Category: EUR/USD Daily

Dovish Draghi sends EUR/USD below 1.25



Draghi says he will seek to raise inflation as fast as possible and says that the economic situation remains difficult and that a stronger recovery is unlikely in coming months.  He is ready to step up action if needed including broadening the purchases if inflation risks materialize. The president of the European Central Bank Mario Draghi talks in a conference in Frankfurt.

EUR/USD traded well within range at 1.2540 before Draghi began talking and is now ticking lower. Update: After some hesitation, EUR/USD is pushing lower, losing 1.25. Another update: the pair is extending its losses and falling below 1.2460.

More from Draghi:

  • Important to bring inflation to target without delay
  • Underlying demand weakness is also playing a role in low core inflation.
  • Higher unemployment means workers have less negotiating power and pushes inflation lower.
  • This time around the picture is different, with core inflation weaker than in the past.
  • Shorter Term Indicators For Inflation Expectations Have Been Declining To Levels That I Would Deem Excessively Low
  • We have to be very watchful that low inflation does not start percolating through the economy.
  • We Are Committed To Recalibrate The Size, Pace And Composition Of Our Asset Purchases As Necessary To Deliver Our Mandate. His colleague Mersch had a long shopping list.
  • We have passed a turning point in credit growth.
  • By buying low risk assets, investors are set be pushed to riskier assets.
  • Draghi also mentions the exchange rate.

And he’s finished – EUR/USD bottomed out at 1.2480, for now

Apart from the fall in EUR/USD, Spanish bond yields are falling towards 2% and Italian bonds are at 2.25%.

Earlier in the week, the president of the ECB spoke in front of the European Parliament and basically repeated what he said beforehand in the rate statement. But, he also mentioned the option of buying bonds – outright QE.

German Bundesbank president Jens Weidmann will also speak in the same event. He is likely to take a different stance, to say the least.

More:

Here is the chart:

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