Euro rallies on Draghi comments, German data
The euro ended the week on a high note as market participants reacted to the latest round of economic data from Germany, the currency region’s largest member-state.
Germany’s Ifo survey, which monitors the business outlook of 7,000 executives in private industry, reached the highest level in more than a year. Expectations concerning business developments climbed to the highest level since spring 2011, as firms expressed greater confidence in the German economy ahead of the holiday season.
Confidence was high despite the broad slowdown in economic activity during the third quarter. Germany’s GDP expanded 0.3 percent in the three months to September, compared to 0.7 percent the previous quarter.
The euro was also supported by European Central Bank President Mario Draghi, who downplayed reports the central bank was activity considering negative deposit rates. In a speech to the Banking Congress in Franfurt, Germany, Draghi stressed the importance of low interest rates, without acknowledging the need for more drastic measures.
“I understand the concerns about a prolonged period of low returns on savings, But it is important to understand that interest rates are low because the economy is weak,” Draghi said.
The ECB slashed its benchmark lending rate in half earlier this month in an effort to combat the slowest pace of inflation growth in four years. Earlier this week signs emerged the ECB was willing to set its deposit rate at -0.1 percent.
The euro advanced 36 pips to 0.8359 against the British pound, after hitting a two-month low against its European rival earlier in the week. The euro made a strong advance against the US dollar, gaining 70 pips to 1.3550. The EURUSD retraced its previous losses, which were triggered by speculation about negative deposit rates.
The US dollar was mostly idle, but remained well bid against most of its major peers. The US dollar index fell more than 0.4 percent to 80.73.
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