Euro US Dollar (EUR/USD) Exchange Rate Rockets Higher on Draghi Comments

Upbeat Growth and Inflation Remarks from Draghi Drive EUR/USD Higher

The Euro to US Dollar (EUR/USD) exchange rate soared this afternoon following the European Central Bank’s (ECB) first policy meeting of the year.

At the time of writing EUR/USD has jumped 0.9% as investors react to the ECB’s rate decision.

Euro (EUR) Jumps as Markets View Draghi Comments as Hawkish

The Euro continued to strengthen against the US Dollar this afternoon as investors welcomed some hawkish comments from ECB President Mario Draghi.

While, as expected, the bank left interest rates and its bond buying programme untouched, Draghi’s comments regarding inflation and growth in the Eurozone nevertheless prompted the Euro to skyrocket.

In his press conference following the policy meeting Draghi told reporters that the ECB was increasingly confident that the recent growth in the Eurozone would help inflation edge closer to 2%.

James Athey, Global Fund Manager at Aberdeen Standard Investments, said:

‘The ECB’s got a bit more confidence in inflation and Draghi has not rowed back on any of the more bullish prognosis banded around for the region lately.’

There has been considerable speculation in recent weeks that the ECB may be planning to accelerate its monetary tightening in the coming months, so investors are very receptive to Draghi’s upbeat message today.

Mnuchin Comments Pressure US Dollar (USD)

Meanwhile the downward spiral of the US Dollar continues in the wake of comments from US Treasury Secretary, Steven Mnuchin at the World Economic Forum in Davos yesterday.

In a press conference Mnuchin addressed the recent downtrend in USD, suggesting the US currency’s short-term value is ‘not a concern of ours at all’.

In fact he states that the US would welcome a weaker dollar, and that it would help make the US more competitive on trade and more attractive to investors.

Mnuchin told reporters:

‘Obviously a weaker dollar is good for us as it relates to trade and opportunities.’

Mnuchin doubled down on his comments earlier this morning as he called them ‘consistent with what I have said before.’

This is not the first time the Trump administration has decried the strength of the US Dollar, after all Trump himself claimed the Dollar was ‘too strong’ in early 2017, prompting USD to stumble in currency markets.

EUR/USD Exchange Rate Forecast: Slower US Growth May Fuel Further Losses for USD

Looking ahead the EUR/USD exchange rate may continue its march higher on Friday as the US publishes its latest GDP figures.

Economists forecast that US economic growth will have slipped back from 3.2% to 3% in the fourth quarter, likely denting the US Dollar.

Further losses for USD may also be prompted by the release of the latest US Durable Goods Orders report as analysts predict that order growth will have tumbled in December.

Meanwhile the Euro may continue to accelerate tomorrow as markets speculate on the possibility of the ECB speeding up its pace of monetary tightening this year.

Adam Solomon

Adam joined the team at TorFX soon after graduating from University in 2005 with a degree in Journalism. Since then Adam has advanced to become both Head of Trading and Head of Treasury. His keen interest in the currency market and knowledge of what drives exchange rates makes him perfectly positioned to produce regular market updates focused on the movements of the major currencies.

Contact Adam Solomon