The Euro hit a 1-week peak versus the US Dollar after Mario Draghi, the head of the European Central Bank, talked of a recovering economy in the Eurozone and said that inflationary factors were primarily transient and thus could be dismissed. Draghi was only one of several speakers in Portugal at the annual policy forum held by the ECB. To investors, it all suggested that the central bank might be willing to accede to Germany’s demands to reduce liquidity, beginning with the monthly asset purchases.
As reported at 11:12 am (BST) in London, the EUR/USD was trading at $1.1254, a gain of 0.63%; the pair earlier hit a peak of $1.12656 before edging back while the session trough was set at $1.11782. The EUR/GBP was up 0.47% to trade at 0.88340 Pence; the pair had peaked at 0.88348 Pence while the session low was at 0.87810 Pence.
Draghi’s Flip Flop Surprised
Analysts say that Draghi’s optimism on growth and recovery and his general dismissal of headline inflation helped to prop up the Euro. Markets were relatively surprised at Draghi’s comments, however, given that Monday he seemed to reject calls to rein in the ECB’s Quantitative Easing schedule, citing specifically that a low interest rate environment helped to create new jobs, benefitted borrowers and fostered growth.