Though market players were waiting anxiously to hear what Janet Yellen, the head of the U.S. Federal Reserve Bank, had to say last Friday at the Jackson Hole symposium for central bankers, it was Mario Draghi of the ECB who brought the house down, and the Euro along with it. The ECB head said, clearly and strongly, that the ECB was ready to use whatever tools were “available” to counteract another drop in inflation. For analysts and FX players, that was a clear signal that they could expect further quantitative easing, possibly after the September 4th policy meeting. Also keeping the Euro down was the release earlier today of Germany’s various IFO surveys; the IFO index measures current assessments, expectations, and business climate, the latter of which came in below analysts’ forecasts at 106.3, suggesting that German business is exceedingly wary of the Ukraine-Russia conflict, as well as sanctions imposed against Russia, and their anticipated impact on the German economy.
As reported at 7:12 a.m. (EST) in New York, the EUR/USD was trading at a session low of $1.3184, a price last seen in September 2013; it later recovered slightly to $1.3198, but was still down nearly0.3%. The U.S. Dollar Index was pushed higher as a result, and is now approaching a 1-year high at 82.671 .DXY.
Eurozone CPI in Focus
The markets’ weekly focus will culminate on Friday’s release of August inflation data for the Eurozone; if the numbers meet analysts’ expectations, and with any fall from July’s 0.4%, it will increase the ECB’s anxiety levels, especially given that their inflation target is 2% and so-called “danger zone” is 1%.