The euro has posted gains in the Tuesday session. EUR/USD is trading at 1.1260, as the pair is up 0.70%. For a second straight day, there are no eurozone releases. Earlier in the day, ECB President Mario Draghi addressed the ECB Forum on Central Banking, and his upbeat comments pushed the euro higher. In the US, today’s key event is CB Consumer Confidence, which is expected to dip to 116.1.
ECB President Mario Draghi addressed the ECB Forum on Tuesday, and the markets liked what they were hearing, as the euro has improved to 2-week highs. Draghi acknowledged that economic indicators were showing a broadening recovery in the eurozone, and even had something positive to say about inflation, as he noted that “deflationary forces have been replaced by reflationary ones”. Draghi defended the bank’s loose accommodative policy, saying that it had pushed inflation higher, but stimulus was needed until inflation becomes “durable and self-sustaining”. Draghi’s message to the markets and his critics is that “we’re on the right path, but please show some patience”. Germany, the eurozone’s largest economy, wants to see a tighter policy, which is a better fit for the robust economy. Clearly however, the ECB under Draghi’s stewardship has no intentions of altering current policy until inflation moves closer to the ECB’s target of 2 percent.
The German economy is firing on all four cylinders, and the business sector remains optimistic, according to a key survey released on Monday. Ifo Business Climate hit a record high in June, climbing to 115.1. The indicator has improved for five consecutive months as optimism in the business sector continues to rise. Ifo chief Clemens Fuest said that the German business sector was in a “jubilant” mood, and said that he expected business conditions to continue to improve. Major economic institutes and the German central bank have revised upwards their forecast for German growth in 2017 and 2018. German GDP grew 0.6% in the first quarter, and the German locomotive has boosted growth in the eurozone. Analysts are closely monitoring how the ECB plans to respond to stronger economic conditions in the euro-area. So far, the central bank has dismissed calls to tighten monetary policy.
