The ECB is expected to raise rates sooner than forecasts

Eurozone bonds declined as market participants raised expectations that the ECB would raise interest rates earlier than expected.
German bonds led the cut, as the euro rose, after rising expectations that the ECB would raise rates well before December of next year.
Currently, at futures trading levels, the ECB is expected to raise interest rates by 82% by September of the following year. By comparison, until recently the expectations were only 70%.
Interest rates on five-year German bonds rose three basis points to a minus 0.26%, while those on 10-year bonds also added 3 basis points to 0.33%.

The ECB ends with incentives at the end of the year, the euro collapses

The ECB was fully expected to keep its short-term interest rates unchanged. What the bank surprised, however, from its meeting in Riga, was postponing the end of the bond repurchase program.
The bank hinted that "quantitative easing" or incentives would only end at the end of the year. The majority of market participants were counting on ending the stimulus in October or at the latest in November.
The European Central Bank will continue to buy eurobonds for €30 billion a month until September, as previously planned.
From next October, however, purchases are expected to be halved - up to 15 billion euros, but on the assumption that economic data confirms the 2% inflation forecast by the financial institution.
Overall, the results of the Bank's meeting were accepted by market participants as too weakly aggressive, not meeting market expectations before. Investors reacted violently by selling the euro against the dollar. The single currency fell to trading levels at about 1.1630 late at night, or about 2% below its price yesterday.

Jens Weidmann - the next President of the ECB?

Jens Weidmann reports that he is ready to succeed Mario Draghi as the next president of the ECB. The strongest trump to the head of the German central bank so far is that he wants the position. But if this is enough to get the role of the most important "central banker" in Europe, we are yet to see.
Weidmann believes that every member of the Governing Council of the ECB should have a willingness to contribute to monetary policy and under another role, the German said in a special weekend interview.
According to Weidmann, public discussions about who will inherit Draghi at the end of his mandate from the end of 2019 began "too early". The European authorities will hardly decide who will be Dragh's heir this year, Weidmann said.
Weidmann became head of the German central bank in 2011. So far, he refused to comment on his chances of being a heir to Draghi and a key candidate for the ECB's post.
Weidmann is considered to be one of the most aggressive Eurozone members of the Monetary Committee.
The expert, however, is expected to have a lot of competition for the post. So far, other representatives of the Monetary Policy Committee have expressed their wish for the position of Draggi. One of them was Erkki Liikanen, the head of Finnish central bank. On Saturday, he said he was open to considering the proposal for this post if invited.
Weidmann has not once and twice announced the recent ending of the ECB's incentives. The eurozone is doing well and its economy does not need such incentives, says the German candidate.
The next ECB interest rate meeting will be on June 14th. It is expected to give more clarity about the future of monetary policy.

The ECB kept interest rates unchanged

The ECB kept the interest rate unchanged by continuing to maintain its position on a smooth exit from the monetary stimulus.
The bank has confirmed that it will continue to buyback 30 billion euros a month at least until the end of September.
The ECB continues to believe that the best moment to start raising interest rates will be after the potential end of the asset repurchase program.
The ECB's decision became a fact, a day after Draghi confessed to the IMF that there is some slowdown in the growth of the eurozone, but overall growth will continue in the future.
Now, the question everyone is asking is if Draghi's acknowledgment will lead to a change in the ECB's policy towards a smooth exit from the stimulus program.
Inflation in the euro area continues to be weak, expected to rise 1.3% in March, against previous expectations of 1.4%.

German economy in great shape

The German economy reported a 0.6% growth in its GDP in the third quarter. This was accelerating the rise in the economy compared to the second quarter of the year. The result responded to the average market expectations.
At the same time, the growth of Italy's economy also rose to 0.5%, according to the forecast.
All this leads investors to expect that the eurozone economy will maintain its robust growth performance since the beginning of the year and in the third quarter.
The data triggered an increase of the euro against other major currencies. The single currency returned to more than 1.1700, trading on peaks at 1.1720 levels. The rise in the euro, after the results, amounted to 0.4%.
The ECB, of course, did not miss the opportunity to underline its function of the observed growth, saying that the measures taken to repurchase assets began to produce its results and was "extremely successful", according to vice-president Vitor Constanceo.
Now, investors are rising expectations that the ECB will resort to further action to normalize its monetary policy at upcoming meetings.

