Draghi repeats worries – EUR/USD pressured

The president of the ECB, Mario Draghi, is  testifying before a committee of the European Parliament.

EUR/USD traded lower, struggling with 1.25 and is now taking another leg down under 1.2480.

Draghi says:

• Most recent forecasts have been revised downwards
• Expecting a moderate recovery in 2015-2016.
• Demand supported by monetary policy stimulus, among other events.
• High unemployment, unutilized capacity and balance sheet adjustments weigh.
• Risks are on the downside.
• Geopolitical risk could dampen confidence and investment.
• Inflation in the euro-are remains very low – expected to remain at these levels before rising in 2015-16.
• We closely monitor developments
• Money growth rate has increased moderately.
• The turning point in credit growth is behind us.
• Fragmentation has receded significantly since the peak of the crisis.
• Since the beginning of June, market money rates are  declining – a result of monetary policy.
• EONIA is not expected to exceed 0.25% before 2018.
• Other rates are low.
• Compression of spreads extended after September announcements.
• Balance sheet expected to return to 2012 dimensions
• Our measures are set to bring inflation to target.
• We will stay alert.
• GC  unanimous to use additional unconventional measures to reach targets, and tasked staff to make preparations.
• Draghi is basically repeating his words from the  recent rate decision, in which he defied  discontent.
• Structural reforms are needed.
• Banking union should be completed after the stress tests.
• New low is 1.2472. Support awaits at 1.2440.
• LTRO helped in stabilizing the collateral framework.
• Draghi goes on to talk about the collateral system and away from monetary policy.
• 2015 is the year when everybody must work together to return the euro-zone growth to track.
• Questions begin: the first question in Spanish is about the trillion euro expansion of the balance sheet.
• Answer: we stand ready to do more, unconventional measures.
• Fiscal and monetary expansion cannot do the job alone without structural reforms.
• Draghi continues answering questions unrelated to monetary policy, but EUR/USD continues  falling to 1.2460 on USD  strength.

Earlier, a fellow member at the European Central Bank, Yves Mersch, opened the door to a wide variety of financial  instruments that the ECB could buy, including state bonds, ETFs, shares, etc.

Another colleague, Praet, said that  the fiscal position in the euro-zone should be  neutral or slightly expansionary in 2015. He also said that the lack of investment from firms is the weakest link of the euro-zone recovery.

In the US, the Empire State Manufacturing number fell below expectations with a score of 10.2 points.  Industrial output was expected to rise by 0.2% after 1% last month.

More:

• Short EUR/USD if it breaks 1.2470;  – Elliott Wave Analysis
• Sell EUR/USD & Sell Gold: Credit Suisse’s Top Trades For 2015