The dollar has against hit a record low against the euro and foreign exchange traders expect the single European currency will soon break through the key $1.40 mark, which has major implication for the euro zone economy. But members of the European Parliament in Strasbourg, France heard soothing words from Luxembourg’s Jean-Claude Juncker, who chairs the regular meetings of euro zone finance ministers. He told them: “The ministers do not feel that a strong euro will undermine economic growth.” And he added: “Those member states that are unhappy with the strength of the European currency vis-a-vis the outside world – which reflects the dynamism of the euro zone economy – should introduce the necessary structural reforms in their countries.” That was a response to criticisms of the European Central Bank from French President Nicolas Sarkozy, who’s called for a weaker euro and argued the ECB should set monetary policy to boost the euro zone’s exports. The head of the ECB, Jean-Claude Trichet, has rejected that and said that keeping inflation under control remains their priority.
Presenting the ECB’s 2006 annual report to EU parliamentarians, Trichet said the bank will “closely” monitor price developments in the euro zone. That implies future interest rate rises, which would push up the euro’s value further.