The EUR/USD pair is trading with a downturn on Thursday afternoon after the sharp comments from the ECB.
The single European currency has consistently strengthened for three sessions in a row, but today it has failed to keep the growing momentum. The current quote in the EUR/USD pair is 1.1445 (-0.3%).
Mr. Novotny, a representative of the European Central Bank, noted today that the euro area lags behind in the plans for the movement to the designated target inflation of 2%. The base inflation rate is as far from the target as the main rate. According to him, it is necessary to strengthen incentives in order to provide the necessary support for the inflationary parameters.
Well, firstly, the European monetary politician has not informed the world of anything new. Inflation in the euro area remains as much of a problem as in the UK and in the US. Last published statistical data showed a zero value of the CPI indicator in September m/m and a slide of the indicator to the zone of deflation of 0.1% in the annual calculation. This is very similar to the beginning of the winter cycle of the European deflation modeled by December-March. Of course, to make such a conclusion, it is necessary to wait at least for the October figures to confirm or deny the trend. In any case, even a single observation, showing deflation in the euro zone, is unpleasant.
For the euro currency, this means that the QE is not giving the necessary support in the parameter of inflation, and therefore the program should be strengthened. This puts pressure on the euro at the moment, and medium pressure will be formed if the ECB will once again confirm the intention to expand the stimulation.
RoboForex Analytical Department
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