LONDON: The euro came off yearly highs on Friday but was still set for its strongest quarter in six years as investors piled into the currency on a brightening euro zone economy and its implications for monetary policy in the bloc.
The single currency dropped 0.35 percent to trade at $1.1402, but in the April-June quarter the euro has climbed over 7 percent, putting it on track for its biggest quarterly gain since January-March 2011.The euro shot to one-year highs after Tuesday’s speech by European Central Bank President Mario Draghi bolstered expectations that a reduction in stimulus measures would be signalled as soon as September.
Though policymakers sought to play this down in the days that followed, investors appear convinced that economic strength will push them to end stimulus sooner rather than later. “This is partly a response to Draghi’s comments and also on the back of a euro zone economy that is firing on all cylinders and outperforming the rest of the developed economies,” said Investec economist Victoria Clarke. Growth in the bloc outstripped that of the United States in the first quarter and set the stage for a strong 2017. “It’s at a different stage in the cycle to the US so I do expect some of that to cool in the second half of the year, but the growth momentum doesn’t seem to be going anywhere,” said Clarke.