How can the ECB dampen the euro?

EUROPE

Ian Gunner, manager of the Altana Hard Currency fund, explains why the European Central Bank may need reinforcements from the US to prevent the euro rising further.

While the European Central Bank’s ultimate policy target is a 2% rate of inflation, it seems clear its approach in recent months has been primarily focused on the euro, culminating in the broad package of policy easing measures delivered last month. The big question is whether this latest easing in policy will have a lasting effect on the euro, as it has arrived against a backdrop of strong capital flows into the eurozone. Indeed, a more plausible route for euro/dollar weakness, or at the very least the avoidance of euro/dollar strength, would be via US fundamentals, and in particular...