European Central Bank chief was overinterpreted by markets

Posted June 29, 2017

Speaking at the ECB's forum on Tuesday, Draghi said factors weighing on inflation in the euro area were mainly temporary, adding that the bank could look through them.

Draghi was intending to strike a balance between recognizing the bloc's economic strength and the need for continued monetary support, Bloomberg reported citing European Central Bank officials.

Bunzl shares climbed 4.1% after the distribution and outsourcing group said revenue for the first half of the year increased by 7% and that it's bought three businesses as part of its growth strategy. One of the only means available to policy makers to control rising inflation is to raise interest rates but it has been argued by Carney and others that rising import costs due to a weaker currency post Brexit referendum is the primary reason for the increase and raising rates at this stage will jeopardise economic growth, which is already slowing.

The euro fell to 2-day low of 0.8780 against the pound, after having advanced to near an 8-month high of 0.8880 at 2:15 am ET. Google has been given 90 days to stop or face further fines of up to 5 percent of the average daily worldwide revenue of parent company Alphabet.

The currency was higher against its major counterparts in the Asian session.

Data from the Nationwide Building Society showed that United Kingdom house prices increased in June after declining for three straight months. The dollar index, which measures the greenback against a basket of six major rivals, fell as much as 0.4 percent to hit a more than seven-month low of 95.967. Economists had forecast a marginal 0.1% rise.

Tuesday's drop in tech shares came as Brussels hit Google with a 2.42 billion euro ($A3.5 billion) fine over abusing its dominance of internet search engines - sending shares in its parent Alphabet down 2.1% lower to $US951.23 (that was the single biggest fine levied by the EU).

His assessment gave the Euro a substantial (1%) boost.

Oanda analyst Craig Erlam said: "The euro jumped higher yesterday and is building on those gains today after Mario Draghi acknowledged the strengthening and broadening recovery in the region, a sign that he's possibly ready to reluctantly back further reductions in stimulus". The next possible support for the euro-franc pair is seen around the 1.07 level. Germany's 2-year government bonds, known as schatz, traded at -0.575%, the highest level in more than a year.

Overall, EUR/USD rallied to a peak around 1.1390 and fresh 10-month highs before a correction back to 1.1355 ahead of the US open.