The euro has risen sharply over the past month and in early August reached its highest level against the US dollar since early 2015. Strikingly, the rise has occurred against a backdrop of broadly unchanged expectations for interest rates between the US and the euro-zone. (See Chart.) The move might instead reflect changes in expectations for unconventional monetary policy, with the ECB expected to announce a tapering of its asset purchases in the coming months. The stronger euro, which will reduce firms’ overseas earnings in local currency terms, has weighed on equity prices. However, equities remain high by recent standards, reflecting the increasingly broad-based nature of the region’s economic recovery.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services