ECB interest rates unchanged; EZ inflation to decrease in coming months

Chris L
Category:  Financial News
The European Central Bank decided to keep unchanged its interest rate at 0%, with the deposit rate at -0.4%, according to a press release published by the bank. 

In addition, "the Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019," says the announcement, "and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term."

In the post-decision press conference, ECB President Mario Draghi commented that data has been weaker than expected, as well as a weaker external demand and soft domestic demand that underpinned economic expansion. 

The job market in the eurozone is supporting consumption with well-balanced wages. Investment remains robust with a global growth expected to continue but slower. Protectionism, geopolitics and financial market risks still persist.

"The balance of risks is moving to the downside owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility."

Draghi also commented that specific factors are suggesting that economy may be slowing. ECB's outlook for GDP was revised lower, with balance of risks to downside. According to its recent forecast, growth in 2018 is expected to be 1.9%, while 1.7% in 2019 and 2020, and down to 1.5% for 2021.

On the prices focus, inflation is lower than the European Central Bank board initially expected with a 1.8% for the current year, 1.7% in 2020 and 1.8% in 2021. Slightly up for 2018, but down for 2019 onwards. 

EUR/USD down following Draghi remarks

The euro reacted to the downside following European Central Bank decision to maintain unchanged its interest rates and Mario Draghi press conference. 

EUR/USD fell from daily highs around 1.1395 to find support at 1.1340 during the speech. Now, the pair is bouncing back to 1.1370 where it is testing the 20-hour moving average level. 

Currently, the euro is trading 0.10% down on the day around 1.1360. Technical indicators in the very short term suggest a short-lived rebound due to oversold conditions. 

In the middle term, the EUR/USD remains inside the last week range between 1.1300 and 1.1420 which is also inside of a more significant channel between the mentioned 1.1300 and 1.15000. 

Technical conditions in the bigger picture remain neutral with the pair attempting to recover ground above 1.1450. To the upside, immediate resistance is at the 50-day moving average at 1.1405, then, Move 20 high of 1.1470 and the upper side of the channel around 1.1500.

To the downside, check the 1.1300 price as the critical level to be broken, lot of stop-losses below there that can push the pair down below 1.1265 and then the 1.1200 area. 
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