European Central Bank President Mario Draghi has joined the fray regarding whether or not the euro is manipulated.
Testifying before the European Parliament’s Economic and Monetary Affairs Committee in Brussels on Monday, Draghi said, “We are not currency manipulators.”
Draghi’s comments follow a war of words that developed last week after Trump adviser Peter Navarro took aim at Germany for using a “grossly undervalued” euro to its advantage against other nations in the European Union and against the United States.
Germany’s trade surplus in November came in at €22.6 billion in November, just below March’s record print of €25.8 billion.
Navarro’s comments drew a response from German Chancellor Angela Merkel who said, “We won’t exercise any influence over the European Central Bank, so I can’t and I don’t want to change the situation as it is now.” Merkel added that Germany, strives for “fair trade with all others.”
Then over this past weekend, German
Finance Minister Wolfgang Schaeuble entered the mix. He told Germany’s Tagesspiegel, “The euro exchange rate is, strictly speaking, too low for the German economy’s competitive position.” He continued, “When ECB chief Mario Draghi embarked on the expansive monetary policy, I told him he would drive up Germany’s export surplus.”
The euro has come under significant pressure since November as traders have begun to price in more rate hikes by the Federal Reserve. After hiking rates at its December meeting, the Fed upped its rate hike forecast for 2017 from two to three. That has put pressure on virtually all of the dollar’s major peers. In mid-December, the euro put in a low of 1.0388 against the dollar, its weakest since 2002.
To his credit, in his testimony, Draghi said the ECB hasn’t intervened in the foreign exchange market since 2011, when there was a “concentrated G-7 effort” to support Japan’s economy.