The Euro rallied to a two week high after ECB President Mario Draghi’s hawkish comments yesterday morning. Draghi said factors weighing on inflation in the Eurozone were only temporary and that deflationary forces had been replaced with inflationary ones. The Euro gained 1% against the Greenback and pushed higher against the Pound after Draghi’s hawkish comments.
The focus around Sterling continues to be on politics. Earlier this week the Pound rallied against the Greenback after May’s Tories finally secured a deal with the DUP to form a government. The deal will apply for the length of this Parliament; however, it will be reviewed in two years’ time. There was further positive news for the UK yesterday as CBI retail sales exceeded expectations. CBI sales were forecast at 4, but posted a much better than expected 12. Although a good week so far for the UK, Sterling does continue to remain fragile due to political uncertainties.
Another busy economic docket today, jam packed with Central Bank speakers. Firstly, ECB President Mario Draghi speaks at the European Central Bank Forum in Portugal where markets expect Draghi’s hawkish tone to continue. BoE Governor Mark Carney will address the market shortly after, as he attends the same forum. Late in the afternoon, the US release two pieces of high tier data; pending home sales and crude oil inventories, both forecast to improve on the previous reading.