Euro rallies 1%, dollar lower ahead of Yellen
The euro rallied around 1% against the dollar on Tuesday boosted by remarks from European Central Bank President Mario Draghi, while the dollar was broadly lower ahead of comments by Federal Reserve Chair Janet Yellen.
EUR/USD touched highs of 1.1305, the most since June 14 and was at 1.1288 by 10.03 ET (14.03 GMT).
The euro strengthened after Draghi said factors weighing on inflation in the euro area were mainly temporary, adding that the bank could look through them.
Draghi said the ECB sees growth that is above trend and well distributed across the euro area, but reiterated that “a considerable degree” of stimulus is still needed in the euro zone, and that the ECB must be “prudent” in how it unwinds it.
The euro was also higher against the yen and the pound, with EUR/GBP advancing 0.57% to 0.8840 and EUR/JPY climbing 1.08% to 126.41.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.63% at 96.49, pressured lower by the stronger euro.
The dollar pushed higher against the yen, with USD/JPY rising 0.15% to 112.06 as traders waited to see if Yellen would maintain a positive outlook on the U.S. economy despite a recent batch of weak economic reports, which would support the Fed’s projection for one more rate hike this year.
Recent weakness in economic data has raised questions over the Fed’s plans to tighten monetary policy, with investors now expecting that the pace of its tightening could be much slower than policymakers want.
Sterling was higher against the dollar, with GBP/USD putting on 0.33% to trade at 1.2765.
Earlier Tuesday, the Bank of England told British banks they will have to set aside extra capital to cover potential losses from exposure to consumer credit in the event of a financial downturn
The BoE also said it is continuing contingency planning for all possible outcomes to the ongoing Brexit negotiations, including the possibility that the UK exits the EU without a deal