Special week for the euro

Special week for the euro

The euro edged higher against the dollar on Friday, November 22, 2013, after the European Central Bank president, Mario Draghi, has reassured investors about the ECB policy. The European currency approach to $1.3500 and roe signifiancrly against the yen and  the  Sterling   pound to 83.30 pence.

European Central Bank President Mario Draghi downplayed prospect of negative interest rates, which gave the single currency support.

The euro had started the week leading to the other major currencies, until Thursday morning, dollar had gained momentum after the release of  positive US  retail sales . So the data affected the EUR/USD and slipped sharply .
The decline of the euro was also due to investor’s trouble to approach the President of the European Central Bank speech and rumors about the possible decrease of interest rate below zero.

Mario Draghi had announced that ECB wouldn’t change its policy,  putting  an end to the speculations that ECB could increase its interest rates for deposit in the negative then it is zero since July 2012. And his statements pushed  the single currency to rise.

These speculations have created trouble in the currency market, based on the last speech of Mr. Draghi at the ECB meeting in early November, when he raised the possibility of lower interest deposits below zero.
If the interest rate is high, Banks use the deposit interest to gain money by putting the extra liquidity in the central bank, but if the interest is negative they could not pay the extra cash to 0.1%.

 Banks then will be  forced  to distribute surplus to households and businesses creditors, which ultimately develop further the economy. But some powerful members as the  Head  of the central bank of Germany, Jens Weidman, are against this method. 

We will wait the next discussion and the out coming publications of the ECB .

But the EUR / USD pair is  still  rising , next week we expect a favorable position of the EUR against USD, especially after the final appointment of Janet Yellen (future president of the U.S. central bank) by the U.S. Senate Banking Commission , which will result in a decline in the dollar earlier this week .

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