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EUR Lower as ECB Decision Impact Continues

The euro dropped on Friday for the second consecutive day after the European Central Bank on Thursday extended its bond-buying program longer than many had anticipated, even as it cut the size of the monthly purchases.

The ECB said it would reduce its monthly asset buys to 60 billion euros starting in April from 80 billion euros currently and extend purchases to December from March. It reserved the right to increase the size of purchases again.

Underlying its promise for extensive stimulus, the ECB predicted inflation at 1.7 percent in 2019, arguing that more-costly energy could boost consumer prices even without lifting the underlying trend. “The extension of the program was longer than most had expected, and a lot of the language … was pretty dovish,” said Erik Nelson, a currency analyst at Wells Fargo in New York. “Inflation forecasts were pretty subdued all the way out to 2019, and growth forecasts were pretty low, and the risks are tilted to the downside.”

The euro dropped to $1.0548, its lowest since Monday, and was last down 0.47 percent at $1.0566.

The U.S. Federal Reserve is widely expected to raise interest rates for the first time this year when it meets next week but may take a cautious tone on the economy.

Traders will focus on the Fed’s economic projections, known colloquially as the dot plot, for indications of any change in expectations following Donald Trump’s surprise election as U.S. president on Nov. 8.

Trump’s victory increased market expectations of greater fiscal stimulus that could boost economic growth and inflation.

via Kitco [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza
Alfonso Esparza

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