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 His prepared testimony to the European parliament jolted a currency
market which has been drifting since a unexpectedly strong batch of
U.S. jobs numbers last week prompted many to bet on a rise in
Federal Reserve interest rates next month.
But there was no follow-through after the initial drop and by midday
in Europe, the single currency had again recovered to trade at
$1.0714, down 0.3 percent on the day but still well above this
week's low of $1.0674.
"Some real action after Draghi this morning, but it's noticeable
that we haven't pushed on," said a trader with one international
bank in London.
There is a broad consensus among the major currency trading banks
that the dollar should rise but analysts have pointed to several
barriers standing in the way of a swift push to highs of $1.0450 hit
in March and April.
That has added to a sticky performance this week that also seems
linked to a generally weaker tone to commodity prices and worries
over what view Fed officials may take of the dollar's gains.
"(There are) concerns the Fed may lace a rate hike next month with a
relatively dovish message," analysts from Rabobank said in a note.
"U.S. price pressure remains moderate and with the gains in the USD
since the middle of last year having effectively already tightened
monetary conditions in the U.S., there is risk that the Fed may
revise down its projections for further policy tightening next
month."
Prior to Draghi's comments, the Australian dollar had been the day's
only big mover, surging more than 1 percent to its highest in a week
after the strong jobs readout knocked 0.3 percentage points off
unemployment.
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A number of European analysts expressed disbelief at the official
numbers, which cool expectations of more loosening of monetary
policy in an economy that has looked moribund since the end of a
China-driven commodities investment boom.
Morgan Stanley are among the more bullish of the major banks on the
Aussie but even they urged caution on the numbers.
"Stellar Australian consumer confidence and labor market data
support our economists’ call for the RBA leaving rates unchanged
this year," the bank's strategists said in a note.
"However, the sustainability of Australia’s economic rebound is in
doubt. Current Aussie strength may only offer tactical bullish
opportunities, towards $0.74, while the long-term outlook remains
bearish."
After a slight retreat at the start of the European session, the
Aussie was up 1.1 percent on the day at $0.7137.
(Editing by Mark Heinrich)
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