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2 Jan 2015
ECB easing & political uncertainty weighing on euro – BTMU
FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, explains that euro has been weighted down by expectations of a more aggressive easing by ECB and the political uncertainty in Greece, further anticipating that the euro weakness may accelerate this year.
Key Quotes
“The euro is starting the year on a weaker footing reflecting heightened downside risks posed from building expectations of more aggressive ECB monetary easing and heightened political uncertainty in Greece which has scheduled a snap general election on the 25th January.”
“With EUR/USD and EUR/GBP both approaching key support at the 1.2000 and 0.7700-levels respectively, there is a heightened risk that euro weakness could accelerate early this year.”
“In an interview with German newspaper Handelsblatt, ECB President Draghi continued to lay the ground work for further monetary easing by stating that “the risk that we don’t fulfil our mandate of price stability is higher than it was six months ago. We are in technical preparations to alter the size, speed and composition of our measures at the beginning of2015, should this become necessary, to react to a too-long period of low inflation. There’s unanimity in the ECB council on that”. He added that deflation “risk cannot be entirely excluded, but it is limited”. When asked specifically about how much the ECB will have to spend on government bond purchases, President Draghi stated that ”it’s difficult to say”.”
“ECB Chief Economist Praet also stated earlier this week that the ECB can’t look through the negative impact on inflation from lower oil prices which will leave euro-zone inflation below zero for a longer period. He described inflation expectations as “extremely fragile” which increases the risk of second round effects.”
Key Quotes
“The euro is starting the year on a weaker footing reflecting heightened downside risks posed from building expectations of more aggressive ECB monetary easing and heightened political uncertainty in Greece which has scheduled a snap general election on the 25th January.”
“With EUR/USD and EUR/GBP both approaching key support at the 1.2000 and 0.7700-levels respectively, there is a heightened risk that euro weakness could accelerate early this year.”
“In an interview with German newspaper Handelsblatt, ECB President Draghi continued to lay the ground work for further monetary easing by stating that “the risk that we don’t fulfil our mandate of price stability is higher than it was six months ago. We are in technical preparations to alter the size, speed and composition of our measures at the beginning of2015, should this become necessary, to react to a too-long period of low inflation. There’s unanimity in the ECB council on that”. He added that deflation “risk cannot be entirely excluded, but it is limited”. When asked specifically about how much the ECB will have to spend on government bond purchases, President Draghi stated that ”it’s difficult to say”.”
“ECB Chief Economist Praet also stated earlier this week that the ECB can’t look through the negative impact on inflation from lower oil prices which will leave euro-zone inflation below zero for a longer period. He described inflation expectations as “extremely fragile” which increases the risk of second round effects.”