Germany's short-dated bond yields hit seven-month highs and the euro jumped to a nine-day peak on Tuesday, after ECB chief Mario Draghi opened the door to tweaks in the bank's ultra-easy monetary policy as the economy recovers. As Kate King reports, Draghi says deflationary pressures have been replaced by reflationary ones.
Mario Draghi is not as easily moved as it seems the euro is, The currency rallying to one-week highs on Tuesday, all be it next to a soft dollar - after the European Central Bank President acknowledged that the eurozone recovery was 'broadening'. Despite that, Draghi insisting that 'considerable' monetary support is still needed. SOUNDBITE (English) NEIL WILSON, SENIOR MARKET ANALYST, ETX CAPITAL, SAYING: "We saw Draghi this morning actually talking about how deflationary forces are being replaced by reflationary forces. Apart from that though the message is that monetary policy ultra loose monetary policy is working with no significant adverse consequences." The ECB has been caught between weak economies that still need stimulus and those that are healthy Germany for one argues rates are too low, with business confidence there at all time highs. But Draghi is searching for signs of organic growth before he makes any big moves. Commodity price weakness and a residual labour market, he says, keeping inflation low. SOUNDBITE (English) NEIL WILSON, SENIOR MARKET ANALYST, ETX CAPITAL, SAYING: "Eurozone economy is doing very well and corporate earnings are increasing significantly and that's supporting stocks. But I think the persistent lack of underlying inflation growth is something that is a major concern." Draghi is a among a slew of central bank policy makers lined up to give their thoughts on the economy at a gathering in Portugal. For years now the ECB has been buying 60 billion euros worth of bonds each month in an attempt to generate growth. The program is set to run until the end of the year - but Tuesday's comments fueling market speculation that the ECB may tweak the stimulus programme as soon as September.