Upcoming Cold winter and Burning Energy Prices, What will Europe do?
The EU plans to intervene in markets directly to curb rising energy costs, threatening to push the Euro area's economy into a deep recession.
ECB meeting: will the euro fall further?
2019-11-11 • Updated
The euro has been plunging for a week and already reached its February lows. Traders are waiting for the ECB meeting (at 15:30 MT time on April 26) to get clues on its monetary policy. An increase of the interest rate is supposed to support the currency. However, the central bank cannot raise its interest rate until it ends the monetary stimulus. So, the agenda includes primarily the tapering of quantitative easing (QE). There are some factors that can cause more cautious comments of the ECB’s President Mario Draghi. The main question is whether negative economic data of the first quarter of 2018, geopolitical risks and March inflation data will affect the ECB’s outlook.
Let’s look at forecasts of the well-known financial institutions.
Analysts of Barclays, Citi and Morgan Stanly do not expect significant changes in the ECB’s monetary policy stance on April 26. However, Barclays considers a possibility of a more cautious sounding speech that will signal a very gradual approach to removing the QE.
Analysts of all 3 most authoritative financial institutes anticipate the QE tapering to end in the fourth quarter of 2018. Moreover, they agree that the June meeting will play a significant role in the QE issue. And then Draghi will give a clear answer on the QE tapering.
Although Barclays anticipates a little bit cautious speech that is not good for the single currency, an analyst at Commerzbank does not see it as a negative factor for the euro. According to Commerzbank, EUR doesn’t react much to changes in the monetary policy. That is why there is a low possibility of the euro’s great fall even if the monetary policy report will be slightly dovish. Moreover, the single currency is depreciating against the USD not because of its weakness but because of a rise of the USD.
Officials of the European Central Bank itself express contrasting opinions. For example, Executive Board member Mr. Mersch announced that inflation’s decline was weaker than predicted, but the head of the Lithuanian central bank Mr. Vasiliauskas said that it is time for transition from the ECB’s bond-buying program. Such comments only increase the intrigue for the market.
When you make your trades on Thursday, remember that the opinion of analysts is not the ultimate guidance for trading. The most certain thing about Thursday is that there will be a great volatility in the market: Mario Draghi knows how to make the euro move.
Although it is unlikely that the ECB will change its general stance at the meeting on April 26, a cautious sounding speech is likely as there are negative factors that can affect the ECB mood. To prepare for the exact trading, check technical analysis for EUR/USD.
Similar
The Fed to Decide the Oil Market’s Future
The oil prices rally and world central banks’ dovish monetary policy caused by the Covid-19 pandemic were the main reasons for current inflation growth…
Gas lights up
For the last several weeks gas was skyrocketing at an enormous pace. It has gained more than 17% from August 18. What is the reason for such moves?
Latest news
Is Bitcoin Set to Drop?
Bitcoin's price remains stagnant despite the Fed's slightly less hawkish tone. In contrast, Bitcoin has outperformed other assets, doubling in price from $16K to nearly $38K this year. Improved fundamentals, including the resolution of Binance concerns...
Top Three Trade Ideas for December 2023
Hey folks, it’s a wrap to yet another month in the 2023 calendar, and I’m guessing you know what that means - time for another episode in the “What To Trade” series. For December, I will be mapping out trade more cautiously as the market volatility often drops
Gold Breaks To New Highs. What Is Expected In December?
Gold prices, reaching the highest since May 5, are consolidating as traders await the US PCE Price Index, a key inflation indicator. The upcoming data could impact the Fed's policy, influencing the demand for the US Dollar and providing direction for gold. The Greenback sees some repositioning, recovering modestly ahead of the data risk.