The euro area economy remains stable

The economy of the eurozone has kept its strong performance since the beginning of the year, with good performance stimulating companies to recruit new staff at the fastest pace in ten years.
The PMI index for manufacturing and services fell to 55.9 in October, compared to 56.7 in September, according to IHS Markit.
And although the indicator has fallen to the lowest level in two months, the rate of new job in the industrial sector has risen to the highest level since 1997.
Good data comes true shortly before the ECB's meeting this week, which is expected to cut its record-breaking stimulus to the economy.
Currently, the ECB buys back assets worth 60 billion euros, which are expected to be reduced by between 20 and 30 billion dollars from the beginning of next year.
And while inflation is still far below the expectations of the central bank, the first steps towards reducing incentives are expected to be released shortly.

The euro falls after ECB meeting

The euro has fallen, along with European indexes since the last ECB meeting. It has been expressed by officials that the euro may be too "hot". US dollar futures fell and the dollar rose.
The index, tracking the performance of the major European companies - the Stoxx Europe 600 Index momentarily changed its direction of decline, but subsequently reverted to a negative territory.
Some market observers think the ECB may postpone its plans to end monetary stimulus and normalize its interest rate policy beyond September.
At this stage, the market predicts that this will happen at the forthcoming meeting in September. It was these expectations, which also triggered the strong growth of the euro against the dollar and other major currencies.

The dollar is nearly at two-year low against the euro, following Draghi's comments

The dollar registered its lowest value for two years against the euro on Friday, following Mario Draghi's comments. Draghi said we can see a change in ECB's asset repurchase policy in the autumn.
The dollar index, following the US currency against six major currencies, fell to 94.31 points and was not far from its lowest value since August of 2016 - at a level of 94.09 points. For the week, the index was down by 0.8%.
The euro closed the week at 1.16635.
Draghi announced that there is no specific date scheduled to change the ECB's ultra-stimulus policy on negative interest rates and asset repurchase, but specifies the season when it can happen.
His comments were considered aggressive by market participants, which was also the basis for the appreciation of the single currency.

Does the ECB ends the stimulus in September?

The European Central Bank is likely to signal the end of its asset repurchase program in September. Such action is expected to happen next year, according to a Wall Street Journal financial report.
Part of the market expects the cancellation of the program to be one-off, while others say that this will happen smoothly and gradually, with a reduction in the volume of the assets purchased.
Last month, ECB chief Mario Draghi opened the door for the end of monetary stimulus, saying the eurozone economy is steadily developing.
Formal bankers who recently commented on Reuters have indicated September or October as the most likely time to make such a decision but have "stressed" that it will largely depend on emerging macroeconomic data.

Draghi appreciated the euro

The euro has appreciated, and US bonds have fallen, as ECB chief Mario Draghi has hinted that inflationary deterrents are temporary. This was accepted by market participants as a serious hint of the forthcoming normalization of the ECB's interest rate policy.
Interest rates on 10-year bonds rose by 3.7 percentage points to 2.175 percent. Bonds on two-year bonds added 2.4 basis points to 1.377%, while 30-year-olds rose by 3.3 basis points to 2.731%.
Draghi said a series of factors delayed the inflationary process, but they are generally temporary and should not cause inflation to deviate from the medium-term.
Market participants, however, read in Draghi's comment a signal for normalizing interest and monetary policy. Monetary incentives in the euro area are scheduled to end in December. It is entirely possible that they will not be prolonged beyond that period.
Interest rates on European government bonds also increased. 10-year German bonds rose by 6.4 basis points to 0.311 percent, while 10-year French bonds rose by 7.7 basis points to 0.684 percent.

The ECB kept interest rates, cutting its inflation forecasts

The ECB, as expected, kept the interest rate at 0%. The bank, however, has removed its comments for further interest rate cuts and said it will continue with its bond repurchase program.
In his statement, Draghi said interest rates are expected to remain at their current levels for an extended period of time, but added that he would be ready to extend the buy-back program if needed.
The speculation led to a momentous depreciation of the euro as the single currency declined to 1.1200 against the dollar after it had previously exchanged at 1.1240 levels.
Mario Draghi also said the ECB considers risks to the ECB's economy as "broadly balanced".
That he did by revising the financial institution's downward inflation expectations. The main reason for this is the cheaper oil, which will most likely continue to weigh above the growth in consumer prices.
The ECB is currently expecting an inflation rate of 1.5% this year, 1.3% next year and 1.6% in 2019. This is a decline compared to the March forecast for inflation of 1.7% this year, 1.6% in the next and 1.7% in 2019.

