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Eurozone finance ministers will meet to discuss developments surrounding the euro exchange rate, Reuters reported on Thursday, citing a senior EU official. However, the official further noted that ministers are unlikely to raise concerns over the euro strength.

Key takeaways from EU Commission paper

“Further substantial strengthening of the euro would carry significant downside risks to eurozone growth, inflation.”

“A long-lasting 5% appreciation of euro nominal effective exchange rate could cut GDP growth by 1.1-0.9% after one year, reduce inflation by -0.8 to -0.5%.”

“Global evolution of pandemic will be a key determinant of exchange rate movements in the next months.”

“Euro would consolidate recent exchange rate gains if eurozone countries keep infection rate under control and continue on the path of economic recovery.”

“Euro gains consolidation more likely if the US and emerging markets do not achieve a major and sustained turnaround in numbers of infected people.”

“EUR/USD exchange rate likely to get more volatile in the run-up to US presidential elections.”

Market reaction

The EUR/USD pair edged slightly lower with the initial reaction to this report and was last seen gaining 0.2% on the day at 1.1743.