Euro Rises Against Major Counterparts as ECB No Longer Worries About Deflation

The euro rallied against the US dollar, the British pound, and other major peers on Friday after the European Central Bank signaled that it no longer worries about deflationary pressures. The shared currency reached its highest point against the greenback in almost 2 months in today’s trading.

Following an update for his bank’s monetary policy, European Central Bank President Mario Draghi held a press conference, in which he said the Governing Council no longer feels deflation represents a risk. The European Central Bank kept its monetary policy unchanged in the update and signaled there will be no rush to increase its quantitative easing program.

The new tone from Draghi and the European Central Bank comes as the economy of the euro zone continues to display healthy signs, which rendered the sense of urgency in taking further action obsolete. However, Draghi said that the bank will maintain its quantitative easing program until the recovery stabilizes, which means the bank is not yet hawkish towards its policy.

Draghi reiterated that the European Central Bank is still willing to increase its asset purchases program, while interest rates will likely be kept at the same level or lower for an extended period of time. The ECB president also added that expectations of near term inflation remain unchanged, which could affect the growth of the euro zone economy.

EUR/USD traded at 1.0629 as of 15:35 GMT on Friday, the pair’s highest level since January 17, from 1.0540 at the beginning of today’s trading. EUR/GBP was at 0.8749, a level last reached on January 17 as well, after starting today’s session at 0.8704.

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