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Euro stumbles after ECB voices concerns over exchange rate

Watch it go.

The euro has extended its losses this afternoon, falling to its weakest level of the month, after the European Central Bank’s policymakers voiced concerns about the currency’s recent strength.

In the latest set of policy minutes from its July meeting, the ECB said:

Concerns were expressed about a possible overshooting in the repricing by … markets, notably the foreign exchange markets, in the future.

That’s helped pushed down the euro more than 0.8 per cent against the dollar this afternoon to its weakest since July 27 and putting it on course for its worst day since March. The currency was trading around 0.5 per cent lower before the release.

A stronger exchange rate poses a headache for the central bank by keeping a lid on inflationary pressures and dampening export growth.

The euro has been propelled to its highest level since 2014 on a trade-weighted measure after Mario Draghi, ECB president, hinted in June that the ECB was gearing up to withdraw its stimulus measures having vanquished the threat of deflation.

The currency effect is likely to be reflected in the ECB’s latest set of inflation forecasts which will be released at its September policy meeting. As it stands, the ECB expects inflation to average below target at 1.6 per by 2019.