The single currency continues to climb higher amid anticipations for tighter monetary policy in the Eurozone and in UK. Investors were absolutely not disrupted by Draghi and Carney‘s apparent communication shambles on monetary policy earlier this week. Indeed, both central bankers made some hawkish comments - or interpreted as such by investors - suggesting the era of ultra-lose monetary policy is coming to an end.
Draghi’s optimistic comments about the inflation outlook led investors to believe the ECB was about to start the process of tapering its bond buying program. EUR/USD hit 1.1435 on Thursday morning, the highest level since June 2016. The move was also exacerbated by a broad USD weakness that sent the dollar index to 95.68.
Across the Atlantic, the pound sterling was buoyed amid Mark Carney’s comments about a potential tightening in borrowing costs in the event of a sharp pick-up in business investment. GBP/USD surged 1.20% to 1.2970 yesterday and consolidated around this threshold during the Asian session.
On Thursday morning, the US dollar continued to lose ground as investors started to finally understand that President Trump’s economic boost will remain at the draft stage. The NOK, AUD and SEK stood amongst the best performer and rose 0.62%, 0.48% and 0.58% respectively. The Japanese yen was the only G10 currency to edge lower amid broad risk-taking mood.
By Arnaud Masset