Complacency from the ECB. Fundamental analysis for 13.06.2014
13.06.2014
The results of the last meeting of the ECB continue to be the key influence on the Eurodollar. Yesterday's message about the possibility of an early rate hike by the Bank of England rocked the currency market, which led to a short-term correction in the euro. However, the movement is more of a local one and general sentiment still remains bearish and which is supported continuing statements from the ECB officials.
An impression is forming that the European regulator is unhappy with the market reaction to their actions. The long-awaited stimulus measures were announced, but the euro has still not moved far from the price levels prior to the meeting. Against this background, some interesting comments were made by the head of the Slovenian central bank, also a member of the Governing Council of the ECB, which did not rule out the possibility of another downgrade of the key rate.
Earlier, Mario Draghi said that the ECB intends to keep rates at the current levels for some time. In other words, the possibility of another downgrade in the foreseeable future is excluded. But the head of the Central Bank of Slovenia immediately made a reservation about his comment, that is likely that no more easing will be necessary because the current measures and sufficient for evening out the risk of deflation.
Incidentally, in its last publication, the ECB has extremely entertaining approaches the question of determining the definition of deflation. The regulator evasively calls a short-term fall in prices "negative annual inflation." Similar things have happened in the euro area in the fall of 2009 and according to the ECB - several months of "negative inflation" is unlikely to cause long-term damage to the economy.
The ECB calls longer periods of falling prices "Direct deflation", indicating that after the end of World War II a similar situation was encountered only twice: in Japan from 1995 to 2013 and in Hong Kong from 1999 to 2004. Based on inflation expectations, the ECB believe that now it is not the time to fear offensive "direct deflation" in the euro zone, but the same Japanese experience shows that the indicator of expectations does not reflect the whole picture.
The Eurodollar sales continue and at the correction I opened my third short. It is unlikely that yesterday’s weak data on U.S. retail, showing an increase of 0.3% instead of the expected 0.5%, will be able to prevent the bears to break through the minimum values. In addition, the French zero inflation in May is an additional driver that acts towards the euro's decline as prices fall here and now, and the effect of the ECB has yet come.
RoboForex Analytical Department
An impression is forming that the European regulator is unhappy with the market reaction to their actions. The long-awaited stimulus measures were announced, but the euro has still not moved far from the price levels prior to the meeting. Against this background, some interesting comments were made by the head of the Slovenian central bank, also a member of the Governing Council of the ECB, which did not rule out the possibility of another downgrade of the key rate.
Earlier, Mario Draghi said that the ECB intends to keep rates at the current levels for some time. In other words, the possibility of another downgrade in the foreseeable future is excluded. But the head of the Central Bank of Slovenia immediately made a reservation about his comment, that is likely that no more easing will be necessary because the current measures and sufficient for evening out the risk of deflation.
Incidentally, in its last publication, the ECB has extremely entertaining approaches the question of determining the definition of deflation. The regulator evasively calls a short-term fall in prices "negative annual inflation." Similar things have happened in the euro area in the fall of 2009 and according to the ECB - several months of "negative inflation" is unlikely to cause long-term damage to the economy.
The ECB calls longer periods of falling prices "Direct deflation", indicating that after the end of World War II a similar situation was encountered only twice: in Japan from 1995 to 2013 and in Hong Kong from 1999 to 2004. Based on inflation expectations, the ECB believe that now it is not the time to fear offensive "direct deflation" in the euro zone, but the same Japanese experience shows that the indicator of expectations does not reflect the whole picture.
The Eurodollar sales continue and at the correction I opened my third short. It is unlikely that yesterday’s weak data on U.S. retail, showing an increase of 0.3% instead of the expected 0.5%, will be able to prevent the bears to break through the minimum values. In addition, the French zero inflation in May is an additional driver that acts towards the euro's decline as prices fall here and now, and the effect of the ECB has yet come.
RoboForex Analytical Department
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