The euro is here to stay, says European Central Bank president

Andrew Cummings
March 11, 2017

Nevertheless, it is the byzantine complexity of unravelling the United Kingdom from the clutches of the European Union which is concerning many, along with the confusion, chaos and ultimately the uncertainty which could attend the divorce proper.

Economic growth for 2017 has been revised up from December's projected 1.7% to 1.8%, with 2018 growth revised up from 1.5% to 1.6%.

For currency traders, there is also the monetary perspective to consider.

Facing low inflation and weak growth, the European Central Bank has kept interest rates in negative territory and bonds purchases at €80 billion a month, promising substantial accommodation and an extended market presence to aid the euro zone's recovery.

In a world increasingly focused on big infrastructure projects and grand designs, the Chancellor's budget was relatively-speaking rather parochial.

UBS rose 0.37% after the Swiss bank said it lowered the pay for its former chief executive past year.

Draghi stressed that the ECB's governing council only "expects" to keep interest rates "at or below current levels" for the foreseeable future, whereby an expectation is short of ruling out a rate hike. The recent rebound in inflation came on the back of recovering energy prices, with core inflation still hovering around 0.9%.

Elsewhere, the euro hit a three-day high against the dollar of $1.0614, after ECB President Mario Draghi said the bank's effort to return the Eurozone to growth had been successful.

The ECB's monthly bond-buying program will run until at least December, slowing to 60 billion euros ($63 billion) in April from the current 80 billion euros. "Measures of underlying inflation, however, have remained low and are expected to rise only gradually over the medium term, supported by our monetary policy measures, the expected continuing economic recovery and the corresponding gradual absorption of slack". The central bankers acknowledged that the economic and inflation situation for the euro zone has improved. However, it appealed to all member countries to intensify reforms to boost growth (read: 3 Reasons to Buy Eurozone ETFs Now).

Still, Draghi agreed that the bank's governors were more upbeat about the outlook, and noted the "urgency" around risks of deflation had dissipated.

Both main oil futures contracts slumped to lows not seen since the end of previous year and sending NY prices sliding below Dollars 50 a barrel.

"But I think a lot of the negatives around Brexit are quite heavily priced in already, and. sterling is going to be supported around $1.20 - I can't see it falling much below that", he added.

Most euro zone bond yields were 1-2 bps higher before the European Central Bank policy decision, with 10-year German yields rising 1.6 bps to 0.39 percent.

US import and exports prices both rose by slightly more than anticipated in the month of February, according to a report released by the Labor Department on Thursday.

Euro bears were unleashed during trading this week as political risk and uncertainty in Europe repelled investor attraction towards the currency.

This begs the question of whether the outlook is really that bleak?

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