Euro Firm After Mixed Data, Comments from ECB Board Member

The euro rose today. In fact, the shared 19-nation currency was one of the strongest currencies during Monday’s trading session despite mixed domestic macroeconomic data released during Monday’s trading. Positive comments made in an interview with a European Central Bank board member were supportive of the currency.
The German consumer price index reported by Destatis was disappointing, falling by 0.1% in August, while analysts had predicted no change. At the same time, it was a much slower rate of decline than 0.5% registered in the previous month. Spain’s National Statistics Institute reported that the annual change in the flash estimate of the CPI was at -0.5% in August, slightly better than -0.6% logged in July. According to data from Istat, Italian consumer prices rose by 0.3% in August, matching analysts’ forecasts exactly, after falling by 0.2% in the preceding month.
Reuters took an interview with ECB Executive board member Isabel Schnabel on Monday. When answering the question about the assessment of economic developments over the summer months, she was rather optimistic:

We now have the numbers for the second quarter and they showed a decline in GDP of 12.1% quarter-on-quarter. That’s of course very large, but it’s close to our projection of -13%. If you look at incoming data, by and large they support the baseline of our June projections. It remains the case that uncertainty is exceptionally high. But overall, I believe that we are still close to the baseline. That means we expect a strong rebound in the third quarter, even if that rebound will not be strong enough to put us back to where we started. So, there will be a protracted recovery, much in line with what we projected in June.

As for the possibility of another widespread lockdown, she said:

We are seeing a certain resurgence of infections, but at the moment it looks unlikely that we are going to see a full lockdown again.

To the question about the recent surge of the euro against the US dollar and other currencies she answered:

We are not targeting the exchange rate, but we are monitoring foreign exchange developments.

Schnabel added further:

At the moment I am not worrying too much about exchange rate developments.

EUR/USD rose from 1.1904 to 1.1936 as of 20:35 GMT today. EUR/JPY gained from 125.47 to 126.39, and its daily high was at 126.84. EUR/GBP was up from the opening level of 0.8919 to 0.8927 but retreated from the session maximum of 0.8967.
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