ECB To Drop Hawkish Tone On Slower Growth, Inflation ; The Euro extended the decline from earlier this week, with the exchange rate slipping to a low of 1.4262, and the reversal from 1.4548 may gather pace as there appears to be a growing rift amongst European officials. Bundesbank President Jens Weidmann argued that the European Central Bank needs to ‘scale back the extra risks monetary policy has taken on,’ while law makers in Germany made a push to have greater control over the European Financial Stability Facility as Parliament’s budget committee is scheduled to vote on the second bailout package for Greece later this month.
As European policy makers struggle to get their house in order, we are likely to see an increased reliance on the ECB to address the address the near-term risks for the region, but the Governing Council may come under increased scrutiny as it goes beyond its one and only mandate to ensure price stability. Nevertheless, the slowing recovery in Europe paired with the ongoing turmoil with the banking system may require the ECB to increase its nonstandard measures as investor confidence remains fragile. As a result, the EUR/USD may continue to retrace the advance from the previous month, and the euro-dollar may ultimately threaten the rebound from 1.3836 as we expect the central bank to strike a dovish tone at the interest rate decision scheduled for the following week. Source www.dailyfx.com
As European policy makers struggle to get their house in order, we are likely to see an increased reliance on the ECB to address the address the near-term risks for the region, but the Governing Council may come under increased scrutiny as it goes beyond its one and only mandate to ensure price stability. Nevertheless, the slowing recovery in Europe paired with the ongoing turmoil with the banking system may require the ECB to increase its nonstandard measures as investor confidence remains fragile. As a result, the EUR/USD may continue to retrace the advance from the previous month, and the euro-dollar may ultimately threaten the rebound from 1.3836 as we expect the central bank to strike a dovish tone at the interest rate decision scheduled for the following week. Source www.dailyfx.com
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