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DailyFX European Market Wrap: Euro Trips Over Draghi’s Inflation Warning

DailyFX European Market Wrap: Euro Trips Over Draghi’s Inflation Warning

Katie Pilbeam, Contributor


The European markets ended the Thursday session higher after the European Central Bank, as expected, left interest rates unchanged. ECB President Mario Draghi made it clear that the bank was ‘ready’ to boost the asset purchases in both size and duration if needed. Eurozone inflation rose sharply in December which has led to speculation that the ECB may begin withdrawing its stimulus program.

Yet Draghi downplayed the uptick inflation, warning that the Governing Council was "looking through" the recent surge. This proved to be the dovish difference maker for The bank had already decided to extend its quantitative easing programme until the end of this year but reduced its scale from €80bn per month to €60bn. If the ECB does act again this year, it will likely be at a meeting in which new staff projections (SEPs) are due - March, June, September, or December.

The British Prime minister took to the stage at the Davos World Economic Forum today with a clear message - Britain is "open for business". Theresa May said that the UK will take on a "leadership role as the strongest and most forceful advocate for free markets and free trade anywhere in the world.’ The British PM added that 'play by the same rules' as 'ordinary working people'. Meanwhile Jeremy Corbyn accused Theresa May of 'absolute unreality' over her speech in Davos. Labour leader says threats shouldn't play a part in our Brexit negotiations.

Elsewhere Royal Mail’s share price dropped after revealing the number of letters being posted in the UK fell thanks to the growing popularity of electronic Christmas cards. Meanwhile Halfords gained after reporting a "strong sales performance" for the Christmas period with sales up +5.9% in the three months to January 15.

Looking ahead to Friday, January 20, there’s a whole raft of Chinese data due out which could set the tone for trading day. The fourth quarter growth rate, retail sales and home prices are all due for publication. And UK retail sales will be released at 9.30am London time. For the rest of the day Europe will be eagerly watching what’s happening across the pond as Donald Trump finally takes the official position of President of the United States of America.

--- Written by Katie Pilbeam, DailyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.