This commentary is from the archive, as your commentator is on holiday. It was first published in May 2015
We have dealt with this topic previously, but for a currency that was effectively being written off a few short weeks ago (remember the drive to parity with the Greenback), the Single Currency has been on a steady upward trend for some little time now - since the middle of last month to be exact, when the EURUSD pair established a double bottom.
The chart above shows consistent higher highs and higher lows, which is the characteristic feature of a classic trend. The supposed negatives for the Euro are all still there: The Greek situation has not been resolved, inflation is still low, employment has not improved to any marked degree and the big consideration, EU Quantitative Easing (QE) is alive, well and set to continue to its stated conclusion, which is all of 18 months away.
The Euro has shown resilience before, and the consensus was proved to be wrong. This time round seems to be no exception.
Mario Draghi at the IMF
The President of the ECB, Mario Draghi, gave the Michel Camdessus lecture at the IMF in Washington yesterday. It was entitled “The ECB’s recent monetary policy measures: Effectiveness and challenges”. You can read the full text of his address here. According to Draghi, QE in the Eurozone is here for some time to come:
“While we have already seen a substantial effect of our measures on asset prices and economic confidence, what ultimately matters is that we see an equivalent effect on investment, consumption and inflation. To that effect, we will implement in full our purchase programme as announced and, in any case, until we see a sustained adjustment in the path of inflation. After almost 7 years of a debilitating sequence of crises, firms and households are very hesitant to take on economic risk. For this reason quite some time is needed before we can declare success, and our monetary policy stimulus will stay in place as long as needed for its objective to be fully achieved on a truly sustained basis”.