The EUR is too high for the taste of some ECB officials

May 20 2015, 12:51 pm
Market news

The lately comeback of the euro has sparked unease among European officials regarding the inflation, the commercial advantages of Germany, the competitiveness gained by others in relation to other partners outside the monetary union and the feeling that Frankfurt is in control. The publication of comments by the European Central Bank policy maker Benoit Coeure clarified the situation as he mentioned that the central bank will accelerate its asset purchases in May and June and if need be, the frontloading may be complemented by some easing in September when market liquidity is expected to improve again.

After this announcement the EURUSD rapidly dropped below the 1.1200 support level, and now is resting above 1.1120. The depreciation was also favored by a German and European ZEW published below expectations and optimistic values of building permits in the U.S. Considering that this week the messages from important central bankers (including Janet Yellen and Mario Draghi) will increase their frequency, the Euro risks further landslides.

Japan’s economy received good news as the preliminary GDP was reported above estimates at 0.6%. The economy proved that it has the necessary resources to expand at its fastest pace in a year, but there is still present the lack of business investment which keeps alive the expectations for more monetary stimulus later this year. Economics Minister Akira Amari told reporters that the deflation danger is not yet overcome, while the private consumption (which accounts for 60% of GDP) rose 0.4%. USDJPY advanced above the 120.90 resistance level while good prospects for the American dollar may help the currency pair advance even in the 121.30 – 121.40 area before having a correction.

Oil prices gain as Japan reported economic growth and the Australian Westpac Consumer Sentiment rose up to 6.4%. The WTI quotation decreased to 57.93 dollars per barrel and currently may go even higher to 58.75, 59.30 and 60.00. Concerning the Brent’s price action, it has been shaping a descending channel whose lower side has been rigorously respected and now the price threatens a return to the upper side of the trend.

The Sterling pound has been losing momentum in the last week as the data in England fall below expectations (CPI decreased to -0.1%) and the American dollar has returned. Today is due to be published the MPC Official Bank Rate Votes together with the MPC Asset Purchase Facility Votes (no changes expected).

The most important events of the week will be the today’s FOMC Meeting Minutes, the ECB Monetary Policy Meeting Accounts published on Thursday, the BOJ Press Conference on Friday and still on the last day of the week the evening’s marathon speeches of Mario Draghi, Mark Carney, Haruhiko Kuroda and Janet Yellen.

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