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EUR Dips After OECD Says Rates Won't Rise Till 2020

EUR Dips After OECD Says Rates Won't Rise Till 2020

Nick Cawley, Strategist

Talking Points

- Broad-based growth but Euro Area wage growth is set to moderate, inflation to remain under 2%.

- EUR/USD dips after growth disappoints the market.

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The latest OECD Economic Outlook shows the Euro Area benefitting from a broad-based recovery but highlights worries that wage growth and inflation will struggle to meet targets. The report says the area will see growth of 2.4% in 2017 before dipping to 2.1% in 2018 and 1.9% in 2019. And it is against this backdrop that interest rates are set to remain at the same level, or potentially lower, for at least another two years.

The announced gradual reduction of asset purchases by the ECB is welcome to avoid disruptions in financial markets and anchor interest rates at a low level. On the basis of this projection, policy rates are expected to begin to rise in 2020, but longer-term market interest rates will start rising earlier.”

Chart: EURUSD One Hour Time Frame (November 22 - November 28, 2017)

EUR Dips After OECD Says Rates Won't Rise Till 2020

Chart by IG

And inflation in the Euro Area is expected to remain under target – around 2% - over the next two years, due to moderating wage growth, causing the ECB a problem when they come to review the QE program next year.

DailyFX Head Forex Trading Instructor Jeremy Wagner takes a look at the latest EUR/USD Elliott Wave Analysis here

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--- Written by Nick Cawley, Analyst

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

Follow Nick on Twitter @nickcawley1

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

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