Subscribe to RSS

EUR: There Is A Method In Draghi’s Madness – Credit Agricole

The ECB disappointed investors in December and the resulting EURbounce could complicate its task of lifting the Eurozone (core) inflation.

There is a method in Draghi’s apparent ‘madness’, however. Indeed, similar to the SNB and the RIksbank, the ECB will continue to lean aggressively against unwarranted FX appreciation while preserving ammunition for the future battles of the global currency war.

E-Institutional Views

There is a method in Draghi’s madness:

To start with, we think that the ECB will welcome a weaker EUR but we doubt that an excessive FX depreciation from current levels is part of the Governing Council’s objective. In particular, we note that the ECB is now focusing more on the core rather than the headline inflation. The former is responding more slowly than the latter to moves in the single currency or, for that matter, any external price developments. Indeed, according to ECB staff estimates, a permanent 10% drop in EUR NEER could lift core CPI modestly or by c.55bp in three years.

The extended time lag between policy implementation and the realisation of the desired economic outcome adds to the significant uncertainty hanging over the effectiveness of the ECB’s policy measures. To make matters worse, the global currency war continues with central banks around the world and most notably in Europe doing their best to cheapen their national currencies.

As a result, the Governing Council may have to do more just to make sure that the pronounced EUR-depreciation we had in recent years is sustained. Needless to say, other, more important, inflation drivers like the Eurozone’s still significant labour market slack should prolong the period of subdued core inflation (Figures 3 and 4).

E-Institutional Views

We remain bearish on EUR/USD and expect the pair to depreciate towards the 2015 lows and drift lower still in the coming mongths as demand for EUR-funding from abroad intensifies.

We expect EUR/USD to extend its grind lower from here. We think that growing demand for EUR-funding and EUR-funded carry trades should remain the main driver of the pair’s weakness. Indeed, we expect that foreign borrowers will continue to exploit the very attractive funding conditions in the Eurozone and issue EUR-denominated debt. They will also remain the primary sellers of EUR in the global markets. We see that as a structural shift away from the more expensive USD-funding and into EUR-funding.

At the same time, we see less scope for policy divergence to push EUR/USD much lower from here. Indeed, the ECB is less likely to engage in aggressive depreciation of the currency. We also think that too many USD-positives are in the price and doubt that the Fed can exceed already hawkish market expectations next week.

‘This content has been provided under specific arrangement with eFXnews.’

0 commentsback to post

Add your comment

Nickname:
E-mail:
Website:
Comment:

Other articlesgo to homepage

100% Withdrawable Bonus on your First Deposit – NordFX

100% Withdrawable Bonus on your First Deposit – NordFX(0)

Up to 150% Bonus for a First Time to binary options Account. For a perfect start, we offer you a 150% bonus for a first-time $5,000 deposit. Link:  Up to 150% Bonus for a First Time Link:  100% Withdrawable Deposit Bonus Link:  55% Deposit Bonus Promotion Link:  DemoCup contest  prize fund is $42000 Available to:

$10 Free Credited into your account – Champion FX

$10 Free Credited into your account – Champion FX(0)

$10 Free Welcome Credited Bonus into your account. Sign up for a ChampionFX Cent live trading account today and get a Free Welcome Forex Credited Bonus worth USD 10 Link:  $10 Free Credited Available to: New and Existing Traders. Ending Date: 31 December 2018 Bonus Offer: $10 Free Welcome Credited into your account to All

Monthly Live Forex Trading Competition – Tickmill Ltd.

