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Euro Turns Slightly Softer as ECB Lowers 2019 Growth and Inflation Forecasts, Increasingly Cautious

It’s a relatively calm day today despite all the high profile events. At the time of writing, Euro is trading as the weakest one after ECB delivered a dovish shift as expected. In short, 2019 growth and inflation forecasts are lowered, and Draghi said balance of risks are moving to the downside. But it will take more time to see if Euro is really reversing for the near term. Swiss Franc trades mixed after SNB retained negative interest rate policy and pledged to stay active in intervention. Sterling is the strongest one so far. After winning yesterday’s leadership challenger, UK PM May is now in Brussels, with no expectation of a breakthrough though.

Technically, EUR/USD, EUR/JPY, EUR/GBP, EUR/AUD are staying in familiar range despite today’s up and downs. EUR/GBP and EUR/AUD are bullish with 0.8931 and 1.5596 support intact. But EUR/USD and EUR/JPY are near term bearish with 1.1472 and 130.14 resistance intact. Meanwhile, GBP/USD is staying well below 1.2811 resistance and keeps bearish outlook. But GBP/JPY could have a taken on 144.02 resistance as early indication of bullish reversal.

In other markets, major European indices are mixed for the time being. FTSE is down -0.18%, DAX up 0.19% but CAC down -0.09%. German 10 year yield is up 0.0002 at 0.282. But Italian 10 year yield drops notably today and is now down -0.082 at 2.932. Earlier in Asia, Nikkei rose 0.99%, Hong Kong HSI rose 1.29%, Shanghai SSE rose 1.23%, Singapore Strait Times rose 0.36%. (if you want to make money in the financial market use our  forex robot)

ECB lowered 2019 growth and inflation forecast, continuing confidence with increasing caution

ECB let interest rates unchanged today as widely expected. That is, main refinancing rate, marginal lending facility and deposit facility rates are held at 0.00%, 0.25% and -0.40% respectively. ECB maintained forward guidance that interest rates will “remain at their present levels at least through the summer of 2019”. Also, the asset purchase program will end this month as scheduled.

In the post meeting press conference, ECB President Mario Draghi said the assessment of risks was a focal point in the discussion during the meeting. And he’d summarize the discussions with “continuing confidence with increasing caution”.

ECB lowered both 2018 and 2019 growth forecast. Growth is now projected to be at 1.9% in 2018 (prior 2.0%), 1.7% in 2019 (1.8% prior), 1.7% in 2020 (unchanged) and 1.5% in 2021 (new). Draghi said that risks are “broadly balanced” but balance of risks is “moving to the downside”. He noted “persistence uncertainties” related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility”, as reasons.

On HICP inflation, i