French President Francois Hollande delivered an impassioned speech before the European Parliament in Strasbourg today decrying the strength and volatility of the euro exchange rate. This was the best indication that Hollande is feeling political heat because of France’s poor economic performance. The result is he has joined the periphery to urge the ECB and Germany to adopt monetary and fiscal stances that promote growth.
Hollande explicitly warned that the euro’s strength would harm fragile economies in Europe. L’Expansion quoted him as saying that the euro “cannot fluctuate according to the whims of the market. A monetary zone needs to have a policy of change because if not it will see an exchange rate imposed that does not correspond to the actual state of its economy.”
I see this is another salvo in the currency wars. The ECB is losing the currency wars right now – in large part because the risk on trade for euro zone sovereign debt has increased the appetite for euro-denominated assets and caused the currency to appreciate. [Content protected for Gold members only]