LONDON: The rise of the euro must be sending a shiver down the collective spine of euro zone policymakers as it threatens the bloc's export competitiveness just as a fragile recovery might be taking hold.
Whether the euro's strengthening is a sign of actual confidence, or reflective of a wider unwinding of positions in which investors had sold the single currency against a raft of emerging market currencies, is open to debate.
But the net result is a stronger euro, with the single currency firming from $1.2745 in early April to above $1.34.
More strident rhetoric that could, as an indirect consequence, take some heat out of the currency's appreciation might logically be expected, even though the European Central Bank does not target a specific euro exchange rate.
Indeed it may already have begun.
ECB head Mario Draghi felt the need to reiterate on Tuesday that the central bank retains an open mind on whether to cut deposit rates to negative.
He said interest rates were becoming an effective tool again. Was this perhaps, on one level, a reminder that the ECB has the tools to brake the euro's rise if necessary?
If so, it had no effect on Tuesday with the single currency making a fresh four-month high against the dollar, even before German economic data.
The rise in German analyst and investor sentiment, as measured by the ZEW think-tank, for a second straight month in June also prompted some demand for the euro, suggesting as it did, that Europe's largest economy is on the road to recovery after a weak end to 2012.
The ECB's problem is, however, that Germany is demonstrably not representative of the euro zone as a whole, and the currency bloc could arguably do without a stronger euro, as it attempts to boost exports and create jobs.
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