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Analysis
Euro nominal effective exchange rate

Euro nominal effective exchange rate

Chart of the Week

by Gabriel Stein in London

Tue 12 Nov 2013

What the chart shows: The chart shows the nominal effective exchange rate of the euro against 40 countries.

Euro Nominal Effective Exchange Rate 11.11

Why the chart is important: Much of the euro area’s fragile recovery in recent quarters has been on the foreign side. The strength of the euro, particularly in a world of weak global demand, threatens to erode this. More importantly, the strong euro adds to the deflationary pressures in the euro area. While the ECB’s repo rate cut on 7 November was good, it will not in itself suffice to avert the risk of euro area deflation. A weaker euro would help, by pushing up import prices. Expect the ECB and other euro area spokesmen therefore to intensify attempts to talk down the euro in coming months.

Chart and comments provided by Stein Brothers (UK) www.steinbrothers.co.uk

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