Will Draghi drop the euro below $ 1.13?


Today, the currency pair EUR / USD is waiting for the news of the ECB meeting and the press conference of Mario Draghi, who is unlikely to inspire optimism in the single currency. However, it is worth noting that the euro strengthened against the dollar for the first time in almost two weeks, but growth is more like not the beginning of a positive trend, but rather the result of closing short positions.

The main financial figures of Europe, who spoke in recent weeks, were unanimous in their opinion. The euro zone's economy is growing more and more slowly. ECB members also expressed concern about the downside risks. Probably the same will be said by Mario Draghi at the press conference. The point here is not only that the economy has lost momentum to growth, but a "tough" Brexit can also become a serious threat to the recovery of the region, for which no one has yet canceled the scenario.

Draghi earlier commented on the latest data on the Euro block, calling them weaker than expected. In the current non-ideal conditions (especially from global risks), substantial incentives are needed, since the slowdown may be delayed, the head of the regulator added.

If labor market activity and spending in Germany have improved, but inflation, manufacturing activity, and entrepreneurial activity slow down. Therefore, the tone of Mario Draghi at the press conference will undoubtedly be "soft." It will demonstrate concern, emphasize the need for continued incentives, and reduce expectations for higher rates.

If the Central Bank declines growth or inflation forecasts and focuses Draghi on slow economic recovery, the EUR / USD rate risks falling to 1.12. The pair may recover to 1.1450 when Draghi tries to find a balance between a cautious forecast and optimism, which comes from strong spending and labor market activity.


Societe Generale believes that if the US economy does not slow down, the currency pair EUR / USD will approach 1.1. Goldman Sachs experts, on the contrary, see a growth rate of up to 1.17, because the US looks even less advantageous. Business activity is rolling with perennial peaks, the economy is also tilting. The situation is aggravated by the longest government shutdown in history, which will subtract 0.3 pp from GDP in the first quarter, Reuters calculated. As a result, the economy in annual terms will expand by 2.1% in the first quarter, by 2.3% in the second, and by the end of the year, it will slow to 1.9%.

Meanwhile, the 34th day of the Shutdown is coming, the battle in the White House is gaining momentum. Donald Trump intends to send a message to the nation next week, but House Speaker Nancy Pelosi refused to participate in the preparation of the event while the government is idle. On all, it is clear that the pressure in the relationship of Trump and Pelosi is not reduced, but the dollar is indifferent to this skirmish.

Today, the Senate will vote on the latest proposal of the US President and the short-term bill on expenditures from the Democrats, which contributes to the launch of the government before February 8. However, the Shutdown may continue, since neither side has a majority. Most likely, the voting will fail, but if at least one passes, the dollar will soar.


The material has been provided by InstaForex Company - www.instaforex.com