Euro NEER at an all-time high – Commerzbank
|The Euro (EU) NEER, which shows how EUR performs against those currencies with which Europeans trade, is calculated daily by the ECB. On Monday it reached a new all-time high. The previous high of December 18, 2008 was exceeded. And therefore: Europe's common currency has never been as strong as it is now, Commerzbank FX analysts Ulrich Leuchtmann and Michael Pfister note.
Euro zone is doing fine and dandy
“When you read the headline, you might think that your FX analyst has completely lost his mind. Because, of course, EUR/USD is miles below all-time highs. On three days in 2008, EUR/USD traded above 1.60. And now it's at a measly 1.09. But EUR/USD is not the measure that is relevant for the European economy. The USA is not the only trading partner of the euro zone. And that's why it doesn't matter.”
“That fact that many of the goods and services that the euro zone exports and imports are settled in US Dollars (USD) seems to suggest that the EUR/USD exchange rate is more relevant for Europe's economy than the NEER. In the short term, this argument may be correct. Because in the short term, foreign trade prices do not fluctuate at will. But it would be a strange world if the choice of transaction currency had a lasting effect on trade flows.”
“I the short term, the strength of EUR may well have a negative economic impact. In the long term, however, currency strength is positive. We receive a lot of consideration for our exports and can purchase imports cheaply. For the price competitiveness of exporters and companies that compete with imports, this may be stupid. But in the long term, it creates prosperity. So we should be happy.”
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