Euro dips against the dollar as ECB president Mario Draghi defends easy monetary policy

Lucy White
Mario Draghi, president of the European Central Bank, spoke to students in Portugal (Source: Getty)

The euro dipped against the dollar from a high of $1.122 to $1.118 yesterday as Mario Draghi, president of the European Central Bank (ECB), defended the bank’s easy monetary policy.

He said that low interest rates create jobs and foster growth, but his comments caused the euro to ease from its recent high against the dollar.

Read more: Eurozone unemployment falls to lowest in eight years but inflation moderates ahead of ECB meeting

The euro had hit a one-week peak earlier in the day after the publication of weaker-than-expected US May durable goods orders.

According to Douglas Borthwick, managing director at Chapdelaine Foreign Exchange, Draghi was “pouring water on expectations of reducing monetary stimulus”.

This is despite signals from earlier this month that the ECB might be edging towards tighter monetary policy, as the bank removed a reference to cutting interest rates further in its latest monetary policy decision.

Investors meanwhile await a speech today in London from Janet Yellen, chair of the US Federal Reserve, although she is not expected to comment further on the outlook for monetary policy.

Speaking to students in Portugal, Draghi also commented on Sunday’s controversial taxpayer bailout of two Italian banks.

Read more: Italy faces €17bn bill in deal to wind down two failed banks

Rather than applying new EU rules which would have been tougher on investors, the European Commission allowed Italy to form the deal on its own terms – which will potentially cost taxpayers up to €17bn. Draghi maintained that “banks have to put aside resources” capable of absorbing losses in case of a crisis.

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