a more balanced view.

The euro has strengthened almost 15% against the dollar since March, trading at $1.2250 on Thursday at 4:42 p.m. Frankfurt time.

Schnabel defended the ECB’s measures against the fallout of the pandemic, saying they “avoided an even deeper economic recession and a financial crisis.” The duration of its emergency bond-buying program will depend on the impact of the virus on the outlook for growth and inflation, she said.

“We remain undeterred in our commitment to bring inflation back to our medium-term aim of below but close to 2%,” Schnabel said.

The ECB and national central banks in the euro area are currently holding a series of listening events to collect input from the public. It will feed into the institution’s strategy review, which addresses questions around inflation, climate change and communication.

Responding to a question about the cancellation of government debt, she said such a step would be a violation of European Union treaties, adding that the “debate is harmful and should be stopped.”

©2020 Bloomberg L.P.

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