14 Mar 2014
Flash: EUR/USD at 1.45 could trigger ECB actioon - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, sees the ECB stepping in should the EUR/USD reaches 1.4500.
Key Quotes
"The euro has pared some its recent gains overnight following comments from ECB President Draghi at an event in Vienna. President Draghi reinforced his message from the last ECB monetary policy press conference that the “strengthening of the effective euro exchange rate…has had a significant impact on our low rate of inflation and, given current levels of inflation, is therefore becoming increasingly relevant in our assessment of price stability."
"At the last ECB monetary policy press conference President Draghi explicitly stated that a 10% appreciation of the effective euro had helped lower inflation by 0.4 to 0.5 percentage points. Given that the ECB’s staffs’ average forecast for inflation in 2016 is already low at 1.5%, it clearly signals that a further significant strengthening of the euro would likely trigger additional ECB easing by increasing the likelihood that inflation undershoots their target."
"In the near-term such euro specific rhetoric from the ECB may help to dampen further euro upside momentum although it is unlikely to prevent further gains. The EUR/USD rate may be able to rise towards the 1.45-level before triggering further ECB easing which would weigh more heavily upon the euro."
"ECB President Draghi remains optimistic that the ECB’s forward guidance will over time place downward pressure upon the euro as the real interest rate spread between the euro area and the rest of the world will probably fall. However, in the near-term the ongoing shrinking of the ECB’s balance sheet continues to support a stronger euro making ECB monetary policy appear relatively tight."
Key Quotes
"The euro has pared some its recent gains overnight following comments from ECB President Draghi at an event in Vienna. President Draghi reinforced his message from the last ECB monetary policy press conference that the “strengthening of the effective euro exchange rate…has had a significant impact on our low rate of inflation and, given current levels of inflation, is therefore becoming increasingly relevant in our assessment of price stability."
"At the last ECB monetary policy press conference President Draghi explicitly stated that a 10% appreciation of the effective euro had helped lower inflation by 0.4 to 0.5 percentage points. Given that the ECB’s staffs’ average forecast for inflation in 2016 is already low at 1.5%, it clearly signals that a further significant strengthening of the euro would likely trigger additional ECB easing by increasing the likelihood that inflation undershoots their target."
"In the near-term such euro specific rhetoric from the ECB may help to dampen further euro upside momentum although it is unlikely to prevent further gains. The EUR/USD rate may be able to rise towards the 1.45-level before triggering further ECB easing which would weigh more heavily upon the euro."
"ECB President Draghi remains optimistic that the ECB’s forward guidance will over time place downward pressure upon the euro as the real interest rate spread between the euro area and the rest of the world will probably fall. However, in the near-term the ongoing shrinking of the ECB’s balance sheet continues to support a stronger euro making ECB monetary policy appear relatively tight."