Fundamental image is favorable for the USD
Fundamental image is favorable for the USD
He focused on inflation and talked about very low inflation expectations in Europe. This is important because the maintaining price stability in the medium term is a direct responsibility of the ECB.
If inflation forecasts are reduced, the ECB should be motivated to take a more accommodative policy measures. Draghi looks forward steps to quantitative easing (QE), and for the second time in a week he said that the ECB will expand purchases (bonds), if the current policy to raise the inflation will not work.
While the ECB never does bind itself on the policy in advance (or so they say), what Draghi openly voiced on QE prospects in Frankfurt worthy of attention, as the Bundesbank was against the idea of buying government bonds.
If Draghi will be able to convince the Germans that QE is the only solution to the problems of ECB, the QE may occur in early 2015. This is exactly what the market is laying in the forecasts at the moment, and that is why the euro is under pressure.
The fundamental image is favorable for the USD at the moment. It also suggests that the Dollar Index can strengthen its position above this level of 88.00.
All this also means that the bulls are still in control, they just make a little breather. Since this level was broken, it will open the way to around 90.00 - a key psychological level and a maximum since 2006.
In the case of firm attachment of the index above 88.00, it may herald the next stage of growth of the USD against the EUR and GBP.