ECB has zero tolerance regarding EUR appreciation

The slowdown in the emerging markets is starting to cast an ugly shadow on the euro area. However, corporates are not yet singing the blues, at least not according to the leading indicators. The manufacturing PMI remained stable and the services PMI even rose slightly. 

And the IFO index declined only marginally in October, by 0.3 of a point. Will everything work out alright? Perhaps. Perhaps the euro-area economy is more resistant than expected. But will this keep the ECB from loosening its monetary policy further? Probably not. After all, the ECB has every reason to sing the blues. 

"At the moment, its inflation target is far out of reach, and declining oil prices and inflation expectations are not making life easier for the central bank. A weak euro might be the solution. That at least seems to be the message which the ECB wanted to send to the FX market at its most recent meeting", says Commerzbank. 

After all, amongst other things, ECB President Mario Draghi blamed the euro appreciation of the last few months for the disappointing trend in inflation. That means that the euro is unlikely to appreciate despite favourable economic news, the ECB will make sure that it doesn't.