Daily Management Review

So Called 'Currency Manipulation' By ECB Targeted By Donald Trump


06/21/2019




So Called 'Currency Manipulation' By ECB Targeted By Donald Trump
The central bank of the European Union – the European Central Bank (ECB), has been accused of engaging in unfair manipulation of the euro by the United States president Donald Trump. This accusation has further escalated the already existing tensions between the US and the EU over trade and analysts see the possibility of Trump opening up another front of war with an ally.
 
An immediate drop in the value of the euro against the dollar had been triggered by the comments by Mario Draghi, the head of the ECB, which made it unfairly easier for the EU “to compete against the USA”, suggested US president in a tweet.
 
Trump further warned Brussels that it had been “getting away with this for years, along with China and others” which, according to analysts, reignited a disagreement between the two parties over transatlantic trade which had been aroused between them for the first time during Trump’s presidency.
 
“Mario Draghi just announced more stimulus could come, which immediately dropped the Euro against the Dollar, making it unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others,’ Trump said in the tweet.
 
In one of his speeches before stepping down as ECB president recently, Draghi had said that in order to further stimulate the eurozone economy, the ECB might take actions to further loosen its monetary policy through bringing down of interest rates or further reinstating its earlier policy of quantitative easing of its bond-buying programme. Trump had made his tweet in reference to this comment by Draghi.
 
In the past 18 months, there has been little momentum in the economic growth of the single currency block even as the economy has also not been able to hike up its inflation rates to or over the 2 per cent target that the ECB had set to achieve. While the economy of Italy has slid into recession, there has been a near stalling of growth in the major and key economies which include the likes of Germany, the largest economy of Europe.
 
“In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required,” Draghi said, while delivering a speech at the ECB’s annual meeting in Sintra, Portugal.
 
Soon after his speech, there was a drop in the euro right across the board on foreign exchanges including a 0.3 per cent drop against the US dollar and touching a two week low.
 
Analysts say that the legacy of Draghi as the EU chief is under threat because of t he slow down in the EU economy just four months before his eight-year term is set to end. Many view Dragho to have been instrumental in reviving the euro after a promise in 2012 to do “whatever it takes” to revamp the economy during the sovereign debt crisis.

The trade war between the US and China has been partly responsible for the stuttering of the growth in the eurozone because the trade war has helped a drop in the overall global trade as well as a drop in demand for EU exports.
 
“The risks that have been prominent throughout the past year, in particular geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets have not dissipated,” Draghi said.
 
(Source:www.theguardian.com)






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