Thursday 8 September 2016

ECB sounded tougher than expected

The rhetoric of the ECB was much less "pigeon" than expected by the markets. The Central Bank left the policy rate unchanged. Draghi during a press conference said that the possibility of extending QE at today's meeting is not even discussed, and the situation itself does not require expansion of monetary stimulus. It is logical that the euro/dollar has reacted to these statements jump to week highs near 1.1327, from which then corrected.
Overall, however, the ECB is now much closer to the camp of the "doves" than "hawks". Despite the fact that the short-term effects of Brexit have not been as disastrous as expected, in the long term, uncertainty remains. In particular, it is unclear exactly how and when the official UK's out-of-EU procedure will be launched. Up until this process is complete, it will remain a risk to the European economy in general and in particular for the Eurozone. In such circumstances, the ECB must be ready at any time to expand the incentives to prevent systemic crisis. That's why remains the likelihood that sooner or later the European Central Bank may be forced to move to a policy of negative interest rates, as did the Bank of Japan.
In the medium term, taking into account the above, EUR/USD pair should continue to weaken. The goal for the next 2 months - a mark of 1.0950.


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