Draghi Warns Of Euro Risks, Hits Back At US On Currency Talk

Reuters

After Treasury Secretary Steven Mnuchin talked down the US dollar this week in Davos, Draghi attributed some of the euro currency's rapid strength in 2018 to the improved economic growth in Europe. The jobless rate is expected to remain at 4 percent in November.

Aaron Kohli, rates strategist at BMO Capital Markets in NY, expects the seven-year rate to come slightly higher than the expected level at the bid deadline, suggesting a little more tepid demand than usual for this type of maturity. His remark at the World Economic Forum in Davos that a weak dollar is good for the USA economy has raised eyebrows.

Yet even as the euro zone economy roars ahead, a strong euro threatens to dampen inflation and endanger the work done by the European Central Bank during years of over 2 trillion euros worth of stimulus.

"An ample degree of monetary stimulus remains necessary for underlying inflationary pressures to continue to build up", he said.

The Pound-to-Dollar exchange rate has risen back above 1.43 in tandem with the Euro's rise, even if the Pound-to-Euro exchange rate is falling.

"Monetary policy will remain accommodative. interest rates will remain low well beyond the end of (QE)".

Attention has been focused on when the bank will end the 30 billion euros ($36 billion) in bond purchases, a step that pushes newly printed money into the economy to raise inflation and support the recovery.

Egypt's military detains ex-general seeking to run for president
Former military commander Sisi was elected in 2014, a year after he led the army to oust Islamist President Mohamed Mursi. He was convicted , and if that ruling is upheld on appeal he will be ineligible to run.

Looking ahead to the rest of the day, we do not have any major news from the Eurozone but we have the advance GDP data from the United States which should bring in some volatility.

Bank of America Merrill Research discusses the Dollars outlook in light of the currency's recent decline and notes that the the USD has been sliding since September just as tax reform began to gain momentum and even the passage of tax reform failed to slow the USD's descent.

The rand was slightly weaker on Thursday afternoon, while trading in tight ranges ahead of the European Central Bank (ECB) decision on interest rates.

He was speaking after the ECB's 25-member governing council left its benchmark refinancing rate at an historic low of 0%.

The European Central Bank kept its policy on hold today, as expected. ECB President Mario Draghi cited the region's "solid and broad" growth and said inflation was likely to rise in the medium term.

"Several (ECB Governing Council) members expressed concern, and this concern was in a sense broader than simply the exchange rate, it was about the overall status of worldwide relations right now..." Purchasing managers' indexes released for January already suggest that momentum accelerated into this year.

After the close of trading on Thursday, results are expected from Intel Corp and Starbucks Corp. The reading follows business activity surveys that also show a strong upswing in the 19-country eurozone.

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