ECB: President Draghi to cite concern over negative external developments - MUFG

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 21, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
    Likes Received:
    FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG, notes that the euro is continuing to derive support from the current period of financial market instability.

    Key Quotes

    “The trade-weighted euro has strengthened modestly over the last month although the EUR/USD rate has remained surprisingly stable so far. In contrast, to last year’s price action during the summer risk off period. Investor expectations for a dovish message from the ECB today could be helping to dampen euro upside potential in the near-term.

    We expect the ECB to deliver a dovish policy message today. The ongoing decline in the price of crude oil, weakening outlook for growth in emerging economies and further softening of inflation expectations have all increased downside risks to the outlook for inflation in the euro-zone.

    On the positive side economic growth in the euro-zone has continued to firm. We do not expect President Draghi to explicitly signal today further easing is likely at their next policy meeting although the tone will be dovish which may initially weigh modestly on the euro. However once the imminent risk of further ECB easing is out of the way, the euro could then pop higher if sell off in risk assets becomes even more intense in the near-term.”
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