- ECB concerned over Eurozone lacklustre inflation
- EUR/USD bulls could struggle.
The ECB could be forced to move on low inflation over the coming months if prices don’t pick up. Analysts expect Euro Area inflation data (September) to miss forecasts and disinflation to continue worse this month than the previous month. This would put the pressure on the ECB to take action.
ECB President Christine Lagarde said in a recent speech that additional monetary policy measures should be used to lift prices. ‘the wider discussion today, however, is whether central banks should commit to explicitly making up for inflation misses when they have spent quite some time below their inflation goals….if credible, such a strategy can strengthen the capacity of monetary policy to stabilize the economy when faced with the lower bound’.
EUR/USD trades around1.1700 amid US Dollar strength and Euro weakness which is keeping the bears in control. 1.1600/1.1610 could be tested again soon, particularly in the case that Friday’s inflation disappoints. A cross over in the 20- and 50-dma saw additional weakness in EUR/USD, to the extent that the pair became oversold. With few areas of support under 1.1600 on the chart, ECB desires for a weaker EUR/USD rate could happen sooner rather than later.
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