European Central Bank monetary stimulus still needed to push up inflation -Draghi

ECB Meeting: Coverage and Reactions of the Euro Exchange Rate Complex

US 'weak dollar' remarks raise policy question, says ECB chief Mario Draghi

An upbeat tone on the economy and the medium-term outlook for inflation helped send bond yields in Germany, the bloc's biggest economy, to their highest level in around six months. With no change in monetary policy expected, the focus will primarily be on President Mario Draghi's press conference and particularly what the European Central Bank plans to do once the asset purchase program expires in September.

Appropriately enough, the Australian and New Zealand Dollars the highest-yielding currencies in the G10 FX space led the way higher against their United States counterpart. The single currency was flat before Draghi started speaking.

The euro surged Thursday afternoon to a new three-year high as doubts grew over the future of the European Central Bank's (ECB) stimulus program.

A number of institutional analysts note that there is a key subtlety that traders were looking for, and this relates to the nature of the Euro's behaviour.

"Euro (has broken) higher on no verbal intervention", said Mizuho's head of hedge fund FX sales, Neil Jones.

The EUR/USD exchange rate could face some downside pressure if Friday's US gross domestic product report and durable goods orders data betters forecast, however.

The latest bout of US Dollar (USD) weakness has come as a result of comments made by US Treasury Secretary Stephen Mnuchin, at the World Economic Forum (WEF) in Davos this week.

Investors were eagerly awaiting Draghi's comments on the euro after European Central Bank policymakers kept interest rates and guidance unchanged, all the more since USA treasury secretary Steve Mnuchin on Wednesday talked of the benefits of a weak dollar. Those remarks broke with a twenty-year USA policy of speaking in favor of a strong dollar. This basically led to a reversal of the entire move upwards in the euro and finally we have the pair trading just above the 1.24 region as of this writing.

Those expecting rate hikes at the end of this year may end up being disappointed.

Credit to businesses grew by 2.9 percent year-on-year last month, adjusting for some purely financial transactions, a drop of 0.2 percentage points compared with the figure for November.

Barclays bank have forecast the GBP/EUR rate to be nearer 1.17 by the end of the year and the high 1.20s against the US Dollar.

'We believe 2018 could again be a year in which Eurozone growth beats expectations, but still inflation is not picking up as wage growth remains weak.

Part of his holding pattern approach, Draghi also kept the bank's guidance unchanged, maintaining a promise to continue asset buys until a sustained rebound in inflation, even after policymakers agreed in December to begin work in early 2018 to draft a new guidance.

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