Euro Currency Analysis

Currency Sentiment - Neutral 

 

The ECB is expected to FULLY withdraw from its quantitative easing bond purchasing program in December 2018. The central bank has stated if the economy performs as expected they will reduce their monthly bond purchases to zero by December and look to raise interest rates in summer 2019.

 

The ECB is focused on seeing CORE inflation rise towards their 2% inflation target before they completely end QE. Headline CPI inflation which includes food and energy prices have peaked at 2%, However, this due to higher energy prices which have been purposefully manipulated by the OPEC Oil cartel. Core inflation which excludes food and energy costs remains at a subdued inflation rate of 1.1%, still, 0.9% away from the ECB's 2% inflation target. The ECB has reiterated they stand willing and able to extend QE in size and duration to help increase spending, higher employment and boost wage growth to push core inflation towards 2%.

 

Investment Banks and economists expect the EURO to strengthen towards the end of 2018, as markets begin pricing in the possibility of ECB rate hikes in summer 2019, although CORE inflation will be the key economic indicator that will dictate whether the ECB follows their economic projections and causes the EURO to rise in value.

 

 

For more details please visit the Central Bank Monitor page for details on the eurozone economy.