Jean-Claude Trichet, European Central Bank president, has been stepping up his warnings about the euro’s strength. But you would be forgiven if you hadn’t noticed. Trichet has added another Delphian dimension to his pronouncements – which is making everyone work harder to decide what he really means. “If you are looking for change, you have to look at the commas and slight changes in words,” Erik Nielsen, European economist at Goldman Sachs, told me.
Until last week, Trichet was happy to stress the US authorities’ interest in a strong dollar – and avoided any direct mention of the euro. Then in Gothenberg, Sweden, last week, he warned more explictly about how “disorderly movements” in exchange rates would have “adverse implications” for economies. That phrasing stuck more-or-less to G7 language, but had not be rolled out for some time.
Today in Istanbul, he talked more broadly about the euro and the impact of unwinding global imbalances. A rebalancing did not “at all imply a change in the bilateral position of the dollar and the euro,” he told Reuters television. With Trichet also talking about the need for some other currencies to appreciate – read, in Asia – it seems clear that there is some concern about the euro’s trade-weighted value.
What will he say next? No doubt Trichet will be grilled on the euro at the ECB’s press conference on Thursday – to be held this time in Venice, Italy. In past attempts at verbal intervention, he complained of “brutal” movements. But, as Nielsen argues, that was more an objection to market volatility than to the level of the currency. So maybe we are in for a few more Trichet linguistic innovations.