Mario Draghi’s Hawkish Comments See Increased Confidence in the Euro


Mario Draghi may have been the factor behind the euro’s highest point against the dollar in almost two years on July 19th. The Italian economist and head of the European Central Bank was perceived as hawkish by analysts as he stated that no key changes were currently under discussion with regard to current easing policies by the ECB.

Mario Draghi Makes No Commitment Either Way On Changes to Easing Policies
Draghi said that the current ultra-easy policies were a topic that would be revisited in the autumn, and no date had been set for those discussions. While many felt his comments were intended to calm the markets, following speculations after comments he made in Portugal last month that there may be a tapering program on the cards to change the current easing policies, in fact, his comments caused further speculation. Rather than committing to try to taper back and return the balance sheets to normal, he has potentially made it possible to add further easing in the future if it is needed.

How Were Markets Affected By Draghi’s Comments?
All eyes were on the ECB on July 19th and Draghi’s words had an immediate effect on the rate of the euro against the dollar. It peaked at $1.1659, which is the highest it has been since August 2015 (and a lot has happened since then!). The euro did steady out again after this spike at around $1.1626, however this certainly shows that the ECBs approach to easing is something the markets are strongly motivated by.

What Will Happen Next?
Evidently, we will have to wait till the summer has ended to see whether there will be a date set for more discussions and then a decision to taper off easing in the EU by the ECB. Draghi will no doubt have noted with interest the strong reaction on the currency markets to what were actually comments with no key changes announced in them. Savvy traders on sites like also no doubt watched the reaction to Draghi’s press conference with interest. Once an announcement is made that does actually change the approach to easing, either by tapering it off or indeed, increasing it, we can be sure the market response will be even more significant.
For now, the euro seems to have settled somewhat against the dollar but is still showing decent performance.