Philip Lane Concerned About ECB Future
Philip Lane (Governing Council member and a head of Ireland’s Bank) claimed that ECB should be concerned about the potential threat of an abrupt appreciation in the single currency. Lane told: “There’s no concern about the current level. But if it moves a lot within a short time interval then you have to think about the implications.”
After Lane’s comments, euro visited a 5-day maximum, but then pulled back to 1.2328 dollars. And now, traders are betting for an appreciation of the euro. According to the implied volatility surface, EUR is expected to trade over 1.27 dollars in half a year. At the end of 2018, the currency is projected to be at 1.26 dollars.
The other problem, that ECB is facing, is that after the end of asset purchase program in September, the 2% inflation target will be very hard to achieve. But, Philip Lane sounds optimistic, claiming that: “our confidence that inflation will converge to the target over the medium term improves”.
During 2017, euro rose 16% against the greenback. And now, many European policymakers are worried about downward pressure on inflation and reduced competitiveness of exporters.