Euro bounces around on rumors, but trend is up
Mario Draghi’s comments that stimulus is still needed do not change the fact that the Germans will eventually push for end to negative interest rates
ECB President Mario Draghi’s comments over the weekend to the effect that Europe still needed a lot of monetary accommodation knocked the Euro down from 1.122 to 1.112, until this morning, when Reuters reported that the ECB would remove its standard reference to “downside risks” from its next statement.
The Euro immediately popped from 1.111 to 1.119. None of this means very much.
The Germans have made clear that negative interest rates have to go by sometime in late 2018, and they have put Europe’s laggards on notice that they have a year or so to get their act together. But they won’t push for sudden or disruptive action by the ECB.
That means EUR/USD will be considerably stronger a year from now, but won’t do much before Germany’s Sept. 24 elections.