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 .