ECB - Eurozone unemployment is higher than official data shows

In its report, the bank explains the discrepancy between the sharp drop in unemployment and the weak rise in wages, with the unemployment figure excluding some people who do not meet the strict statistical criteria. After adjustments, unemployment in the euro area is 15%, which is well above official figures at 9.5%.
Well, Hello!
Maybe the statistic should change their measuring criteria, 'cause official figures don't match for long time with the reality, which makes them, at least, useless?

The B20 Minfin Summit is the next risk factor for the dollar

Sales of US currency slowed on Friday. The markets have practically played the insufficiently tough rhetoric of the US Federal Reserve, having switched attention to the G20 summit at the level of finance ministers.
EUR/USD reached 5-week highs in the region of 1.0780, receiving a fresh impetus to growth on ECB's "hawkish" comments by E.Novotny, who hinted on the possibility of raising the deposit rate before the expiration of the asset buy-back program. Having reached this resistance, the euro attracted a profit-taking and went into negative territory.
Now the main currency pair will wait for signals from the G20 summit. And here, we must admit, there are downward risks for the dollar. Participants in the foreign exchange market fear that Washington will again oppose a strong national currency, in which the Trump administration is not interested right now. In addition, in the draft copy of the G20 there are hints of adherence to the goals of preventing competitive devaluation of currencies.
If these risks are confirmed, on Monday the dollar can expect a new wave of sales against most competitors. In this case, EUR/USD could break above the key area of ​​1.08, spurring growth. And USD/JPY, which is struggling to stay close to 113.00, will lose its psychological support first and go to 112.00.

EUR/USD: A rise to 1.0740 is expected

On Monday, the euro trading ended slightly down. Despite falling to the level of 1,0620, eurobulls managed to partially restore the daily losses. The single currency fell against the dollar on the statements of the representative of the ECB Ewald Nowotny. He said that Brexit can lead to significant problems, and that the ECB will not discuss QE decrease until the autumn. The price in the American session returned to the level of 1.0709.
The ECB President Mario Draghi will have a speach today and Europe will publish preliminary data on GDP for the fourth quarter. The speaches of Draghi at the press conference after the ECB meeting usually has a strong influence.
On Tuesday it will begin a two-day meeting of the US Federal Reserve Open Market Committee. It is expected that the regulator will keep rates unchanged. The event is important for the markets, but it is unlikely to have a strong impact.
In this regard, the forecast for Tuesday is for decrease to the area of ​​1.0661 and a rise to 1.0740. According to the technical analysis of the intraday outlook: minimum for the day - 1.0662, maximum - 1.0740, closing - 1.0710.

Euro halted the rally, the ECB and Italy on focus

On Tuesday, the euro stabilized, bounced off 20-month lows reached during the previous session after Italian voters rejected constitutional reforms proposed by the government, forcing the prime minister Renzi to resign.
The EUR/USD is now trading at 1.0718. On Monday, the single currency lost 1.86% against the dollar, after falling in early trading to 1.0507, the lowest level since March 2015.
Demand for the euro is supported now by signs that Italy will not hold early elections after the resignation of Renzi, and many analysts believe that before the elections in 2018 the interim government will be presented.
But the prospects for the single currency continues to remain vague on concerns about the financial condition of the unstable banking sector in Italy.
Italian banks are burdened with unpaid on time loans, and they may need a full-scale financial assistance from the European Central Bank.
Investors also remain cautious ahead of the ECB meeting on Thursday.
The European Central Bank is likely to announce the extension of its quantitative easing program, but any sign that they can begin to reduce the amount of asset purchases, may compensate the effect of the extension of the incentive program.

