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2 Oct 2015
EURUSD: Draghi speech gave little evidence of stimulus, Euro range to stay - MUFG
FXStreet (Delhi) – Derek Halpenny, Research Analyst at MUFG, notes that ECB President Draghi spoke in New York yesterday but did not touch specifically on the outlook for monetary policy.
Key Quotes
“He merely stated that economic growth was returning to the euro-zone and emphasised the need for further progress in integration. On that front the ECB will be pleased to see evidence of late that the fragmentation of the euro-zone financial markets is diminishing.”
“Success on that front may well encourage some to act a little more cautiously in regard to additional stimulus. Indeed, ECB member Weidmann in an interview in Der Spiegel magazine has urged caution stating that he saw no evidence of spiralling deflationary forces in the euro-zone.”
“Weidmann of course is always opposed to QE and hence is probably not a true reflection of thinking within the ECB. Risks continue to build however when inflation expectations are plunging like they are at present. The level of the 5-yr/5-yr forward inflation rate remains below 1.6%, much closer to the January low just below 1.5% than the 2.0% level consistent with price stability. That, and financial market conditions continue to tighten as well. For now though there is no reason to think EUR/USD will break out of its recent trading range of 1.1000-1.1500.”
Key Quotes
“He merely stated that economic growth was returning to the euro-zone and emphasised the need for further progress in integration. On that front the ECB will be pleased to see evidence of late that the fragmentation of the euro-zone financial markets is diminishing.”
“Success on that front may well encourage some to act a little more cautiously in regard to additional stimulus. Indeed, ECB member Weidmann in an interview in Der Spiegel magazine has urged caution stating that he saw no evidence of spiralling deflationary forces in the euro-zone.”
“Weidmann of course is always opposed to QE and hence is probably not a true reflection of thinking within the ECB. Risks continue to build however when inflation expectations are plunging like they are at present. The level of the 5-yr/5-yr forward inflation rate remains below 1.6%, much closer to the January low just below 1.5% than the 2.0% level consistent with price stability. That, and financial market conditions continue to tighten as well. For now though there is no reason to think EUR/USD will break out of its recent trading range of 1.1000-1.1500.”