Daily Afternoon Report 20.07.2017

Daily Afternoon Report 20.07.2017

The euro rose to almost two year highs against the U.S. dollar on Thursday after European Central Bank President Mario Draghi said the bank would discuss the next steps in its monetary stimulus program in the fall.

EUR/USD was up 0.94% to 1.1616 by 10.34 a.m. ET (02.34 p.m. GMT), its highest level since August 24, 2015.

Speaking at the ECB’s post policy meeting press conference Draghi said the governing council was “unanimous in setting no precise date on when to discuss changes in the future,” before adding that discussions should take place in the autumn.

Draghi said the risks to the growth outlook in the euro zone are broadly balanced and the region is now enjoying a “robust” recovery.

He also noted that growth has not yet translated into ‘stronger inflation dynamics’, pointing out that headline inflation is being dampened by weak energy prices.

Draghi added that a ‘substantial degree of accommodation’ is still needed.

The single currency was also higher against the pound and the yen, with EUR/GBP advancing 1.14% to 0.8942 and EUR/JPY climbing 0.95% to 130.17.

The Bank of Japan kept monetary policy on hold overnight and pushed back the timeline for hitting its inflation target.

The warning on inflation reinforced expectations that the BoJ will lag other central banks in tightening monetary policy.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.36% to a fresh 11-month low of 94.3, pressured lower by the stronger euro.

The dollar has weakened in recent days amid mounting speculation that the subdued inflation outlook for the U.S. will undermine that case for the Federal Reserve to raise interest rates once more this year as policymakers have indicated.

The prospect that other central banks may join the Fed in policy tightening has also fed into dollar weakness.

The dollar has also been pressured lower as failed attempts by Republicans to reform healthcare indicated that President Donald Trump’s other legislative efforts, such as overhauling the tax code and implementing fiscal stimulus could face difficulties.

The dollar was little changed against the yen, with USD/JPY at 111.97, not far from Wednesday’s three-week lows of 111.54.