ECB meeting can pass at soft pace

Posted 16 January, 2019

The euro has trimmed almost all last-week gains in the first half of the week. The euro-to-US dollar exchange rate still can be seen at the 1.15-1.13 handle. Moreover, the rate is testing the 1.14 handle now. The short-term outlook is bearish, with no hikes or slumps being expected.

The European Central Bank Chief, Mario Draghi made quite careful and more bearish message yesterday. At the same time, the market was hardly surprised by such tone, especially given the signs of economic upturn slowdown in the euro area. Nevertheless, the euro felt some pressure anyway. According to the report released this Tuesday, the German economy showed the worst growth over the past five years and did not face a technical recession by a miracle. In this situation, it is clear that there is no need for the interest rate increase to be made by ECB. It makes sense to maintain economic stimulus taking into account softer inflation pressure in the euro-area on the recent oil price collapse.

As a result, the situation is hardly positive for the euro ahead of the ECB meeting. Only pigeon signals from the US Federal Reserve can bring some relief to the euro. In particular, the US Central Bank is about to take a break in the rate increasing in 2019.

After the decline, the euro-to-US dollar rate may break out of the range this week, so the extent of its movement may depend on how soft the ECB's statement will be. Market participants will also study the latest economic reports from Europe and the USA looking for new signs of upturn slowdown. 

Previous forecast

18 January, 2019 14:21

← Sterling shows good stance by week's end

By the end of the week, the sterling has left the 2-month peak at 1.30, which is also considered as the psychological level. However, the sterling was quite dynamic this week despite numerous local risks and no reasons for optimism now. At the same time, a lack of negative Brexit development somewhat supports the sterling, so it faces restrained pressure.

Sterling shows good stance by week's end

Next forecast

15 January, 2019 18:13

Euro loses grounds Tuesday, Brexit vote prospects vague →

The euro started sliding vs the US dollar in the course of Tuesday. The current rate stands at some 1.1428. In general, such development is more likely market adjustments amid the lack of economic reports. The Brexit vote is the milestone of today's European trading session, which is in the spotlight now. The UK will decide on its further political way today. Some MPs refuse to support the draft agreement, which can mean unexpected results after the vote and even some slowdown in the Brexit.

Euro loses grounds Tuesday, Brexit vote prospects vague
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