Draghi speech causes Euro strength
Yesterday saw Mario Draghi the head of the European Central Bank (ECB) speak yesterday at the latest ECB press conference. There are worries that the Euro is too strong which could hinder exports , but Draghi stated that it was not a cause for concern and was positive about the Eurozone economic situation as a whole. The Euro currently sits at the best levels against the US Dollar since 2014.
He also mentioned inflation, which has been a problem in the past for the Eurozone. He said that recent economic data shows consistent growth in the bloc and feels that inflation will head towards its 2% target without the need for a change in monetary policy. Draghi also mentioned that there was the possibility that Quantitative Easing (QE) could be elongated. QE is pumping money into an economy in order to stimulate growth. QE was reduced from €60bn monthly increments to €30bn last year and Draghi’s statement that QE could continue longer than it’s current target for completion shows a slight lack of confidence in the economy and was probably a factor in the Euro not strengthening further against the major pairs.
There are concerns for the Euro however, We have Italian elections due in March where far right parties are gaining popularity , such as the Casa Pound. If a party such as Casa Pound gained power there is the potential for a referendum due to their strong views on immigration. This has the potential to substantially weaken the Euro. There is also the ongoing situation of Catalonian independence which also could cause potential Euro weakness should Catalonia leaving mainland Spain become more apparent.
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