Euro Bounces off Two-Week Low - 3.5.2012

The single currency touched a two-week low of 1.3095 against the dollar, but rose back toward 1.3200, climbing above 20-day moving average, during the press conference of the ECB President Mario Draghi, after the bank decided to leave key interest rates unchanged, with the main refinancing rate at 1%. Draghi said in his introducing statement, that inflation is expected to stay above 2% in 2012, and probably will fall below 2% in early 2013, judging by current futures prices for commodities. The ECB head also indicated that “economic activity is expected to recover gradually over the course of the year”, although “latest survey indicators for the euro area highlight prevailing uncertainty” and downside risks remain alive. “Together with fiscal consolidation, growth and growth potential in the euro area need to be enhanced by decisive structural reforms, enhanced by the national governments”, he said. Finally, Draghi concluded that maintaining price stability over the medium term would be “the best contribution of monetary policy to fostering growth and job creation in the euro area”. Answering to questions at the press conference, Mario Draghi said that the Governing Council did not discuss any specific interest rates reduction, and that the bank’s program of granting longer term refinancing operations is successful and might had already contributed to avoiding a major crisis. The euro also recovered its previous losses against the British pound, rising from an almost two-year low 0.8102 to 1.8140, and the Japanese yen, rising from 105.30 to 106.12.