Euro/Dollar Parity Exceeds 2021 Peak: ECB on Alert

Strengthening of the Euro: A New Record Against the Dollar

The Euro is drawing attention by surpassing the $1.20 barrier, the highest level since 2021, against the dollar. This situation has created significant ripples within the corridors of the European Central Bank (ECB).

While the Dollar's Value is Falling, the Euro is Rising

The global depreciation of the dollar has laid the groundwork for this rally in the euro. The rise of the euro is creating influential winds affecting Europe's export competitiveness and inflation targets.

Climbing Appetite in the Options Market Continues

At the beginning of the week, the euro, which rose above the 1.20 level, continues to maintain its upward appetite according to data from the options markets. Long-term pricing shows the most optimistic picture in the last six years.

Attention to the Strengthening Euro in the ECB

Chris Turner, Head of Currency Strategy at ING Bank NV, stated, “One of the biggest threats to the ECB's neutral policy outlook has been the strengthening euro. Current price movements suggest that the 'doves' within the ECB may be justified in their concerns that a strong euro could miss the inflation target.”

Warning That Inflation Targets May Be at Risk

The ECB's efforts to keep inflation balanced at around 2% could be threatened by the excessive appreciation of the euro. This situation may push the bank to consider measures such as interest rate cuts or asset purchases earlier to keep inflation under control.

Aspirational Statements from ECB Officials

While ECB officials have stated they do not directly target exchange rate levels, they do not hide the fact that they have entered monitoring mode. Francois Villeroy de Galhau, Governor of the Bank of France, emphasized that the euro's gain will be taken into account in policy-making.

Martin Kocher, Governor of the Austrian National Bank, signaled the possibility of ECB intervention if the parity rises further. Valentin Marinov, Chief Strategist at Credit Agricole, cautioned, “The ECB should have been careful about the increasing global role of the euro; now what they wanted has happened, but it has brought a headache.”