Euro jumped to new record highs following the ECB President Draghi’s comments while U.S. dollar weakness pushed EUR/USD even higher. Greenback is falling as Trump’s administration continues to disappoint. Loonie is rising ahead of retail and consumer price index released.
ECB on hold, as expected, with the key interest rate at 0.00% and the deposit rate at -0.4%. They also kept the Quantitative Easing program unchanged at 60 billion euro per month asset purchases until the end of the year. These updates didn’t surprise the market at all, thus there was a minimal change in the euro exchange value. However, the market reacted positively to the ECB President Draghi’s speech. Central bank’s chief announced that they will consider QE tapering in the next policy meeting in September. However, he sounded cautious on commenting on the inflation rate, mentioning that “while the ongoing economic expansion provides confidence that inflation will gradually glide toward levels in line with the inflation aim, it has yet to translate into stronger inflation dynamics”, adding that “a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up”. The inflation rate in the Eurozone was 1.3% in June, slightly lower than 1.4% in May and by far below ECB’s target of close to, but below, 2%.
The news followed from the U.S. gave to EUR/USD an extra boost to reach a near two-year high against the U.S. dollar while it ended the day positive versus all its G10 peers except the New Zealand dollar. On the other hand, greenback is about to end the week in red versus most of the G10 currencies after the strong sell-off suffered yesterday following the announcement that the special counsel, headed by Robert Mueller, who is looking into the Trump/Russia relationship will now examine the business dealings of Trump, Kushner and Manafort. Meanwhile, the number of American filing for jobless benefits fell more than expected, to the lowest level in five months. This means that July is another month of strong jobs growth which will underpin economic growth. According to the Labor Department, initial claims for jobless claims dropped 15,000 to a seasonally adjusted 233,000 for the week ended July 15.
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