Euro Falls Against Most Majors as Draghi Highlights Risks of Delaying Reforms

The Euro broke sharply against the U.S. Dollar, led by comments from European Central Bank president Mario Draghi. The EUR/USD last traded 1.1320, down 0.-0074 or -0.65%. The selling begin when Draghi delivered a speech warning Euro Zone leaders about the cost of delaying reforms.

“There are many understandable political reasons to delay structural reform, but there are few, very few good economic ones,” the ECB president said in a speech in Brussels today. “The cost of delay is simply too high.”

Draghi’s comments reflected increasing concern that governments are undermining the central bank’s policies by holding back on reforms. He went on to say fiscal policy should not work against monetary policy by curbing aggregate demand, and should be seen as a microeconomic tool to enhance growth. He also called for measures to increase workforce participation and to improve productivity, and said the economic and monetary union must urgently be completed.

“If other policies are not aligned with monetary policy, inflation risks returning to our objective at a slower pace,” he said. “I will only note once more the critical need to restore clarity and confidence on the institutional set-up of the Euro area. We know that the current set-up is incomplete.”

The sell-off in the Euro along with a broad decline in commodity and stock prices in major world markets raised the U.S. Dollar and the Japanese Yen on Thursday as investors sought shelter during this period of uncertainty. The dollar gained ground against other currencies, except the Yen and New Zealand Dollar.

The Greenback was also underpinned by an unexpected drop in domestic jobless claims and a stronger-than expected rise in wholesale sales in April, soothing some worries about U.S. economic growth decelerating in the second quarter.

U.S. weekly unemployment claims came in at 264K, below last week’s 268K reading and the 269K estimate. Wholesale inventories increased 0.6% versus a 0.1% estimate.

Strong buying came in to drive August gold prices higher after an early session setback was fueled by a short-covering rally in the US Dollar Index. Weaker equity markets may have also been supportive for the precious metal. Gold was last trading at a three-week high at $1272.60, up $10.30 or +0.82%.

Profit-taking drove July Crude Oil prices lower on Thursday, but prices remained near their highs for the year thanks to a fall in U.S. crude inventories and supply disruptions. The rebound in the U.S. Dollar also weighed on prices.

Falling oil prices also weighed on U.S. equity indices. The Russell 2000 Index was down -0.78% at midday. A 1% drop in the financial stocks sector helped drive the S&P 500 Index futures contract down 9.50 or -0.45% to 2108.50.