EUR/USD: ECB normalization policy and the euro medium-term growth will be slow

The euro managed to regain positions in tandem with the US dollar yesterday after a speech by the President of the European Central Bank, who pointed out that the ECB's monetary policy normalization would be slower than economists had previously predicted.

The main problem is that Mario Draghi fears the risks associated with protectionism, as well as the slowdown in emerging markets. Besides Uncertainty in trade relations with the United States, problems with Brexit led to increased uncertainty in further actions by the ECB. Too early increase of interest rates may adversely affect the prospects for economic growth in the eurozone, which is already slowing down by the end of this year.

It is not necessary to raise interest rates anytime soon since the forecast of the economists of the European Central Bank for inflation does not pose a serious threat.


Let me remind you that experts predict an increase in inflation at the end of the year. It is expected that the EU-harmonized consumer price index will be 1.8% in 2018, while it was projected to grow by 1.7% in September. However, it is expected that HICP inflation will show a slower growth in 2019 with a forecast of compared to the previous of 1.7% in September of this year. For 2020, the forecast remained unchanged. The consumer price index is expected to be 1.7%.

The ECB president also noted that the monetary policy decision was unanimous, and the timing of the rate hike will depend on the data and the state of the economy. Draghi has repeatedly pointed out in which case the ECB has the tools for any kind of development of the situation.

It is important that while other monetary policy instruments were not discussed during the ECB meeting, the TLTRO program was mentioned but without any details.

As for yesterday's fundamental data, the US labor market continues to delight traders with its statistics.

According to a report by the US Department of Labor, the number of initial claims for unemployment benefits fell by 27,000 to 206,000 over the week from December 2 to 8. Economists expected last week's number of applications to be 225,000 until December 1, which was revised higher by 2,000, to 233,000.


Import prices in the US have declined. According to the US Department of Labor, import prices fell by 1.6% compared in November compared with the previous month this year. Meanwhile, economists had a fall in import prices of 1.1% in November.

It is not surprising but the leaders of the fall are all the same energy. Prices for oil imports fell immediately by 12.1% compared with the previous month while excluding oil import prices fell by only 0.3% in comparison with import prices increased by 0 in November last year.

As for the technical picture of the EUR/USD pair, buyers of the European currency need to really try today in order to maintain an upward trend. Only a fixation above the intermediate resistance level of 1.1370 can lead to the formation of a more pulsed upward movement in the expectation of updating the area of 1.1400. If the trading instrument returns to the support level of 1.1345, then you can count on a larger sale of the euro with a minimum of 1.1305.

The material has been provided by InstaForex Company -