As ECB will be keeping QE “as long as necessary” due to risks tilted to the downside, Euro might continue to sell off in the coming months. Sell EUR/USD?
- ECB kept rates unchanged, as widely expected, at a historic low of -0.5%.
- ECB President Christine Lagarde said rates will remain unchanged or go even lower until they can see an improvement in inflation levels close to their target of 2%.
- Furthermore, she also mentioned that the Governing Council “stands ready to adjust all of its instruments as appropriate” in order to guide inflation towards target.
- During the press conference, President Lagarde expressed pessimism on eurozone’s growth outlook, taking into account geopolitical factors, rising protectionism and vulnerabilities in emerging markets which remain tilted to the downside, but have become less pronounced as some of the uncertainty surrounding international trade is decreasing.
- Nonetheless, we believe that ECB may implement further easing through QE while keeping rates unchanged for 2020.
- With this in mind, Euro could face short-selling pressure in early 2020 until inflation and data show signs of growth.
- EUR/USD may be a good pair to short as differential in interest rates between the two countries would cause this pair to move lower towards 1.0980
Fullerton Markets Research Team
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