The euro edged up today after the better-than-expected German business climate print and rose further sharply following comments from European Central Bank President Mario Draghi. As of now, the currency has lost its gains versus the US dollar, trimmed them against the Japanese yen, but kept them against the Swiss franc.
The ifo Business Climate Index ticked down to 103.7 in September from 103.9 (seasonally-adjusted) in August. The drop was smaller than the decline to 103.2 predicted by analysts. Despite the fall, the report did not sound pessimistic at all:
Firms’ assessments of their current business situation deteriorated marginally, but remain at a high level. Companies also scaled back their business expectations somewhat. Despite growing uncertainty, the German economy remains robust.
But the main reason for the euro’s rally was the Draghi’s testimony before the European Parliament Economic and Monetary Affairs Committee in Brussels. Experts paid especial attention to his comments regarding inflation:
Measures of underlying inflation remain generally muted but have been increasing from earlier lows as domestic price pressures are strengthening and broadening. Underlying inflation is expected to increase further over the coming months as the tightening labour market is pushing up wage growth.
EUR/USD traded near its opening level of 1.1744 as of 21:16 GMT today following the earlier rally to the daily maximum of 1.1815. EUR/JPY opened at 132.02, rallied to the daily high of 133.07, but retreated to 132.48 later. EUR/CHF jumped from 1.1263 to 1.1329.
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