Surprise Uptick in UK Earnings Dents Euro to Pound (EUR/GBP) Exchange Rate

Surprise Uptick in UK Earnings Dents Euro to Pound (EUR/GBP) Exchange Rate”

Mnuchin, speaking at the World Economic Forum in Davos said that a weaker dollar was good for trade, while also talking about new tariffs and trade pacts.

Demand for the US Dollar is likely to remain rather weak ahead of the weekend, though, to the benefit of the EUR/USD exchange rate.

Draghi went on to say: "The recent volatility in the exchange rate represents a source of uncertainty.with regard to its possible implications for the medium-term outlook for price stability".

North of the border, the Bank of Canada kicked off 2018 by hiking interest rates, buoyed by robust job growth and having raised rates twice back-to-back previous year, even as uncertainty around the fate of the North American Free Trade Agreement lingers.

When asked if the Trump administration was a cause for concern, Mr Draghi said: "Several members of the European Central Bank governing council expressed concern".

The low over the past year has been just under $1.05, but this is now up from $1.20 at the end of 2017 and marks a high not seen since October of 2014.

Consequently, euro zone bond yields - which move inversely to price - dropped 1-3 basis points across the board on Thursday.

Away from the euro's rise, the European Central Bank left policy on hold, with a deposit rate of -0.4%, a base interest rate of 0.0%, and a quantitative easing programme of €30 billion per month.

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The euro is now up 4 percent against the dollar in 2018, and 7.2 percent over the last six months.

Europe, similar to the United States, is looking for ways to get inflation back up to 2% to foster ongoing economic growth.

Quizzed on the chances of ending stimulus, Draghi said there was a need to distinguish between a sudden stop, extension of the asset purchase programme and gradual tapering. Naturally, it's US President Donald Trump's speech on Friday that is most hotly anticipated given growing concerns globally about protectionism, with many other leaders having warned against it already at the event.

The value of the euro rose above $1.25 during Mr Draghi's conference after he pointed to growing confidence that inflation would meet its 2pc target.

Draghi also said there were "very few" chances of a rate hike from the bank this year and said inflation pressures were now subdued but would rise in the medium term.

With no change in policy expected at this juncture any attempt to talk down the prospect of an imminent return to monetary tightening is likely to leave the Euro lacking in support.

This has prompted investors to bet that the European Central Bank will strike a more cautious tone when it meets later on Thursday on potential rate rises and withdrawal of its bond-buying scheme.

Jane Foley of Rabobank mentioned that "Draghi failed to surprise the market", and "The economic data is too strong", Most analysts also pointed that despite what Draghi said, the market and the whole Eurozone can still expect a tighter monetary policy.

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