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