ECB Minutes Point to Stubborn Inflation

Talking Points

- ECB minutes show solid growth and stubbornly low inflation.

- The single currency continues to rally despite the central bank’s pledge to keep monetary policy loose.

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The latest ECB minutes, from the October 25-26 meeting, highlight a strong Euro-Zone economy still blighted by persistently low inflation. The minutes said that economic expansion continued to be solid and broad-based across countries and sectors with the latest information pointing to stronger-than-expected growth in the second half of the year. However, as in the past, stubbornly low inflation is forcing the central bank to keep buying government bonds (QE) to drive price pressure in the block.

“Overall, members continued to emphasise that, while the ongoing economic expansion increased confidence that inflation dynamics would strengthen over time, patience, persistence and prudence were still required, as this process was expected to take time and remained contingent on a substantial degree of monetary policy accommodation.”

The single-currency shrugged off the release and continued to push ahead against a weak US dollar, edging towards multi-week highs. A strong EUR coupled with a greenback pulled lower by fears the US inflation may remain below 2% for longer than originally anticipated is pushing the pair higher. And the USD is unlikely to get any substantial domestic support over the next 48 hours with America closed Thursday for the Thanksgiving Holiday while markets will only be open for a limited time on Friday.

Chart: EURUSD Four Hour Timeframe (November 7 - November 23, 2017)

Chart by IG

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--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

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