Dollar has no doubt in the increase of the Fed's rate

The US currency continues to update the long-term highs against its competitors. After a short pause, the dollar "bulls" have intensified again and received new purchase driver. Markets regarded Thursday's rhetoric of Fed as "predatory" because J. Yellen warned about the risks of tightening with increasing rates and made it clear that the regulator will soon resume its tightening policy.
After receiving a new charge of optimism, USD sent euro to new yearly lows under the mark of 1.06, while the USD/JPY attacked the 110.00 barrier and at the moment is close to the next psychological level of 111.00. Despite overbought US currency, players can continue to open long positions due to positive expectations regarding future policy of Trump and the almost 100% probability of increasing the cost of credit in the last for this year meeting of the Federal Reserve.
Particularly deplorable is the situation with the pair EUR/USD. Here we must note the worsening divergence of monetary policies of two key Central Banks. If the state of the US economy justifies the policy tightening, as the Fed speakers do not tire repeating, the ECB intends to continue the stimulus. This intention has confirmed by the head of the European regulator M. Draghi. And in December, the ECB may decide to extend the program of buying assets, which expires in March next year, which promises the single currency further losses.
At the beginning of next week there will be another speech Draghi, and if his rhetoric will wear a pessimistic character with reference to the risks for the region, the EUR/USD may gain a firm foothold under the mark of 1.06 and go to a minimums from the beginning of December 2015 - the area of ​​1.0520.

Mario Draghi hinted at upcoming additional stimulus measures

Eurozone economic recovery remains heavily dependent on stimulus measures taken by the European Central Bank, said on Friday the ECB President Mario Draghi, hinting that the bank is likely to extend the program of "quantitative easing" for a total of 1.7 bln euro at its next meeting, which will take place on 8 December.
"We still can not cancel our vigilance", - said Draghi on a banking conference in Frankfurt, adding that the ECB will continue to act as justified by using all the tools that are available, while inflation did not grow sustainably.
He warned that central bankers do not yet see consistent strengthening of basic dynamics of prices and said that the ECB is committed to comply substantially the policy of monetary stimulus.
Central bankers from the ECB are preparing for quite a crucial meeting on December 8, which is expected to decide whether to extend the program of "quantitative easing." At this stage, the program should be completed at the end of March 2017.
By purchasing bonds, the ECB hopes to reduce real interest rates in the euro area, thereby encouraging lending, economic growth and inflation, analysts say. Despite these efforts, inflation in the region last month rose by 0.5% and remained still too far below the target of the ECB from just under 2%.

Is parity between the dollar and euro seen on the horizon?

Euro/dollar on Friday successfully updated the minimum from eight months. On Thursday "bears" did not have quite a bit: the instrument stumbled on 1.0913 (the "bottom" stood at 1.0911), but on Friday the market has corrected this misunderstanding. Dollar rises in price everywhere, rapidly and confidently. The main trades in EUR/USD at the beginning of the week go around 1.0880, sellers goal shifted to 1.0821, a minimum of March 10 this year.
Nothing new has happened. Just in the background there was an empty macroeconomic calendar, investors continued to win back the results of the meeting of the European Central Bank, which took place on Thursday. The belief that Mario Draghi will soon (possibly this December) will announce the extension of the quantitative easing program, is growing with each passing hour. While in the ECB at the official level it is still not discussed, but also the time to make such a decision is enough.
Mitigating of European QE on the background of interest rate rises by the Federal Reserve System draws in the investors imagination very colorful pattern, where the euro is weak, falls on each sneezing, and the dollar is strengthening its market position. There, you see, speaks about parity become louder and louder.
However, it's not that simple. Perspectives outlined above are already in currency quotations, everything else is emotions and reactions. So in December will still be euro/dollar movements, perhaps with drops to 1,06-1,07, but the market quickly will play them back and will return in the medium range of 1,08-1,10.

Euro is defensive before the ECB meeting

Euro is close to the minimum of three months expexting the ECB meeting on Thursday and after completion of the final debate in the run-up to the November elections in the US.
The euro weakened by 0.1 percent to $ 1.0969, not very far from the minimum of three months, reached on Wednesday at $ 1.0955.
The main interest for investors is the question will the ECB President Mario Draghi point on the willingness of the bank to reduce the bond purchase program.
The ECB is expected to leave unchanged its monetary policy after a meeting on Thursday, confirming plans to continue the purchase of assets in the amount of EUR80 billion per month, at least until the end of March 2017.
At the same time investors are increasingly worried about what will happen next: many of them fear that after the unprecedented expansionary policies by the world central banks over the years, their ability to support growth and inflation seriously weakened.

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.