Traders were very surprised by the speech and statements of the President of the European Central Bank Mario Draghi, who during the press conference made only remote hints at a possible reduction in interest rates and the launch of the asset repurchase program, without giving any temporary guidance when the policy will be changed.
On the other hand, it is obvious that the head of the European regulator is gradually preparing the markets for such a scenario, which affects the quotations of risky assets. However, it is already clear that the current euro exchange rate already includes the launch of the bond buyback program and one decrease in interest rates, so global changes in the market are unlikely to occur in the near future.
The demand for the US dollar will gradually slow down, as next week all attention will be focused on the meeting of the Federal Reserve System, which, like the ECB, will go to the easing of monetary policy, which will hit the positions of the US dollar.
From the speech of the President of the ECB, we can identify several important statements on the subject of monetary policy and inflation.
During the press conference, Draghi said that employment growth and wage increases continue to support the economy, but the threat of protectionism and geopolitical factors worsen the mood. In his opinion, the inflationary pressure will remain restrained, as recent data indicated a slightly weaker economic growth in the 2nd and 3rd quarters than expected. Mario Draghi also noted that the risks to economic growth prospects are still downwards, and a significant degree of monetary stimulus is still needed. The head of the ECB expects a decline in overall inflation in the next few months, but a return to growth by the end of the year.
As for the prospects for the economic growth of the eurozone, according to Draghi, the recovery this year is less likely, so now the ECB is inclined to soften policy and a step closer to taking action.
However, before taking any action, the European Central Bank wants to see new economic forecasts.
At the end of his speech, Draghi said that lower rates will be observed in conjunction with the mitigating measures, but this meeting has not yet discussed the scale of rate cuts and the volume of purchases of assets.
From all this, it can be concluded that the ECB will sooner or later resort to a change in the course of monetary policy, and this will be done in the middle of autumn this year, provided that the economic indicators of the eurozone continue to deteriorate. One thing is clear: a very soft policy will be maintained for a long time.
As for yesterday's fundamental data on the United States, the weekly data on the number of Americans who first applied for unemployment benefits pleased the markets.
According to a report by the US Department of Labor, the number of initial applications for unemployment benefits for the week from July 14 to 20 decreased by 10,000 and amounted to 206,000. Economists had expected the number of applications to be 220,000.
Simply excellent data on the demand for products with a long service life in the United States supported the dollar in the afternoon. The growth was due to new orders in the transport sector.
According to a report by the US Department of Commerce, durable goods orders in June this year increased by 2.0% compared to the previous month, while economists had expected orders to grow by only 0.5%.
As mentioned above, the transport sector has shown good growth. Thus, orders for cars and spare parts for them increased by 3.1%, and orders for aircraft increased by 75.5% immediately after the failed situation in the past months due to the suspension of flights of Boeing 737 MAX aircraft.
As for the technical picture of the EURUSD pair, despite all the significant fluctuations, both sellers and buyers managed to hold their positions. The market is still in the balance, but the bears will try to continue the downward trend. This requires a breakthrough of the intermediate support of 1.1125, which will push the trading instrument even lower in the area of the monthly lows of 1.1100 and 1.1040.
If buyers are risk assets will try to return to the market, the resistance will be the staging area of 1.1155, however, the larger level can be seen in the area of 1.1185.
