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Draghi Comments Send the Euro Falling

Draghi Comments Send the Euro Falling

2013-09-05 13:51:00
Gregory Marks,
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Draghi Highlights

  • Rates to be at present or lower levels for an extended period of time.
  • EU lawmakers are wrangling in regards to the oversight of ECB minutes.
  • Growth risks in the Euro region continue to remain on the ‘downside’ despite improvements.
  • ECB discussed a possible rate cut, but some governors said that the economy does not justify it.

The European Central Bank President Mario Draghi commented today on the European recovery and offered some updates onforward guidance for GDP/inflation. Although Mr. Draghi cited higher confidence indicators as a key positive factor in the Eurozone, the fact that he mentioned EU growth risks still being on the ‘downside’ weighed heavily as traders sold the Euro into the open of US equities.

Mr. Draghi, speaking on behalf of the ECB, raised 2013 GDP forecasts from -0.6% to -0.4% while lowering those for 2014 from 1.1% to 1.0%. Inflation forecasts for 2013 were also raised by a tenth of a percent to 1.5% as Draghi cited risks of higher commodity prices.

EUR/USD 5-Minute Chart

Draghi_Comments_Send_the_Euro_Falling_body_Picture_1.png, Draghi Comments Send the Euro Falling

Source: MarketScope

The Euro rose against the greenback as the ECB followed the Bank of England in leaving its key benchmark interest unchanged as expected, but this did not last as Mr. Draghi’s comments and guidance sent the Euro lower by almost 90 pips. Moving closer to the September FOMC meeting and with various risks surrounding the event, the fact that the Euro has broken through some key levels today may weigh heavily on traders in the weeks ahead.

Updated ECB Forecasts

Inflation

GDP

Avg. Oil

Euro

2013

1.5%

-0.4%

107.8

1.32

2014

1.3%

1.0%

102.8

1.33

Changes

  • 2013 inflation forecasted at 1.5% vs. 1.4% est. previously
  • 2013 GDP forecasted at -0.4% vs. -0.6% est. previously
  • 2014 GDP forecasted at 1.0% vs. 1.1% est. previously

Written by Gregory Marks, DailyFX Research Team

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

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