European Central Bank Mario Draghi raised market expectations for further quantitative easing after comments he made at the European Parliament today. Draghi’s remarks had a similarly dovish tone to the October post-ECB press conference.
The euro was knocked below 1.07 against the dollar after the ECB Chief said that the likelihood of inflation returning to target had diminished somewhat while risks from global growth and trade were “clearly visible”. Therefore markets expect more stimulus from the ECB, in the form of an extension or expansion of the QE programme as well as a possible further reduction in the -0.20% deposit rate.
Meanwhile data out of the Eurozone today showed disappointing industrial production data for September at -0.3% m/m, after -0.4% m/m in August.
The euro reached a low of 1.0690 before recovering sharply to 1.0794 when the US session came around. This bounce in the euro came about after the dollar fell on comments by Richmond Fed’s Jeffrey Lacker and St. Louis Fed President James Bullard who raised concerns about low inflation which lowered the rate outlook beyond the Deceber lift off. Both spoke today at the Cato Institute’s annual monetary conference.There were no comments on monetary policy by Fed Chair Janet Yellen. Other Fed speakers will be watched later, which include Fed Vice Chair Stanley Fischer and Chicago Fed President Charles Evans.
US initial jobless claims data released today had little impact on the dollar as the number of claims were unchanged at a seasonally adjusted 276,000 for the week ending November 7. Tomorrow’s retail sales report will likely be more important.
The dollar traded in a small range for most of the European session against the yen between 122.86 123.06 before falling to 122.65 early in the US session.
In other currencies, sterling faded yesterday’s rally against the dollar that took it to 1.5245 and it eased down to 1.5173 today before bouncing back up to 1.5242. The Australian dollar trimmed some gains made after this morning’s strong rally versus the greenback following robust Australian jobs data.
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