An Upbeat Mario Draghi Propels the Euro
Heading into the weekend, the euro touched just below $1.33 on Friday morning after a positive press conference following the European Central Bank's monthly meeting. The euro traded at 1.3266 on Friday, as confidence returned to the eurozone.
The ECB decided to leave the record low interest rate unchanged at 0.75 per cent. The decision, although expected was reportedly unanimous; something that left investors who were expecting rate cuts later in the year puzzled. Following the decision, Bank President Mario Draghi gave an upbeat address in which he made it clear that the Finance Ministers were not considering any cuts later in the year.
In December, his address described a long and tedious discussion over the rate and whether or not the bank should cut it, but in January the tone had changed. He noted that the economy was set to recover in 2013, and that the recent economic improvements would eventually reach struggling countries without the help of the bank.
According to the Wall Street Journal, Draghi addressed the skyrocketing unemployment in the region by saying the ECB's job was to keep inflation low, and that monetary policy would not impact joblessness in the region.
The decision to keep such problems at an arm's length contrasts to what the US central bank, which has been quite aggressive in trying to protect the economy, has done. In an effort to reduce unemployment, the Federal Reserve has been buying mortgage bonds.
Recent bond auctions in Spain and Italy have given the eurozone a bit of hope that economies in Southern Europe, where most of the struggling economies are, can recover in 2013. In both countries, the governments exceeded expectations by drawing lower borrowing costs than in past auctions.
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