Rand weaker as market awaits Mario Draghi press conference

Posted January 28, 2018

On Thursday, having left policy unchanged, the bloc's central bank warned the euro's surge was a potential risk and said it might have to review strategy if USA comments on a weak dollar led to a change in monetary conditions.

US Treasury secretary, Steven Mnuchin advocates that the lower dollar is good for the US.

Demand for the US Dollar is likely to remain rather weak ahead of the weekend, though, to the benefit of the EUR/USD exchange rate.

And he said recent exchange rate volatility had been sparked by "the use of language that doesn't reflect the terms of reference we have agreed".

A market gauge of inflation expectations closely watched by the European Central Bank, the five-year five-year forward breakeven rate, closed Wednesday at 1.765 percent, down from 1.78 percent earlier in the week.

He also said that "several European Central Bank policymakers expressed concern" over the recent statements from the U.S. and such worries were "broader than the exchange rate, but the status of worldwide relations right now". The corresponding index is seen at 112.3 in January versus 112.5 in December. Its shares, however, reversed course after opening higher as investors took out profits in a stock that has risen around 80 per cent in the past year.

The euro is at a three-year high against the dollar.

The bank says it'll keep buying 30 billion euros ($36 billion) per month in bonds at least through September.

The euro rose above $1.25 for the first time since December 2014 on Thursday before slipping to $1.249 in late London trading, up 0.6 percent on the day. Today, investors turn their attention to the European Central Bank policy meeting, where there is a risk that President Draghi echoes recent remarks from his colleagues and expresses discomfort with the recent strength of the euro, triggering a correction lower.

Later, Draghi made it clear that he does not expect the bank to change interest rates in 2018, saying: "Based on today's data I can see very few chances that interest rates could be raised at all this year".

The stimulus would come from asset purchases, asset holding, reinvestment and forward guidance that interest rates will remain low, Draghi said.

With no change in policy expected at this juncture any attempt to talk down the prospect of an imminent return to monetary tightening is likely to leave the Euro lacking in support. "It's not that we were arguing but we were debating the pros and cons. the big cloud over the forecast, as well as our discussion, is NAFTA", Poloz told a news conference.

Answering reporters' questions, Draghi said: "We don't target exchange rates".

But Draghi said: "Incoming information confirms a robust pace of economic expansion", adding that the state of the economy helped to "strengthen further our confidence that inflation will converge towards our inflation aim of below, but close to, 2%".