Euro holds at three-year high as attention turns to Draghi

  25 January 2018    Read: 1390
Euro holds at three-year high as attention turns to Draghi

The euro hovered at 3-year highs against a weakened dollar on Thursday, as traders looked to whether European Central Bank President Mario Draghi would try to talk down the single currency from its recent rally.

Draghi was to speak at 1330 GMT after the monetary policy meeting against a backdrop of a euro that has gained more than 3 percent against the dollar already this year, following double digit gains last year.

Its rise was intensified on Wednesday when U.S. Treasury Secretary Steven Mnuchin said a weaker dollar was “good for us”.

The euro was flat at $1.24100, down from a high of $1.2459 but still close to its best levels since December 2014.

The ECB kept its ultra-easy policy stance and guidance unchanged on Thursday, as expected, but the currency was little moved.

The dilemma facing Draghi will be how to address the euro’s surge against the dollar, a move that threatens to dampen inflation and endanger the work done by years of unprecedented stimulus amid an economic rebound in the euro region.

“The burning question for FX markets at today’s ECB meeting is ‘will – and can – President Draghi talk the euro lower?’ For the past week, we’ve argued that in the current environment – there is very little the ECB can do to stem the tide of a stronger euro,” ING said.

Analysts note that the euro’s rise on a trade weighted basis has been far less substantial than versus the dollar, and with investor sentiment towards the region at its highest in years, the single currency is strengthening for the right reasons.

Still, Draghi will likely seek to stop the euro from firming further, economists said.



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