By: Barbara Zigah
Though the debacle in Greece continues to dominate global headlines, markets’ focus will assuredly turn to the European Central Bank president, Mario Draghi, later today. A recent survey of economists that was undertaken by Bloomberg news are forecasting that, despite the recent steep decline in Euro area bond prices, Mario Draghi will reaffirm that the central bank won’t be stepping in to halt it. Draghi said earlier this month that the Euro’s volatility was something that FX traders would simply have to get used to. Draghi will be speaking at the European Parliament later today, and will be taking questions from the members. Those questions are likely to include how the ECB plans to respond to potential risks to the Eurozone, and what the central bank would do if Greece leaves the Eurozone.
The ECB has embarked on a massive liquidity program called Quantitative Easing, which has resulted in the significant deterioration of the Euro. As at 11:17 am (BDT) in London, the EUR/USD was trading at $1.1125; that is a gain of 0.06% and about midway in the day’s trading range of $1.1190 and $1.1265. The EUR/GBP pair is also higher at 0.7246 pence, a rise of 0.50%.
Inflation Still a Factor for ECB
Besides Draghi, many ECB board members have said recently that the central bank would take a “hands off” approach, and would consider only stepping in if the central bank’s inflation target is at risk. That likelihood is minimal, however; the ECB has set an inflation target of 2% and May’s inflation rate at 0.3% was the first time in six months that the figure had not been negative.