Forex Market Review – Euro supported by Draghi comments

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Euro moved off a two-year low hit early on Monday and was lifted higher into the U.S. trading session following comments from European Central Bank President Mario Draghi. In a press conference today, Draghi said he will keep the door open to further interest rate cuts if the economic outlook warrants it.


This gave markets some relief since any signs of action to stimulate the economy will be taken as positive by investors.  He also said that the European bailout fund (ESM) that will recapitalize euro zone banks will have no need for a sovereign guarantee. Euro remains vulnerable though as Spanish bond yields surpassed the risky 7 percent level today.


EURUSD edged up to a high of 1.2323 in New York trading, moving away from a two-year low of 1.2255 hit in the Asian session.


Meanwhile, increasing prospects of QE3 will weigh on the U.S. dollar as speculation rises that the Federal Reserve will likely begin a third round of debt purchases in an effort to stimulate the sluggish economy.


The dollar has been trading sideway against the yen since Friday. USDJPY was last down to a low of 79.56 in late U.S. trading, from an earlier high of 79.69. Dollar has been weakened by a disappointing U.S. jobs report which showed non-farm payrolls grew less than expected last Friday.


Euro hovered near a one-month low against the yen, buoyed slightly to 98.12 yen after Draghi’s comments supported euro against its major peers.