The euro lost some -0.4% against the dollar after having made strong gains earlier in the week on the back of Emmanuel Macron’s victory in the first round of the presidential elections. Draghi remained wary of reading too much into it yet, in a sign he prefers to wait for the final result of the French presidential elections before drawing conclusions. A Le Pen win, after all, would radically change the outlook for the European economy.
But the ECB-president acknowledged macroeconomic prospects for the eurozone have clearly improved since the ECB’s previous meeting in early March.
“The recovery was fragile and uneven and is now solid and broad,” he said in a press conference following Thursday’s monetary policy statement.
Inflation remains key
However, Draghi habitually repeated his long-held view that European governments should press on with structural reforms before the ECB can withdraw its stimulus. He also reminded his audience that core inflation remains subdued, despite headline inflation having risen thanks to the recovery of the oil price.
“Today’s ECB meeting confirms our long-held view that the central bank’s policies are likely to remain very accommodative, despite the broadening of the economic recovery and a rise in headline inflation in the common currency area. The focus on core inflation remains key for Mr. Draghi as he justifies extraordinary central bank policy support in the face of the positive data surprises of recent months,” commented Salman Ahmed, chief investment strategist at Lombard Odier IM.
Blackrock’s fixed income strategist Marilyn Watson read a little more into the subtle change of tone in Draghi’s policy statement: “Given the currency bloc’s improving fundamental backdrop and the global reflationary environment, we believe that the ECB will fully taper its asset purchase programme next year,” she said.