Monthly Live Forex Trading Competition – Tickmill Ltd.(0)

Forex Monthly Live Trading Competition. Put your forex trading skills to test and win up to $1000 every Month! Forex Live Trading Competition is only available for clients of Tickmill Ltd.(FSA Regulated) Link:  Weekly Demo Race Trading Contest Link:  $30 Free Welcome Bonus Offer Link:  Forex Monthly Live Trading Contest Available to: All new traders

Get $1500 Forex No Deposit Welcome Bonus – InstaForex

Get $1500 Forex No Deposit Welcome Bonus – InstaForex(0)

Get $1500 No Deposit Forex Bonus from InstaForex no need to risk your own money if you have already got funds to earn more money. The $1500 No Deposit Free Bonus from InstaForex is an exciting opportunity to start Forex live trading. Link:  $500 Forex No Deposit Free Bonus Link:  $1000 Forex No Deposit Free

Up to 50% Welcome Bonus on Each Deposit – Fort Financial

Up to 50% Welcome Bonus on Each Deposit – Fort Financial(0)

Up to 50% Welcome Bonus of Every Deposit to All New and Existing Traders. You Deposited $1000 on your account, chose a 50% bonus and got 500 extra dollars to the initial deposit amount. Link: $888 Extra Bonus Amount Promotions Link:  $5 Forex No Deposit Welcome Bonus Link:  Up to 50% Bonus of Every Deposit

300 USD No Deposit Forex Welcome Bonus – CARRAX

300 USD No Deposit Forex Welcome Bonus – CARRAX(0)

300 USD No Deposit Forex Welcome Bonus for 30 calendar days for real trade in the forex market. Only Carrax verified users may participate in the 300 USD No Deposit Forex Welcome Bonus Promotion. Link:  300 USD Forex No Deposit Bonus Withdrawal: Only profits can be withdrawn after 30 days of having the account active.

FX Zone Currency Capital Forex Trading Contest – FXTM

FX Zone Currency Capital Forex Trading Contest – FXTM(0)

FX Zone Currency Capital Trading Contest final Bid Central. Sharpen your forex trading skills completely RISK-FREE as you enter ForexTime Broker simulated forex world of 2017 the FX Zone Currency Capital Contest. Link:  FX Zone Currency Capital Contest Link:  $25 Per Referral Earn up to $10000 Link:  Receive $30 Tradeable Credit Bonus Link:  Loyalty Cashback

$123 Free No Deposit Welcome Bonus – FBS Broker

$123 Free No Deposit Welcome Bonus – FBS Broker(0)

$123 Free No Deposit Forex Bonus of FBS Broker all new members to get a Free bonus of $123 without initial deposits and start a risk-free forex liveForex Trading. Link:  $123 Free Forex Bonus Promotion Link:  100% Deposit Bonus Promotion Link:  $88.8 Lucky No Deposit Bonus (for Malaysian traders) Available to: All new traders Ending

$50 Free No Deposit Bitcoin Bonus Special Promo – UFX

$50 Free No Deposit Bitcoin Bonus Special Promo – UFX(0)

$50 Forex No Deposit Bitcoin Bonus Special Promotion to all new trading account holder. Start Forex Trading Bitcoin with UFX and  Get a $50 No Deposit Bonus Link:  $50 Forex No Deposit Special Bonus Link:  $50 Free No Deposit Bitcoin Bonus Link:  100% Real Money CashBack Promo Link:  $5000 BitCoin Rewards Bonus Promo Available to:

Forex Special Promo FREE Forex Trading Signals – CMSTrader

Forex Special Promo FREE Forex Trading Signals – CMSTrader(0)

Forex Special Promotion for our new clients. Open account and get our FREE Forex Trading Signals with high success claim them Now 91% Success! Link:  Top Social Copy Trading Platforms Link:  FREE trading signals Special Promotion Ending Date:  31 December 2018 Available to:   New Clients only Bonus Offer: Get FREE forex trading signals Special promotion

read more

Forex Featured Broker

Contacts and information

ForexDepositNews.com Forex Deposit Bonus, Forex No Deposit Bonus, Forex Live Contest, Forex Demo Contest, Free Forex Bonus Forex Brokers Review and Other All Forex promotions.

ForexDepositNews.com

Social networks

Most popular categories