Euro weakens on downbeat ECB

25 January, 2019

In a widely expected move, the European Central Bank left its benchmark interest unchanged at 0% in January.

However, President Mario Draghi’s cautious comments and warnings of rising risks to growth sent the Euro tumbling lower against its major counterparts. According to Draghi, the “risks surrounding the euro area growth outlook have moved to the downside” thanks to persistent uncertainties. Geopolitical risk factors in the form of trade tensions and Brexit drama have weighed on Europe while a tepid growth in Germany, France and Italy simply rubbed salt into the wound. With headline inflation likely to respect a negative trajectory over the coming months and growth momentum seen weakening further, the Euro is poised to remain depressed. The fact that Draghi also reiterated the central bank’s intention of leaving rates at their present levels through summer of 2019 and possibly longer continues to highlight how the Euro remains fundamentally bearish.

Taking a look at the EURUSD, the currency pair remains under pressure with prices sinking towards 1.1300 before later recovering. The Euro has the potential to conclude heavily depressed this week if investors exploit the downside momentum to push prices lower. A solid daily close below 1.1300 will signal further downside towards 1.1200.


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