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July ECB cheat sheet: Currency heatwave
In broad terms, the euro has not been a significant consideration for the ECB in the post-pandemic period, provided it remains within the 1.00-1.20 range against the USD. When the euro fell below parity in 2022, the ECB’s hawkish stance was widely interpreted – including by us – as partly aimed at supporting the currency to mitigate imported inflation. With the EUR now approaching the upper bound of this range following a strong appreciation, FX has returned to the ECB’s focus, as reflected not only in market participants’ attention but increasingly in official communications from Governing Council members. ... (full story)