The ECB scares the bulls. Fundamental analysis 08.05.2014
08.05.2014
ECB takes the floor. Most likely, the regulator will leave its monetary policy unchanged. Since the April inflation rose to 0.7%, then surely Mario Draghi would prefer to leave the possibility of lowering the rate in the case of deterioration of the situation in the future. However, in the European capitals there are increasing talks about the direct responsibilities of the ECB to somehow curb the rise in the euro, as it damages the exporters.
Earlier Draghi himself did not rule out taking additional measures if the increasing rate of the euro will have a direct pressure on inflation. So far it is unclear which euro/dollar price will trigger these actions. It is possible that Mario Draghi will be extremely convincing during his press conference and if we hear about the possibility of some intervention, then the market will immediately go into a decline.
Whether it will be a turn for the market, or simply a correction - depends on Draghi, who previously without spending a single euro managed to stop the growth of rates in the euro zone bond market, by simply promising to "do everything to save the euro zone." On the other hand, last week, speaking to the German parliament, Draghi noted that the probability of launching a European QE remains small.
It is likely that Draghi will make it clear that, while maintaining the status quo, the ECB will not take any action. However, if the euro will continue to grow, it will put pressure on inflation. And if this inflation rate will begin to decline again, instead of the expected growth, then the ECB may start running its printing press. It is likely that these words will be enough to reduce the price of the euro/dollar, at least in the short term.
Mario Draghi holds a sufficient arsenal of possible actions. First, to decrease the rates to 0.15% or even 0.10%. Previously, even the possibility of reducing the deposit rate to a negative level was mentioned. Furthermore, the ECB may suspend the "sterilization" from liquidity from the already completed SMP program; start a new LTRO for banks; reduce reserve requirements; launch QE or start to support the securities market.
I left only one transaction to purchase at work, and took profits from the first two. In a case that Mario Draghi during his press conference will describe in detail the possible actions the regulator will take at a high euro rate, I set aside an order to buy at the latest minimum. On the other hand, if the rhetoric Draghi will be more relaxed, the growth will continue, and here a by order will be useful.
RoboForex Analytical Department
Earlier Draghi himself did not rule out taking additional measures if the increasing rate of the euro will have a direct pressure on inflation. So far it is unclear which euro/dollar price will trigger these actions. It is possible that Mario Draghi will be extremely convincing during his press conference and if we hear about the possibility of some intervention, then the market will immediately go into a decline.
Whether it will be a turn for the market, or simply a correction - depends on Draghi, who previously without spending a single euro managed to stop the growth of rates in the euro zone bond market, by simply promising to "do everything to save the euro zone." On the other hand, last week, speaking to the German parliament, Draghi noted that the probability of launching a European QE remains small.
It is likely that Draghi will make it clear that, while maintaining the status quo, the ECB will not take any action. However, if the euro will continue to grow, it will put pressure on inflation. And if this inflation rate will begin to decline again, instead of the expected growth, then the ECB may start running its printing press. It is likely that these words will be enough to reduce the price of the euro/dollar, at least in the short term.
Mario Draghi holds a sufficient arsenal of possible actions. First, to decrease the rates to 0.15% or even 0.10%. Previously, even the possibility of reducing the deposit rate to a negative level was mentioned. Furthermore, the ECB may suspend the "sterilization" from liquidity from the already completed SMP program; start a new LTRO for banks; reduce reserve requirements; launch QE or start to support the securities market.
I left only one transaction to purchase at work, and took profits from the first two. In a case that Mario Draghi during his press conference will describe in detail the possible actions the regulator will take at a high euro rate, I set aside an order to buy at the latest minimum. On the other hand, if the rhetoric Draghi will be more relaxed, the growth will continue, and here a by order will be useful.
RoboForex Analytical Department
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Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex bears no responsibility for trading results based on trading recommendations described in these analytical reviews.