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21.01.2016 19:22

American focus: the euro fell on Draghi comments

The euro fell sharply against the US dollar after European Central Bank President Mario Draghi made it clear that the Governing Council may decide on additional stimulus measures at its next meeting in March. Draghi also said that the outlook for inflation "significantly" worsened.

Earlier Thursday, the ECB left its key interest rate unchanged, despite the fact that low energy prices and concerns about the impact on the world economy of China may attempt to disrupt the central bank to return inflation to the target level.

Speaking at a press conference Mario Draghi said the economic stimulus measures implemented by the central bank in June 2014 and most recently extended in December, "strengthened the stability of the euro zone to the recent global economic shocks."

However, he also added that the recent decline in oil prices suggests that the annual inflation rate in 2016 is likely to be "significantly" lower than the forecasts published in the last month.

Economists expect the ECB that inflation will rise from the December level of 0.2% this year to average 1%, and then continue to grow in 2017. However, Draghi said that under the current conditions in the coming months, prices could fall again.

"We re-evaluate our policies and may amend it at the next meeting in March," - said Draghi.

Later, the dollar lost some positions recruited, the dynamics of the US dollar affected the mixed US economic data. The report submitted by the Federal Reserve Bank of Philadelphia, showed that in January, the index of business activity showed a moderate increase, reaching at the same level of -3.5 points versus -5.9 points in December. It is worth noting that many economists had expected growth of this indicator only to the level of -5.0 points.

US Department of Labor said the number of Americans who first applied for unemployment benefits, increased dramatically in the last week, reaching the highest level since the beginning of July, and pointing to some loss of momentum of the labor market. According to the report for the week ended 16 January, the number of initial applications for unemployment insurance increased by 10,000, to a level of 293,000 (seasonally adjusted). Economists, however, expected to decline to 278 000. The figures for the previous week was revised up to 283 000 to 284 000. It is worth emphasizing the number of calls is below 300,000 for 46 consecutive weeks (the longest series since 1970).

The yen fell against the dollar under the influence of today's announcement of government officials. "The Bank of Japan should expand the easing of monetary policy," - said one of the assistants to the Prime Minister of Japan Shinzo Abe. He is sure that there are all necessary conditions. According to him, the volatility in the world markets threatens to undermine "abenomics", which was intended to revive Japan's economy. "The conditions for further easing have developed," - said the adviser, referring to Japan's stock market decline, the strengthening of the yen, sluggish economic growth and easing inflation expectations. Meanwhile, Adviser to the Prime Minister of Japan Abe Shibayama said it was too early to talk about new measures to mitigate the Bank of Japan, as falling stock markets may be temporary. "At this stage we need to closely monitor the situation and exchange information with financial authorities in other countries," - he added. This statement was made amid growing talk about the fact that the Central Bank may take action to stimulate already at the meeting on 28-29 January, increasing the amount of asset purchases.

Market Focus

  • The eurozone started the third quarter on a solid footing, according to PMI survey data
  • Earnings Season in U.S.: Major Reports of the Week
  • German private sector output growth slowed for the second month running in July
  • ECB's Mersch says as conditions normalise, it is unlikely that uncoventional policies will remain necessary
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