Euro Strengthens Amid ECB Draghi's Speech
24 May 2017 - 8:39PM
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The euro climbed against its major rivals in the European
session on Wednesday, as the European Central Bank President Mario
Draghi signaled that the bank is likely to wind down asset
purchases before raising interest rates.
The unconventional measures taken by the ECB have been effective
in stimulating and sustaining the economic recovery while limiting
the possible adverse effects, Draghi said at a conference in
Madrid.
"When we introduced unconventional policy instruments in order
to secure a return of inflation towards our objective, we were
aware that those new instruments could result in somewhat more
pronounced side-effects than conventional instruments," Draghi
told. "These side-effects have remained contained."
"Asset purchases are inevitably more difficult to calibrate,
more complex to implement, and more likely to produce side-effects
than other instruments, including moderately negative rates.
Negative rates may also have unwarranted side-effects, but those
have so far remained limited," he added.
The bank, therefore, finds no reason to deviate from the policy
guidance that had been providing in the introductory statement to
ECB's press conferences, he said.
In its latest Financial Stability Review, Eurozone financial
market stress remained contained in the past six months, though the
risk of further bond market repricing remains and the risk of a
return of concerns over debt sustainability has risen.
Further, the ECB warned that excessive exuberance in regional
house prices, in particular in capital cities, could have spillover
effects into the national level and this warranted close monitoring
especially in a low interest rate environment.
The euro held steady against its major rivals in the Asian
session, with the exception of the dollar.
Reversing from an early 2-day low of 1.1170 against the
greenback, the euro edged up to 1.1205. The next possible
resistance for the euro is seen around the 1.14 area.
The euro edged up to a session's high of 125.38 against the
Japanese yen, compared to Tuesday's closing value of 125.00. If the
euro extends rally, it may locate resistance around the 128.00
mark.
Data from the Cabinet Office showed that Japan's leading index
increased to a 21-month high in March as initially estimated.
The leading index, which measures the future economic activity,
rose to 105.5 in March from 104.7 in February.
The euro advanced to 0.8651 against the pound, off early 2-day
low of 0.8603. Continuation of the euro's uptrend may see it
challenging resistance around the 0.88 level.
The euro reversed from an early 2-day low of 1.0903 against the
Swiss franc, edging up to 1.0937. If the euro extends rise, 1.11 is
likely seen as its next resistance level.
Looking ahead, the Federal Reserve's minutes of the May meeting
are due at 2:00 pm ET.
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