FXStreet (Guatemala) - Camilla Sutton, CFA, CMT, Chief FX Strategist at Scotiabank noted that the EUR is weak, having traded to its lowest level in almost a year (the September 2013 low was 1.3105).

Key Quotes:

"German IFO was weaker than expected, but the collapse in EUR came on the back of President Draghi’s comments on Friday, where he shifted course by admitting that medium term inflation expectations had declined by stating that: “Over the month of August financial markets have indicated that inflation expectations exhibited significant declines at all horizons."

"The 5year/5year swap rate declined by 15 basis points to just below 2% ‐ this is the metric that we usually use for defining medium term inflation … the Governing Council will acknowledge these developments and within its mandate will use all the available instruments needed to ensure price stability over the medium term”."

"The ECB’s reaction to falling inflation expectations: President Draghi has previously detailed that a drop in inflation expectations would be met with broad‐based asset purchases; whereas an impairment in the transmission of the ECB stance would be met with LTROs and an ABS purchase program. The June program included an LTRO as well as a suggestion that an ABS program was approaching. Accordingly President Draghi’s Friday comments have opened the door to further policy action by the ECB (the next meeting is September 4th)."

"However with German yields already well below 1% and all European 10year yields at or close to their one year lows; it does open debate on how QE would address the major issues in Europe, particularly the structural ones. Still the anticipation of a policy response by the ECB is currency negative, particularly juxtaposed against an increasingly hawkish Fed. We hold a year‐end EUR target of 1.30."

"EUR/USD short‐term technicals: Bearish—all signals have shifted to strong sell signals and there are no warning signals on the charts. Support lies at the September 2013 low of 1.3105."

Related Articles
  1. Forex Education

    Four Currencies Under the Spotlight in 2016

    With currencies having become the “tail that wags the dog,” in terms of their impact on the global economy, these four currencies will be under the spotlight in 2016.
  2. Forex Fundamentals

    These Currencies Are The Biggest Losers Of The Stock Downturn

    Here’s a list of the hardest-hit currencies amid the global stock market mayhem.
  3. Forex Strategies

    Will the Euro Continue to Rally? (EUO)

    The euro is rallying. Should investors chase this performance or is the real opportunity on the other side of the trade?
  4. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  5. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  6. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  7. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  8. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  9. Investing

    Financial News Comparison: Bloomberg Vs. Reuters (BAC, GOOG)

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  10. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
Trading Center