The Euro weakened to a session low against the US Dollar on Tuesday after the European Central Banks Vice President said that markets had missed part of last week’s message on forward guidance policy.
ECB Vice President Vitor Constancio said that the ECB had made its forward guidance programme more precise on the existence of slack in the Eurozone economy, something that the markets appeared to have missed.
“All the messages were not taken in completely. The forward guidance was made more precise in relation to the existence of this slack. Unfortunately…this was not picked up by the markets. We have tools on the table that we consider as available to use if the need arises. And that includes, as it has been said, either cuts in rates or QE or asset purchases.
‘If a gradual economic recovery does not materialize, then that’s a different environment and that’s when other instruments would be available to use. This does not mean that we are on hold regardless of the developments of the situation. That’s not true. We keep, of course, looking as always to what is happening to the economy,” Constancio explained to MNI news agency in an interview.
The Euro raced higher against the majority of its major peers last week as the ECB signalled that it was unlikely to ease policy anytime soon, despite slowing inflation, and President Mario Draghi said the currency’s strength was having only a marginal impact on imported inflation.
The Euro rallied to two-and-a-half year highs against the US Dollar on Friday, rising to peaks of 1.3915, as expectations for further easing by the ECB dimmed.
Against the Pound the single currency remains firmer.
Euro (EUR) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3841 ,
Euro,,British Pound,0.8335 ,
Euro,,Australian Dollar,1.5324 ,
Euro,,Canadian Dollar,1.5386 ,