Euro Reaches $1.31 Following ECB Meeting

By Roger Baettig | March 08 2013 9:18 AM

The euro gained strength following the European Central Bank meeting and reached $1.3119 overnight, its highest value since January. The common currency settled at $1.3093 at 8:43 GMT on Monday morning.

Reuters

A star of the euro currency sign is seen Friday in front of the European Central Bank headquarters in Frankfurt, Germany. The ECB host country's Federal Ministry of Finance warned Monday, "Germany will see a significant economic slowdown in the last quarter of 2012." And the ministry attributed the country's expected slow growth in 4Q to the weak economies of its fellow euro-zone members.

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The ECB decided to keep interest rates fixed at 0.75 percent and bank President Mario Draghi gave investors confidence with his optimistic statements at the press conference following the meeting.

Draghi claimed there were several signs that confidence in the region was being restored and gave the impression that the bank was not planning to intervene in the future.

According to the Wall Street Journal, the ECB has forecast inflation in 2014 to be 1.2%, a figure far below the bank's 2% target. Nevertheless, Draghi reassured investors that the dismal projection was in line with medium term price stability and although the bank considered a cut, felt it would not be the best option.

Draghi also touched on Italian elections during his press conference, downplaying their significance and praising the markets for their resilience. Although the lack of government has many uneasy, some say it won't matter who comes to power as the eurozone policies are binding for any party in power.

Just a few months ago, French citizens gave a similar cry for an anti-austerity government by electing Francois Hollande. However since he has been in power, he has been unable to change the austerity led path to recovery because he is constrained by fellow leaders and laws that are already in place.

This is seemingly a trend across the eurozone, something many economists worry could cause social unrest if it continues much longer. People who vote for a change but see no difference in policies could result in growing popularity for extremist parties like the neo-Nazi Golden Dawn party in Greece, which is currently ranked third in the country's opinion polls.