Euro currency marks 14-month-high on Draghi’s comments

The Euro currency continued on Friday its strong growth since policy remarks from Mario Draghi, president of the European Central Bank. In the morning, the price had temporarily risen to 1.1677 US dollars, which is the highest level since August 2015. In the course of the day, the single currency gave up only a small part of the gains and stood at 1.1659 dollars in the afternoon. The European Central Bank (ECB) set the reference price at 1.1642 (Thursday: 1.1485). The dollar thus cost 0.8590 (0.8707) euro.

The euro has risen by almost two cents since the ECB’s decisions on Thursday, despite the fact that the central bank did not hurry to make a move away from its ultra-low monetary policy. Some experts explain this with the statement by ECB President Mario Draghi on the exchange rate. Although the euro has been rising for several weeks, Draghi has not shown the slightest sign of nervousness. His only comment on the euro was: The exchange rate was given some attention.

Ric Spooner from the British trading house CMC Markets explained the current strength of the euro but also with statements by the ECB. Although Mario Draghi had made clear the day before that the Governing Council had agreed not to provide any information at a time of a possible change in securities purchases. According to Spooner, the market also interpreted the statements that the central bank would discuss changes in the bond purchase program in the coming months and that it would be possible to limit purchases early in the coming year.

Earlier, many market commentators had argued that the ECB is concerned about the strong euro. Draghi would have been able to try to weaken the euro. An approach that is called verbal intervention among experts. Some experts also pointed out that Draghi had suggested a possible change in the course of the autumn. Others argue that many investors would have expected more appeasement from Draghi. Still others see Draghi’s new optimistic words about the economy in focus.

“There was clearly a conscious effort not to provide new hawkishness to the market while at the same time not wanting to dial down the message from Draghi’s Sintra speech,” said Divyang Shah, global strategist at IFR Markets.

“We were unanimous in setting no precise date for when to discuss changes in the future,” Draghi told a press conference in Frankfurt, Germany. “We simply said that our discussions should take place in the autumn.”

“Inflation is not where we want to it be or where it should be,” Draghi noted.

On other major currencies, the ECB fixed the reference rates for one euro at 0.89610 (0.888718) pounds sterling, 129.72 (128.92) Japanese yen and 1.1051 (1.1039) Swiss francs.

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