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Euro Extends Rally Even as ECB Tries to Downplay QE Tapering Expectations

June 28, 2017 at 21:57 by Vladimir Vyun

Euro sign monumentThe euro rallied today even as officials from the European Central Bank tried to downplay yesterday’s comments from Mario Draghi, which markets considered to be hawkish. The currency fell against the US dollar intraday, but the drop was short-lived. The euro was unable to beat the very strong Great Britain pound.

While Draghi’s speech delivered on Tuesday was largely neutral, insisting that any changes to the existing extra accommodative monetary policy should be made with utmost caution, markets reacted as if it was extremely hawkish. Today, an unnamed official told Bloomberg that markets misinterpreted Draghi’s stance and monetary stimulus is still required. Yet it looks like speculators continued to bet on stimulus tapering from the ECB, and that drove the euro to new highs.

The euro also profited from the dollar’s weakness. Signals from the Bank of England and the Bank of Canada led to speculations that those central bank are considering stimulus exit as well. Meanwhile, market participants continued to doubt that the Federal Reserve will be able to proceed with tightening its monetary stimulus further.

EUR/USD rallied from 1.1181 to 1.1378 as of 22:54 GMT today. EUR/JPY climbed from 125.06 to 127.73. At the same time, EUR/GBP dropped from 0.8846 to 0.8800.

If you have any questions, comments, or opinions regarding the Euro, feel free to post them using the commentary form below.

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