Draghi acknowledges Euro strength
Good morning as we see the start of a shortened week due to Easter. The big news out over the weekend was regarding Mario Draghi and his posturing towards the strength of the Euro. After weeks of speculation and hearsay, Draghi finally stood up and acknowledged that there is an issue that is not just going to go away.
At a weekend filled with meetings of the International Monetary Fund and World Bank, Draghi told reporters in Washington that “the strengthening of the exchange rate requires further monetary stimulus… (and is) an important dimension for our price stability”. Over the last 6 months, the Euro has gained 6% against the US Dollar, which harms price stability by cheapening imports and hurting exporters. The issue of low inflation currently afflicting the Eurozone is also of huge concern, with rates consistently below target and a need to address this before we see deflation to the extent it happened in Japan.
The hints of Draghi are that there will be some type of quantitative easing and this will be done within the next couple of months.
There isn’t really any news coming out of the UK today as the focus shifts to the US economic calendar. Retail sales are the most important figures being released and if these are worse than expected, then we should see GBP go back up to its higher levels against the US Dollar, although this should not be expected.
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