Mario Draghi Changes His Tone
The euro crept towards $1.40 this week as investors regained confidence in the region as it slowly edged towards recovery.
The common currency steadied at $1.3877 on Friday morning at 7:015 GMT after European Central Bank President Mario Draghi struck a more dovish tone in a speech at an awards ceremony in Vienna.
Reuters reported that Draghi said the ECB has been working on additional policy changes which will help protect the region from a period of deflation. He reiterated that the bank doesn't see an imminent risk of deflation, but that he plans to keep a close eye on the bloc's inflation figure as it remains far below the bank's target rate.
Draghi also remarked that the bank is prepared to intervene with non-standard policy tools if the region's strengthening currency continues to weigh on prices.
Draghi's attitude was much more conservative than at the bank's post policy meeting press conference just last week. Following the ECB's March meeting, he told the public that the bank saw no reason to act as economic data showed signs of a sustainable recovery despite the disappointing inflation figures.
However, his confidence initiated a wave of momentum for the common currency which took it to a two and a half year high against the dollar. The currency's strength is worrisome for the bloc, which is already battling low inflation. On top of that, several of the region's economies are struggling to pay back debts and the strong euro has made it difficult for them to remain competitive in the marketplace.
The euro retreated following Draghi's comments on Thursday as many believe that the bank will take the currency's strength into account at April's policy meeting and inject funds into the eurozone's financial system by unconventional means.
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