Appreciation of the euro

The strong euro in recent months. These are some factors to explain the strong euro and the ECB, the euro's appreciation should

Why the strong euro has been received?

Interest rates are relatively higher than in other major trading partners. The United States has cut interest rates aggressively in order to avoid a recession. Japan is still very low interest rates, so the euro area has become a cost-attractive target. This has led to hotmoney flowAnd the appreciation of the euro.
The euro area is considered to have good business prospects. The European Central Bank has a good track record of low inflation. Relatively strong economic growth, which could lead to future higher prices. However, this optimism about the economy may be misplaced. Especially in the south some of the country is a sign of economic weakness. For example, many, like the Spanish real estate market prices are likely to decline in house prices are too high.
Compared with other countries, the EU's international balance of payments often leads to exchange rate appreciation, because the money into the economy.
The euro against the dollar as an alternative. Weakening of the dollar led many speculators to keep the euro currency instead of dollars, of which long-term decline.

If the European Central Bank's concern to increase the value of the euro?

If it is appreciation of the euro, export moreBe more expensive and imports cheaper.

Therefore, if demand is elastic, it will be the decline in export value, which will lead to lower aggregate demand and economic growth. Assessment of the damage will be mainly export industry. In a sense, they can save costs, but if the euro continued to make profits drop, had to lay off, resulting in rising unemployment.

Appreciation will help reduce inflation. First of all, it is notIncreased the demand on inflation. Second, imports of cheap, cheap-push inflation. Third, to encourage appreciation of the company to cut costs, and strive to improve efficiency. In reducing inflation, which is very useful, and therefore can reduce the Monetary Policy Committee interest rate, thereby promoting economic growth and investment.

In appreciation of the impact of other factors determined. For example, if you see a decline in private consumption in the euro area (from the housing crash, killing), then,The negative impact on advertising would be significant. There are also concerns, the European Union is not strong many people would like to believe. It is feared that the EU's housing market, for example, in the Spanish housing market is very weak.