G7 ignored by markets, but watch China

THE last couple of years have seen a pretty dramatic exchange rate adjustment by any standards. Since the beginning of 2002 the euro has gained over 43% against the dollar and over 11% against sterling.

From an Irish perspective, it is certainly good news that sterling’s previously very close relationship with the dollar has broken down significantly over the past six months. If the euro had made the same gains against sterling as it has against the dollar, the Irish export sector would be in serious trouble, particularly the SME sector, which still has an inordinate trade dependence on the British market.

From a broader Eurozone perspective the relationship with the dollar is most important and hence it is no surprise the appreciating euro has in recent weeks become an issue of some concern for some European authorities.