Published: Wed, June 28, 2017
Money | By Armando Alvarado

Draghi: ECB will be cautious in adjusting stimulus effort

Draghi: ECB will be cautious in adjusting stimulus effort

It was a lively start to European trading.

Speaking in London, Federal Reserve chairwoman Janet Yellen did little to suggest U.S. policy makers have altered plans for a third interest rate hike later this year, saying "it will be appropriate to the attainment of our goals to raise interest rates very gradually".

That provoked the banking world's single biggest cheerleaders for a stronger dollar, Deutsche Bank, to abandon calls for a stronger greenback and instead call the end to a dollar rally dating back to 2014.

"I do think the euro now has got quite significant momentum behind it and I think that will build towards the confirmation of some tapering announcement this year".

"The move today is really being driven by the hawkish pivot from Draghi", said Mazen Issa, senior FX strategist, at TD Securities in NY.

"Yesterday's remarks from Draghi were meant to have an effect, now the ECB seems to be managing out the effect of the effect", said Stephen Gallo, European head of FX strategy at Bank of Montreal.

"If you are looking at a 10-year maturity and further out, it is a global bond market and the extremely low yields in core Europe stick out alongside Japan and Switzerland as the places that seem stretched in terms of valuation". U.S. crude futures were down 0.9 percent at $43.86.

Against the perceived safe-haven yen, the dollar slipped 0.3 percent to 112.120 after rising as high as 112.285 yen.

Since the most recent US inflation report came in well below expectations, Fed rate hike bets for 2017 have remained below 50% and the US Dollar has seen limp trade.

The yield on 10-year German debt also turned round as the session developed, to hit the flatline at 0.35 per cent, having been up 4 basis points earlier.

Modi meets Trump with his usual greeting _ bear hugs
In advance of the meeting, the Trump administration approved India's purchase of almost two dozen unarmed surveillance drones. It takes place amid uncertainty over the relationship because of differences on trade and other issues.

Federal Reserve Chairperson Janet Yellen will speak in London on Tuesday to the British Academy two hours after Patrick Harker the president of the Philadelphia Fed makes an address.

"These weren't very hawkish comments, as he suggested some changes to policy although the overall stance did not change", said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

WALL STREET: The Standard & Poor's 500 index fell 0.8 percent to close at 2,419.38.

The delay in the healthcare vote brought back worries about the time table of President Donald Trump's business-friendly agenda.

The strength of the common currency pulled on the dollar index, which is a measure of the dollar versus a basket of worldwide currencies, to a low of eight days of 96.972.

The Australian dollar stood near three-week lows on Wednesday versus a euro hoisted up by remarks from European Central Bank Governor Mario Draghi, which were seen as signalling a change in its super-easy policy stance.

The market has been expecting an European Central Bank move despite caution offered during the previous weeks. USA gold futures GCcv1 gained 0.32 percent to $1,250.40 an ounce. Brent, the worldwide standard, lost 8 cents to $46.57 per barrel in London.

USA crude futures Clc1 were up 0.2 percent at $43.48 a barrel.

The weaker dollar helped bolster spot gold, which was up 0.4 per cent at US$1,251.59 per ounce.

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