Dollar-Euro Currency War Fantasy.

• Author: Merkel, Angela

When members of the European Central Bank's executive board, including President Christine Lagarde and Chief Economist Philip Lane, made comments in early fall 2020 about the strengthening of the euro, particularly against the dollar, speculation began about a potential currency war. But it is highly unlikely that European policymakers will be guided by an exchange rate target anytime soon. ECB strategists say this is because the euro's strengthening in 2020 has little to do with ECB or Fed monetary policy. Instead, strengthening of the euro started after the heads of state agreed on a recovery program. Of course, that proposal for [euro]750 billion for coronavirus virus rescue efforts plus [euro]100 billion for a reinsurance scheme was considered a "game changer" by many in the markets. Strategists add, however, that there is no consensus on...