Is Europe turning toward a strong Euro? - by Melvyn Kraus
European Central Bank President Jean-Claude Trichet made news at the press conference following the May meeting of the ECB Governing Council not by what he said, but by what he did not say. Trichet, who on occasion has protested the strengthening of the euro, refused to object to its appreciation even when encouraged to do so by several reporters. Is this a sign that the tide is turning in Europe in favor of a stronger euro? Or does it simply reflect the fact that the ECB now is reverting to its old policy of not commenting on exchange rates whatever the circumstance?
The answer may come clearer at the June meeting next Thursday when the appreciating euro undoubtedly will be brought up once again at the press conference. Two factors point to a possible turning of the tide. One is the fact that crude oil is heading towards $75 a barrel or higher. Second, Europe’s economic recovery is progressing to the point where exports are no longer the sole source of growth.
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