The ECB's chief economist, Philip Lane, said that "the euro-dollar exchange rate matters" in the eyes of the ECB, stopping the rise of the European currency. Waiting for the ECB meeting next Thursday

The euro's rise was halted on Wednesday by a statement by ECB chief economist Philip Lane saying that "the euro-dollar exchange rate matters" in the eyes of the ECB. On Wednesday evening, the euro fell 0.58% to $ 1.1842, after having exceeded the threshold of $ 1.20 the day before, posting a gain of 12% for 5 months, the highest in two years. The dollar index, which measures the evolution of the greenback against a basket of six currencies, including the euro, regained Wednesday evening 0.44% to 92.75 points.

Although at first glance Philip Lane's remarks may seem almost innocuous, they had a significant psychological effect on investors, signalling that the ECB was not ready to see the European currency appreciate at a level that penalizes eurozone exports. It is therefore very rare for the European Central Bank to comment on the evolution of currencies. This decline in the euro was also welcomed on Wednesday by European stock markets, with the EuroStoxx 50 jumping 1.84% and the CAC 40 climbing 1.9%.

Negative inflation in the euro area in August, the ECB expected

Markets have begun speculating on new support measures from the ECB, which will hold its back-to-school meeting next week, on Thursday 10 September, which will be followed by a press conference by its president Christine Lagarde. Any further easing would further weaken the euro, while giving a boost to the eurozone economy, where prices fell in August for the first time in 4 years. Inflation thus came out negative by 0.2% in August, according to Eurostat, raising the spectre of deflation against the backdrop of the coronavirus crisis...

Meanwhile, Germany, the region's largest economy, showed signs of weakness on Wednesday, with a surprise 0.9 percent drop in july from a month earlier, while economists were expecting a 0.5 percent increase. In June, sales had already fallen by 1.9%.

German Finance Minister Olaf Scholz said mercred that the European economy is showing signs of recovery but the worst may not have passed.

The Fed's new strategy could weaken the dollar sustainably

Many economists believe that in the medium term, the dollar should remain in a downward trend, as further Fed easing measures are anticipated. The dollar has accelerated its decline for a week, after the presentation by the US Federal Reserve of its new monetary strategy.

At the Jackson Hole symposium, Fed Chairman Jerome Powell indicated on August 27 that the Fed would no longer apply a strategy of pre-emptive rate hikes in the event of a temporary rise in inflation above the Fed's 2% target. or tensions in the labour market. He thus indicated that key rates should remain at the floor for an extended period...

On Wednesday, the Fed's Beige Book reinforced this view by signaling that the economic rebound ran out of steam in August in the United States, especially on the employment front. The day before, one of the Fed's governors, Lael Brainard, said that the institution would have to take new measures to support growth in the coming months, probably after the presidential election in November.