Euro Plummets After Lagarde’s Speech

 | Nov 16, 2021 04:12AM ET

The euro headed down after being flat for a while despite an empty macroeconomic calendar and the relevance of a correction.

Data on the eurozone trade balance went unnoticed, although the trade surplus came at EUR 7.3 billion in September compared to a forecast of EUR 10.7 billion. Moreover, the previous results were downwardly revised to EUR 3.5 billion versus EUR 4.8 billion.

Anyway, the market has never been interested in the trade surplus or deficit size, especially regarding the eurozone or the United States. Therefore, it came as no surprise that the market was flat at the time of the publication.

A plunge in the euro came later when European Central Bank (ECB) President Christine Lagarde delivered a speech. She said that the regulator would keep its loose stance on monetary policy for a long time and stressed that the ECB could raise interest rates as early as 2023. According to Christine Lagarde, amid an economic recovery, any monetary policy tightening is highly undesirable.

Generally speaking, Lagarde did not say anything new in her speech. All ECB representatives have been talking about it for a while. At the same time, inflation in the EU is rising, and the only way out is to tighten monetary policy. Nevertheless, the European regulator prefers doing nothing. In addition, Christine Lagarde noted that inflation would continue to grow and remain at record highs for a long time. Despite further inflation, the ECB's inaction is the only reason for the euro's continuing downward spiral.