Yesterday saw a much weaker euro on the back of some negative headlines out of the European Central Bank. The outlook for the region doesn’t look good, as a result, the shared currency may well remain under pressure for a prolonged period of time.
The central bank boss, Mario Draghi, managed to downgrade the bank’s forecasts by the largest amount since they embarked on quantitative easing a number of years ago. The outlook for growth was lowered by a whole 0.6% from just 3 months ago. This is a huge amount by any means. The result of this negative outlook saw Draghi confirm rates would not be rising until at least 2020, almost a 6 month delay from previously expected. The governing council had discussed extending this for longer – a sign the ECB are getting nervous.
The second major development which knocked the euro even lower was confirmation that stimulus would indeed be continued via a TLTRO part III (targeted longer-term refinancing operations). This programme would essentially offer longer term loans to banks which may face significant consequences due to previous loans which run off in June.
All-in-all, the event was a negative one for the euro which crashed through support at $1.12 against the buck. As a result the pair traded down to its lowest levels since June 2017. As mentioned above, the currency may remain pressured for the foreseeable future.
Today is all about US non-farm payrolls, this release could inject one last bout of volatility before the week closes. All eyes will be on the report released at 1330.
Have a great weekend.
Written by Viv Savani. 8:46am, March 8th 2019
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