Hansson Comments on Euro Exchange Rate Strength Confirm ECB Board Split on the Matter, but Draghi Comments Eyed

Ardo Hansson pours cold water over concerns over "euro strength" at the ECB, but markets are concerned President Draghi might not deliver the same message at Jackson Hole.

European Central Bank rate setter Ardo Hansson appears to be relaxed about the Euro's recent rise and suggests the Bank might be split on the matter.

In an interview with Bloomberg Hansson appeared to shrug off concerns over the nascent strength of the eurozone currency citing economic momentum in the Eurozone as being a natural and expected driver of recent gains for the Euro.

The Euro which has risen 12.24% against the U.S. dollar and 8.29% relative to the pound sterling for the year to date leading to concerns in some quarters that the currency might strangle the recovery.

The minutes to the July meeting of the ECB's Governing Council showed that some members of the Bank were concerned about the rising Euro. The concerns signalled to markets that the ECB might be a roadblock to further gains.

The Euro has been subdued against the Dollar since. But Hansson's remarks are indicative that it will take further strengthening in the Euro before the ECB is unanimous in its thinking on the matter.

"It's not surprising that markets might react and say, on balance, we're more upbeat about Europe than we were a while ago, which will cause the currency to be a bit stronger," Hansson was quoted as saying.

Hanson, who is known as a hawk and has previously advocated reducing the scale of the ECB's bond buying program, heads the Estonian central bank and is one of 14 rotating members of the ECB governing coucil.

His statements came as markets eagerly await the appearance of ECB head Mario Draghi and Federal Reserve chair Janet Yellen at the Jackson Hole Symposium. The event gets under way Thursday although both Yellen and Draghi are not scheduled to speak until later on Friday.

Traders have focused intensely on how Mario Draghi will use his Jackson Hole speech.

Some observers had previously speculated that Draghi might use a series of speeches this week to jawbone the euro back from recent peaks, given that a strong currency can counter inflation, which would offset much of the work done by the ECB with its monetary policy measures.

"Sentiment toward the Euro was lifted by the lack of comment from ECB president Mario Draghi in a speech Wednesday, about the Euro's appreciation," said Rhys Herbert, an economist at Lloyds Bank.

The Euro was trading at 1.1793 against the U.S. Dollar in London on Thursday while changing hands for 0.9213 pence against the Pound Sterling.

With the policy makers seemingly undettered by currency effects, other observers have suggested Draghi might use the jackson Hole speech to reinforce a more hawkish message, which was originally sent out to the market in June.

"Market participants have speculated on Draghi siezing the opportunity to hint at QE tapering at Jackson Hold, which would be very symbolic following his indirect QE announcement at the symposium three years ago," said Pernille Bomholdt Henneberg, an analyst at Danske Bank, in a note earlier this week.