Draghi Warns Of Euro Risks, Hits Back At US On Currency Talk

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

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

US stocks were poised for a higher open on Thursday, buoyed by solid earnings reports and a decline in the dollar after comments from European Central Bank President Mario Draghi.

The report indicated that Eurozone economic growth was continuing to strengthen at the start of 2018.

Mnuchin said Wednesday that "obviously a weaker dollar is good for us as it relates to trade and opportunities".

He spoke after the bank left its stimulus levels and interest rates unchanged.

Draghi went on to say: "The recent volatility in the exchange rate represents a source of uncertainty.with regard to its possible implications for the medium-term outlook for price stability".

4 percent a year ago according to European Central Bank estimates - inflation has remained sluggish, reaching just 1.4 percent in December.

The bank's governing council gathers as markets wait for clues from bank president Mario Draghi at a news conference on how long the ECB will continue its bond-purchase stimulus now that growth is strong.

The region's currencies have tracked the euro's surge to 3-year highs against the dollar this week. The corresponding index is seen at 112.3 in January versus 112.5 in December.

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The euro rose above $1.25 for the first time since December 2014 on Thursday before slipping to $1.249 in late London trading, up 0.6 percent on the day.

He said "that an ample degree of accommodation is necessary to help price pressures build up" adding that "there are very few chances that interest rates would be raised this year". "We were looking for it but we didn't get it".

The single currency may rise if Mr Draghi's comments at the press conference following the policy announcement reinforce the hawks' position, though gains may be limited considering the impressive rally already achieved in recent weeks.

"The explicit targeting of the exchange rate is something that goes back many many years ago", he insisted. It also kept its policy sequencing unchanged, namely that interest rates are likely to stay at "present levels for an extended period of time and well past the horizon of the net asset purchases".

"With momentum in aggregate demand, tightening labour markets, some evidence of a rebound in inflation, and resilient financial conditions, we expect three hikes in 2018 and one more in 2019", analysts at Nomura wrote to clients.

Drinks maker Diageo dipped 0.2 per cent after saying it expected foreign exchange swings to take a bigger than expected bite out of sales and profits.

Draghi noted that for the European Central Bank, the question raised by exchange rates volatility was whether it would have an effect on the eurozone's "inflation path".

But even a normally cautious Draghi is seen unlikely to shoot down these expectations and the economy is running out of spare capacity, the jobless rate is rapidly dropping and growth is now sustainable even with reduced central bank support.

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