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Euro soars higher as ECB's Draghi comments on currency's strength

Matt Clinch
Debate has been raging about the effect online retailers have had on inflation in major economies.

The euro saw a volatile afternoon of trade on Thursday as currency traders reacted to comments from Mario Draghi, the president of the European Central Bank (ECB) .

The single currency was trading at 1.1970 against the U.S. dollar before the economist started his speech at a press conference at 1:30 p.m. London time, but jumped higher to nearly 1.204 shortly afterwards.

This came despite Draghi specifically mentioning the strength of the currency, suggesting the central bank is monitoring how it is affecting inflation and growth in the euro zone. Many see the euro appreciation as being a key reason why the ECB has held off from announcing a start to the wind down of its stimulus package.

"The recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability," Draghi said.

These dovish words did little to pressure the euro, and instead some traders pointed towards his comments on inflation. Draghi said that core inflation - which excludes energy and food - is doing "slightly better better" and reiterated that the exchange rate wasn't a key metric that the ECB used to set policy.

The higher the euro, the more expensive products and services get for non-euro customers, which might affect exports from the currency union. At the same time it dampens inflation as imported goods get cheaper.

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