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Euro near 3-month dollar high after Draghi's inflation comments

posted onSeptember 26, 2018
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There was a notable rise in the euro on Monday after European Central Bank (ECB) President Mario Draghi claimed that underlying inflation is set to rise in Europe as a result of a tightening labour market. Speaking in Brussels, the Italian ECB chief said the labour market tightening will help boost wage growth in Europe. 

Selected remarks from Draghi are as follows:

  • Domestic price pressures are rising
  • Labour markets are tightening, shortages in some areas
  • Pick-up in wage growth will continue
  • Relatively vigorous pickup in underlying inflation

After his hawkish comments, the single currency hit a three-month high against the dollar
Overthe last 10 days, the euro has risen 2.5 percent versus thegreenback according to Reuters.

ecb bank president mario draghi
ECB President Mario Draghi Photo: Reuters

Earlier this month, the ECB unveiled the new €100 and €200 banknotes, which will enter into circulation on 28 May 2019. The older notes will remain legal tender but will gradually be phased out from circulation. 

The new banknotes will incorporate innovative security features: a satellite hologram and an enhanced emerald number. They also are a different size to the old €100 and €200 notes. Both denominations are now the same height as the €50 banknote. However, their length remains unchanged – the longer the note, the higher the value.  

As Executive Board Member Yves Mersch highlighted in his speech unveiling the new banknotes, with the changeover to the new €100 and €200 the entire set of euro banknotes will continue to offer strong protection against counterfeiting. This makes euro banknotes even more secure, but also easier to check and handle. 

Euro banknotes continue to be a trusted, secure means of payment. The number of counterfeits remains very low (301,000 pieces removed from circulation during the first half of 2018) compared with the steadily rising number of genuine banknotes in circulation (over 21 billion) the Frankfurt-based institution said.

Global trends indicate that the demand for cash continues to grow. In 2016, 79% of all transactions in the euro area were made with cash, while only 19% were made by card.  

“Though electronic payments are becoming more popular, cash is still our most important means of payment. […] Over three-quarters of all payments at points of sale in the euro area are made in cash. In terms of transaction values, that’s slightly more than half. So even in this digital age, cash remains essential in our economy” Draghi had said at an event marking the issuance of the new €50 banknote in Frankfurt on 4 April 2017.