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Euro Pressured by Dovish ECB Stimulus Comments from Rehn

Euro Pressured by Dovish ECB Stimulus Comments from Rehn

2019-08-15 16:22:00
Rich Dvorak, Junior Analyst
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EURUSD, EURGBP, EURJPY SLIDE ON DOVISH ECB REMARKS

  • Euro price action is extending to the downside as selling pressure accelerates on the back of dovish remarks from ECB’s Rehn
  • EURUSD, EURGBP and EURJPY sink with the prospect of additional ECB monetary policy stimulus in the near future growing more likely
  • Be sure to check out the DailyFX Q3 Euro Forecast for in-depth fundamental and technical outlook

Euro price weakness looks likely to continue as EUR-currency pairs sink in response to the latest ECB commentary from Finnish central banker Olli Rehn. ECB’s Rehn stated the importance of outlining a “significant” and “impactful” stimulus package that overshoots market expectations at its next monetary policy meeting in September. Rehn cited that the Eurozone’s weakening economy – most recently evidenced by Germany’s GDP contracting by -0.1% in Q2 – justifies aggressive easing of monetary policy which could include rate cuts and substantial bond purchases.

EURO CURRENCY INDEX PRICE CHART: 15-MINUTE TIME FRAME (AUGUST 13, 2019 TO AUGUST 15, 2019)

EXY Euro Currency Index Price Chart Reaction to ECB Rehn Stimulus Comment

Chart created with TradingView

The dovish ECB remarks is extending Euro downside recorded so far this week that was initially sparked by a jump in the US Dollar following news that President Trump will delay tariffs on China. Dismal Eurozone economic data released during Wednesday’s trading session accelerated the Euro’s selloff and could largely be factoring into Rehn’s renewed calls for ECB policy accommodation. Now, the Euro is lower by nearly 1% since Friday’s close measured by the EXY Euro Currency Index.

EURUSD PRICE CHART: DAILY TIME FRAME (JANUARY 03, 2019 TO AUGUST 15, 2019)

Spot EURUSD Price Chart Technical Analysis

The forex market's initial reaction pushed spot EURUSD below the 1.11 handle before prices recovered slightly. The overarching downtrend in EURUSD could be reinforced owing to Rehn’s dovish ECB commentary and anticipated capitulation by the central bank to provide aggressive monetary stimulus.

EURGBP PRICE CHART: DAILY TIME FRAME (APRIL 25, 2019 TO AUGUST 15, 2019)

Spot EURGBP Price Chart Technical Analysis

The Euro’s slide so far today is most notable against the British Pound Sterling. Spot EURGBP began to sink earlier Thursday following better-than-expected UK retail sales data. Also, EURGBP looks to continue its retracement lower after upbeat Brexit commentary earlier this week aiming to prevent a no-deal departure from the EU has bolstered the British Pound.

EURJPY PRICE CHART: DAILY TIME FRAME (DECEMBER 30, 2018 TO AUGUST 15, 2019)

Spot EURJPY Price Chart Technical Analysis

Euro weakness is clearly evident when looking at spot EURJPY price action. The currency pair is flirting with its lowest level since April 2017 as risk appetite remains tarnished by market angst over slowing global growth which has led to several sovereign yield curve inversions.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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