The euro led an astonishing charge for risky assets after European Central Bank president Mario Draghi said that the bank will do whatever it takes to save the euro. Investors took the remarks to mean that the European Central Bank will soon restart its contentious government debt-buying intervention scheme to help ring-fence Spain. The euro rallied sharply, rebounding from near two-year lows to reach two-week highs against a tumbling US dollar. The greenback crumbled as investors shunned safe havens and piled back into equities, risky bonds and high-yielding currencies. The pound was also at the forefront of the risk rally, climbing by 1.64 per cent at one stage. The move gives UK importers a unique opportunity to cash-in on the dollar’s decline after dire UK GDP data has increased the chances of a more active Bank of England at next week’s policy meeting.
Sterling
Sterling’s short-term outlook has gained a massive lift after confidence-boosting comments from the European Central Bank sent the refuge US dollar tumbling and the pound soaring. At one stage the pound registered a 1.64 per cent daily gain against the US dollar while it ended up by 1.33 per cent versus the yen. Still, investors will not have forgotten Britain’s dismal second quarter GDP result which had sent the pound crashing to seven-week lows against the dollar.
US dollar
An unexpected battle cry from the European Central Bank coupled with anxiety ahead of yesterday’s US growth data led to an aggressive sell-off of US dollars. The buck plunged by around 1.5 per cent against a group of currencies led by sharp decline against the euro after the ECB said that it will do whatever it takes to safeguard the eurozone from its current crisis. Those remarks saw traders pile into riskier assets at the expense of the safe haven dollar and that trend may develop further.
Euro
The euro has amazingly snapped back from near two-year lows to reach two-week highs against the US dollar after ECB president Mario Draghi hinted that the central bank is prepared to intervene in bond markets again to save Spain, and ultimately the euro. Investors will look towards the European Central Bank’s monetary policy meeting next week for action while the euro looks set to strengthen. However, uncertainty could keep any gains in check.
Japanese yen
The yen extended its decline following data showing Japanese inflation turned negative in June, confounding expectations of a small increase which has put concerns about additional asset purchases from the Bank of Japan back on the table.