ECB has no FX target but prior policy drivers are having less of an effect
The ECB will be the first to remind FX markets that irrespective of how they view the exchange rate’s impact on inflation (and expectations) there is no FX target level in mind. Nevertheless, there will be the general view amongst policymakers that certain relationships which determine valuations should hold. If they do not, central banks will likely make this point known as a form of market guidance. One good example is the March Norges Bank statement, where they stated that the ‘depreciation of the krone was considerably more than the decrease in interest differential…would imply’.
Read the full report: UBS