Euro slips as Draghi hints at June easing by ECB
LONDON (AP) — The euro slipped back below $1.39 Thursday after the European Central Bank's president, Mario Draghi, hinted that the bank may ease its monetary policy next month.
Though the ECB kept interest rates unchanged, Draghi said the bank's governing council was ready to do more, possibly in June, to shore up the recovery and prevent prices from falling. Inflation in the 18-country eurozone stands at an annual rate of 0.7 percent, way below the ECB's target of just below 2 percent.
He said the 24-member council was "dissatisfied about the projected path of inflation" and "is not resigned to have too low inflation for too long a time."
The recent high value of the euro — it nearly breached the $1.40 mark for the first time since November 2011 — is one of the reasons why inflation is low. A high currency can rein in economic activity by making exports more expensive and making imports, such as energy cheaper. Though the ECB does not target an exchange rate, cutting interest rates or some other type of stimulus measure could reduce the value of the euro.
Very low inflation, or a period of falling prices, also known as deflation, can derail a recovery by prompting consumers to delay purchases in the hope of bargains down the line.
Following his comments, the euro was down 0.1 percent on the day at $1.3894.
Stocks in Europe weren't affected too much by Draghi as the focus remained on a vow from Federal Reserve Chair Janet Yellen to maintain low interest rates until the U.S. job market is healthy.
Germany's DAX was up 0.4 percent at 9,556 while the CAC-40 in France rose 0.6 percent to 4,471. Britain's FTSE 100 was up 0.4 percent at 6,822.
Wall Street was poised for a flat opening, a day after the Yellen-inspired boost.
U.S. stock markets turned positive Wednesday after Yellen told lawmakers that the U.S. job market is "far from satisfactory." She said the Fed will begin increasing interest rates only when there is enough progress in restoring full employment and when inflation is back up to its target of 2 percent. Yellen's comments appeared to ease concerns that the Fed might move too quickly to raise interest rates.
Adding to the upbeat sentiment was China's April trade data that showed an improvement in exports. Exports rose 0.9 percent from the previous year, compared with a 6.6 percent decline in March. Imports also grew after a contraction in March but at a subdued level.
Earlier in Asia, Tokyo's Nikkei 225 stock index, the region's heavyweight, closed up 0.9 percent at 14,163.78 and South Korea's Kospi added 0.6 percent to 1,950.60. Hong Kong's Hang Seng added 0.4 percent to 21,837.12 and China's Shanghai Composite gained 0.3 percent to 2,015.27.
