Last Friday (20/11), the EUR/USD fell sharply after the speech nature loosening of president of the European Central Bank (ECB). Ending the session, the pair closed at $1.06432, down 0.8% compared with the opening price $1.07320.
In a speech in Frankfurt on 20/11, Mr. Mario Draghi said “If we conclude that the current trajectory of monetary policy is not enough to achieve the inflation target, we will do what is mandatory to increase inflation as quickly as possible. When making an assessment of the risks of price stability, we will not ignore the fact that inflation has been low in recent years. Specifically, we will consider asset purchase program as a powerful and flexible, so that it can be adjusted in size, composition or duration”.
Mr Draghi said core CPI, excluding food and energy prices, is also a signal of too weak inflation. The index reached 1.1% in October.
His spokesman Draghi stressed the concerns of the ECB, that the inflation rate of the single currency area is currently at 0.1%, will slip further 2% target in the context of slowing economic growth and crude oil price declined. The policy makers are considering the need to extend further easing, the economic value of 1.1 trillion euros ($1.2 trillion) that began in March, or other measures such as putting interest rate below 0%, in the next meeting on 3/12.
The remarks of Mr Draghi which launched amid expectations the US Federal Reserve (Fed) raised interest rates in December meeting, dragged the pair down.
Today the market will focus on Eurogroup meeting in Brussels, Belgium. Brussels is placed in alarm status on the terrorist threat so public places such as schools, offices, etc … have been closed, but the meeting is taking place as scheduled. The meeting will be closed to the media but will have the interview on the sideline, and the market is expecting the statement in support of policy easing from the European officials, to put pressure on the common currency.
Besides, in the US, investors also awaited performance indicators such as Chicago Fed National Activity Index (CFNAT) announced by the Fed Chicago, PMI manufacturing index published by Markit Economics, and Existing Home Sales, to reinforce confidence about the US economy health before the Fed raising interest rates, support dollars go up. CFNAT index is forecast at 0.08, while the expected number of new homes sold reached 5.4 million units. PMI is used to measure the purchasing power of the managers. PMI reading above 50 indicates the economy expand and the US is expected to reach 53.9 in this report.
Currently, at 2:02 pm GMT+7, the pair is trading at $1.06176, down 0.18% compared with the opening price $1.06364.
Forecast: In the long term, the pair remains under pressure due to the monetary policy divergence from central banks. EUR/USD is likely to below the threshold of $1.05800.
However, if the figures from the US are not as well as expected by the market, the pair still have a chance to prosper, not strong but can exceeded $1.06600.