Talking Points
- EUR/USD remains near a two-year high on Euro-Zone optimism and US dollar woes.
- Growth expectations are clicked higher but a lower inflation outlook may cause the ECB to reign in future monetary tightening expectations.
The results of the Q3 ECB survey of Professional Forecasters will present ECB President Mario Draghi with a headache moving forward, with growth expectations nudged higher but with inflation expectations moved lower.
A look at the above table will show that the forecasters expect inflation to remain stubbornly low over the next three years and below the central bank’s mandate of close to 2%. This lower-for-longer inflation outlook may curtail some of the current thinking that the ECB will tighten monetary policy in the short- to medium-term. The ECB’s outlook for EURUSD was pegged around the 1.09 level for the next few years and with the pair currently trading around 1.16, even the revised lower inflation forecasts may prove difficult to hit.
The quarterly survey is conducted by financial experts within the EU but do not represent views of the ECB decision-making bodies or staff.
EURUSD is currently drifting off its August 2015 high after rallying from a low of 1.03400 at the turn of the year. And from a technical perspective, the 20-day ema has just moved up through the 100-day ema, a bullish sign that suggests further gains for the pair.
.
Chart: EURUSD Weekly Timeframe (January 2013 – July 21, 2017)
If you would like to get your free IG Client Sentiment trading guide, please click here.
--- Written by Nick Cawley, Analyst
To contact Nick, email him at nicholas.cawley@ig.com
Don't trade FX but want to learn more? Read the DailyFX Trading Guides
