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. During an ... (full story)