Euro Rises After ECB Draghi's Comments
February 03 2016 - 11:39PM
RTTF2
The euro strengthened against the other major currencies in the
early European session on Thursday, after the European Central Bank
President Mario Draghi said that the bank will not "surrender" to
low inflation, even though it is held by global forces.
In a lecture delivered at the Bundesbank, Draghi said, "Adopting
a wait-and-see attitude and extending the policy horizon brings
with it risks: namely a lasting de-anchoring of expectations
leading to persistently weaker inflation."
Draghi also said that global forces are holding inflation down
at present and this might cause inflation to return more slowly to
the ECB target of 'below, but close to 2 percent'. However, the ECB
Chief said there was no reason why they should lead to a
permanently lower inflation rate.
In other economic news, data from Markit Economics showed that
Germany's construction sector expanded at the fastest pace nearly
five years in January, driven by the sharp growth in residential
building activity. The seasonally adjusted Purchasing Managers'
Index, or PMI, climbed to 57.9 in January from 55.5 in
December.
Meanwhile, European shares advanced as commodity prices rallied
amid a weaker dollar. The oil prices jump and mixed private-sector
employment and service sector data raised expectations that the Fed
would put interest rate increases on hold.
In the Asian trading today, the euro held steady against its
major rivals.
In the early European trading, the euro rose to nearly a
13-month high of 1.1197 against the Swiss franc and a 6-day high of
0.7629 against the pound, from early lows of 1.1139 and 0.7590,
respectively. If the euro extends its uptrend, it is likely to find
resistance around 1.12 against the franc and 0.77 against the
pound.
Against the yen, the euro advanced to 131.08 from an early low
of 130.64. This may be compared to an early 2-day high of 131.09.
The euro may test resistance around the 133.00 area.
The euro edged up to 1.5516 against the Australian dollar, from
an early 2-day low of 1.5418. On the upside, 1.59 is seen as the
next resistance level for the euro.
Against the U.S., the New Zealand and the Canadian dollars, the
euro climbed to 1.1137, 1.6686 and 1.5337 from early lows of
1.1069, 1.6588 and 1.5222, respectively. The euro is likely to find
resistance around 1.14 against the greenback, 1.70 against the kiwi
and 1.57 against the loonie.
Looking ahead, the Bank of England is due to announce its
interest rate decision, inflation report and the minutes of the
meeting at 7:00 am ET. Economists expect the bank to retain
interest rates unchanged at 0.50 percent and asset purchase target
at GBP 375 billion.
At 7:45 am ET, the Bank of England Governor Mark Carney, along
with the other MPC members, will hold a press conference on the
Inflation Report in London.
In the New York session, U.S. weekly jobless claims for the week
ended January 30 and U.S. factory orders data for December are
slated for release.
Federal Reserve Bank of Dallas President Robert Kaplan is due to
participate in a discussion of Global Economic Conditions at an
event hosted by the Real Estate Council in Dallas at 8:30 am
ET.
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