European stocks rallied sharply on Wednesday and extended the momentum into the Thursday trading as the euro retreated from fresh twenty-seven months high against the US dollar. The common currency has hit the $1.20 level on Tuesday. The strong euro is likely to significantly impact European exports around the world.

The Stoxx Europe 600 index SXXP grew more than 2% on Wednesday and the index is in green on Thursday. The euro is currently hovering around $1.18 level against the US dollar.

“Our central case remains that the ECB will stick to verbal intervention, rather than cut the deposit facility rate,” said Gizem Kara, an economist at BNP Paribas in London, in a note to clients.

European Central Bank chief economist Philip Lane comments helped in retreating the dollar from a record high.

“If there are forces moving the euro-dollar rate around, that feeds into our global and European forecasts and that in turn does feed into our monetary policy setting,” Philip Lane said.

The lower than expected Eurozone numbers have also impacted the common currency. Data shows that eurozone consumer prices plunged in July while German retail sales dropped 0.9% last month, according to the Federal Statistics Office.

A flash reading data also indicates that annual headline inflation fell in the negative territory this month, down 0.4% from the previous month. This represents the lowest inflation number since 2001.

Wall Street, on the other hand, has been hitting fresh records amid strong tech stock performance. The prospects for stronger economic recovery is adding to investor’s sentiments. S&P 500, the broader market index, hit another record high on Wednesday.

What Does it Mean for Investors?

  • Wall Street and European stock futures are in green on Thursday.
  • Gold fell below $1950
  • US crude oil jumped on economic recovery.
  • US dollar gained momentum while the euro retreated from previous highs.