Investing.com -- EUR/USD enjoyed its largest one-day move in nearly a month, amid strong indications of diverging monetary policies from the Federal Reserve and the European Central Bank in the coming months.
The euro jumped to its highest level against the dollar in five sessions after ECB president Mario Draghi offered further hints that the bank is ready to introduce additional stimulus measure in order to boost inflation throughout the euro zone. At the same time, a handful of policymakers from the Fed expressed strong objections to raising its benchmark Federal Funds Rate when it meets next in December.
EUR/USD traded in a broad range between 1.0692 and 1.0831 before settling at 1.082, up 0.71% on the session. On Tuesday, the euro fell to a seven-month low against the dollar as investors continued to digest a robust U.S. jobs report from last week that strengthened hawkish arguments for an imminent rate hike. In spite of Thursday's steady gains, the euro is still down by nearly 5% against its American counterpart over the last month.
The currency pair likely gained support at 1.0673, the low from November 10 and was met with resistance at 1.1496, the high from Oct. 15.
In testimony before the European Parliament on Thursday morning, Draghi told the Committee on Economic and Monetary Affairs (ECON), that indications of a "sustained turnaround in core inflation have somewhat weakened" over the last several weeks. Last month, core inflation in the euro zone ticked up to 1% on an annual basis, considerably below the ECB's long-term target.
In response, the ECB could expand the scope of its comprehensive €60 billion a month quantitative easing program when the Governing Council meets next in early-December. Among the tools at the ECB's disposal include lowering interest rates and extending the program beyond September, 2016. In addition, Reuters reported on Wednesday that the ECB is exploring the possibility of purchasing municipal bonds in the City of Paris and several cities in Germany to further bolster the economy.
In the U.S. a handful of Federal Open Market Committee members, including chair Janet Yellen made public appearances on Thursday, ahead of its critical meeting on Dec. 15-16. In welcoming remarks at the Fed's conference on Monetary Policy Implementation and Transmission in the Post-Crisis, Yellen declined to address the FOMC's near-term outlook regarding a potential rate hike or the current state of the U.S. economy. Instead, Yellen spoke briefly on the importance of assessing how monetary policy impacts the global economy in the post-crisis period.
Shortly after, New York Fed president William Dudley said at a speech in New York that he believes a December lift-off depends on the incoming data over the next several weeks as the risks of moving too quickly or too slowly are currently "nearly balanced." On Thursday evening, Fed chair Stanley Fischer is scheduled to deliver a speech on the transmission of exchange rates to output and inflation at the Fed's post-crisis conference.
The spread on U.S. 5-Year and Germany 5-Year bond yields widened to 181 basis points on Thursday, its highest disparity since 1999. Yields on the U.S. 10-Year fell two basis points to 2.31%.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, closed at 98.61 in U.S. afternoon trading, down 0.55% on the session. On Tuesday, the index surged more than 0.3% to 99.60, reaching a fresh seven-month high.