Draghi Leaves Euro Traders Befuddled as Currency Fluctuates

Updated on
  • ECB chief says stimulus effects haven’t yet been fully felt
  • Inflation outlook raised for 2016, kept unchanged for 2017-18

Currency traders struggled to get a handle on Mario Draghi on Thursday.

The euro swung between gains and losses as the European Central Bank president said at a press conference in Vienna that the full effects of monetary stimulus are yet to be felt, stoking speculation that the institution will stand pat on further measures for now. At the same time he raised the 2016 inflation forecast, while leaving the longer-term outlook unchanged.

“Commitment and conviction seems very low right now as there are a number of major events coming up,” said Ned Rumpeltin, European head of currency strategy at Toronto Dominion Bank in London. “So, unless Draghi said something really surprising, the market was likely to stay pinned within a familiar range.”

The euro was little changed at $1.1189 as of 2:33 p.m. London time, after rising as much as 0.3 percent and falling 0.2 percent. It touched the highest level since May 24 earlier in the day.

Draghi was speaking after leaving the ECB’s interest rates and quantitative-easing program unchanged. He reiterated that officials are focusing on implementing measures announced earlier, including a corporate bond-buying program that starts June 8. He said low inflation hasn’t become entrenched in a wage and price setting.

The 19-nation euro has fallen about 1 percent against the dollar since the ECB’s April 21 decision.

“All in all, everything points toward the ECB staying put for now,” said Esther Reichelt, a Frankfurt-based currency strategist at Commerzbank AG. Draghi “also said that they didn’t see second-round effects, so that should actually diminish the downside risks.”

— With assistance by Anchalee Worrachate

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE