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Markets Ignore Dovish Draghi – EUR Rises versus AUD, GBP, USD

21 July 2017 by News Desk

The pound was trading at eight-month lows versus the euro (GBP/EUR) towards the close of the week as investors got excited about the tapering of European Central Bank (ECB) stimulus. Despite ECB Chief Mario Draghi adopting a dovish rhetoric, markets didn’t buy the tone and the euro reached the highest level against the US dollar (EUR/USD) for almost two years. The euro also rallied against the Australian dollar (EUR/AUD), pulling away from two-month lows.

The central bank kept interest rates on hold as expected, but Draghi wasn’t dovish enough to convince markets that the Eurozone wouldn’t soon see change. Investors have been speculating since the address in Sintra that Draghi would soon ease the level of stimulus.

Following the Global Financial Crisis (GFC) the Eurozone suffered a long period of lethargy when it came to economic growth. However, 2017 has seen the Eurozone make a healthy recovery and some growth statistics have shown the currency bloc outperforming the US and UK expansion figures.

Draghi commented: ‘Inflation is not where we want it to be and where it should be. After a long time we are finally experiencing a robust recovery where we only have to wait for wages and prices to follow course to our objective.’

Meanwhile, in the UK, retail sales bounced back in June after contracting in May. The rebound is thought to be down to an increase in summer clothing sales following the UK’s spell of bright weather.

Economist Paul Hollingsworth commented: ‘We shouldn’t get too carried away by these figures. After all, the retail sales figures are very volatile on a month-by-month basis. And the heatwave in June provided a boost to clothing sales that may not be sustained.

On Friday, the pound sterling to euro (GBP/EUR) exchange rate was trending in the region of 1.1164. The Australian dollar to euro (EUR/AUD) exchange rate was trending in the region of 0.6797.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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