FXStreet (Edinburgh) - Lee Hardman, Currency Analyst at BTMU sees the likeliness of further downside for the single currency in the medium term.
“The release yesterday of the disappointing euro-zone GDP report for Q2 will increase pressure on the ECB to implement further monetary easing”.
“The ECB may feel that it would be prudent to take out some more policy insurance to protect the economic recovery which remains very weak and fragile”.
“The ECB has already clearly signalled that it remains open to implementing further stimulus to support economic growth and inflation in the euro-zone including unconventional easing measures”.
“It has also stressed that intense preparatory work is underway to begin purchasing private assets in the form asset backed securities which are backed by bank loans”.
“We have been assuming that the ECB would wait at least until later this year before introducing further monetary easing”.
“However, economic developments are clearly increasing pressure on the ECB to act again in the near-term”.
“Building investor expectations of further ECB monetary easing will likely keep the euro under modest downward pressure in the near-term helping to ease overall monetary conditions in the euro-zone”.
“Euro weakness should remain gradual unless there is a signal from the ECB that it is becoming more willing to consider QE”.
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