Forex Markets: ECB Policy Sends Euro Lower
Recently, forex markets have been dealing with the news that the European Central Bank (ECB) opted to leave its benchmark interest rates at 0%. According to the accompanying policy statement, the central bank said that they plan to continue their generous asset-buying program until at least the end of the year.
ECB President Mario Draghi stated that in order for the Eurozone to remain healthy and have strong economic growth, it will be necessary to have monetary stimulus programs in place and reduce interest rates from the ECB itself. All of this has sent the EUR/USD currency pair much lower, and investors can access these markets through a trading forex platform with accurate price feeds and regularly updated market information.
There should be some very good trading opportunities in many EUR currency pairs, and market brokers will offer access to all of these for their investor clients.
Draghi also stated that the ECB will be looking for “transient” changes in the headline inflation figures, and look to cooperate with smaller jurisdictions in order to keep the inflation as low as possible. In recent speeches, the ECB chief has made introductions with comments like “the ECB will use all its instruments within its power to keep the system healthy.” But while these programs might be positive for the Eurozone as a whole, it is much less positive for the EUR currency itself.
In his last few appearances, Draghi opted to cut out statements with the warranty that those measures are not needed at the moment, and no further changes are needed to be made because that was only due to the risk of deflation. ECB economists have had quite a lot of changes in their forecasts for the growth in the future.
In December, their forecast was a grow of 1,7% in 2017 and 1,6% in 2018. Recently, they changed it and they believe the grow will come up to 1,8% in 2017 and 1,7% in 2018. Other than growth forecasts, they have had and changed their inflation forecasts. First it was 1,3% for 2017 and 1,5% for 2018, now it’s 1,7% and 1,6%. The year of 2019 was left unchanged at 1,7%, which was still under their target inflation.
However, the ECB will call up the Euro Zone countries to go through with the reforms and ensure the stable growth of the EZ. Regarding the political imbalance in the Europe, the rumors of France leaving the EU if Marine Le Pen wins the elections, many have been scared of the Euro dropping, maybe the whole EU being in danger.
As a response to those critics and fearing statements, ECB president Mario Draghi announced that the Euro is here to stay, which at the same moment as he said it, caused the Euro to rise above 1,06, up to 0,7% in one day at one point.