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ECB: Watching the Euro Slide
- It is notable that many were surprised at the economic optimism stressed by the ECB at is Council meeting statement and forecast made earlier this month. This surprise looks misplaced as the more pertinent question is why the ECB was so pessimistic prior to this month.[private]
- Partly explaining the euro’s continued weakness, it seems that the ECB is trying to persuade markets that unless it completes its bond buying program, the Eurozone economic recovery could well falter, if not reverse.
- Regardless, the euro fall is helping reverse the slump in prices: headline Eurozone HICP inflation may move back toward the 2% target by year end rather than taking until 2017 as the ECB envisages!