Euro At 3 Yr. High Against Dollar; ECB President Draghi Says Volatility In Exchange Rate Represents Source Of Uncertainty

The U.S. dollar remains at a 3 yr. low against the euro which is strengthening on Thursday following a rate decision from the European Central Bank (ECB) to keep rates unchanged and their monetary policy intact.

The euro is currently trading at 1.2468 against the dollar and remains elevated following a comment on Wednesday from U.S. Treasury Secretary Steve Mnuchin at Davos, Switzerland about a weak U.S. dollar being good for trade.

During the ECB’S January monetary policy meeting on Thursday, the European Central Bank decided to keep the interest rates on the marginal lending facility and the deposit facility unchanged at 0.00 percent, 0.25 percent and -0.40 percent, as expected, and maintained their net monthly asset purchases at a pace of €30 billion until the end of September 2018 or beyond.

During the ECB’S press conference from Frankfurt, Germany, ECB President Mario Draghi said that inflation remains flat with no strong indicators of price pressure or convincing signs of upward movement.

“Domestic price pressures remains muted, overall, and have yet to show convincing signs of a sustained upward trend. Against this background, the recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium term outlook for price stability” Darghi said.

“Overall, an ample degree of monetary stimulus remains necessary for underlying inflation pressures to continue to build up and support headline inflation developments over the medium term” Draghi added.

Consumer price inflation in the 19 member euro area remains below the ECB’s target just below 2 percent and came in at 1.4 percent in December 2017.

Commenting about the dollar’s weakness compared to the euro, Draghi quoted a past governor’s meeting from the IMF and said,  “We will refrain from competitive devaluations and will not target our exchange rates for competitive purposes.”

Draghi also emphasized that the ECB doesn’t target exchange rates and certain movements are justified by the strengthening of the economy.

DAVOS- World Economic Forum 

President Trump is currently in Switzerland to attend the World Economic Forum alongside more than 3,000 leaders across the globe and will give a speech on Friday.

On Wednesday German Chancellor Angela Merkel gave a speech at Davos about immigration in Europe which remains a serious challenge with a large influx of new immigrants from Africa and the Middle East in recent years.

Chancellor Merkel advocated for a multi-literal approach that moves away from protectionism.

“Germany is a country committed to finding multilateral solutions. Unilateral action and protectionism are not the answer” Merkel said.

Yesterday, President Trump suggested during a press conference with reporters that a pathway to U.S. citizenship may be offered to “dreamers” under DACA and explained that we’re going to “morph” into it over a 10-12 year time span while he’s also asking for $25 billion to build a southern border wall and another $5 billion for security.

Written and Edited by:

Johnathan Schweitzer



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