ECB Press Conference Not As Dovish As Expected

Published date: 13/09/2018

Going into the ECB press conference, there were some expectations that due to soft data this week and the overriding concerns of protectionism (trade wars), the economic outlook would be dampened a little. This was exacerbated by the leaked projections on growth, with 2018 and 2019 revised down a tenth of a per cent to 2.0% and 1.8% respectively.  Inflation forecasts at 1.7% were unchanged. 

Instead, the market focused on the rhetoric from ECB President Draghi, who continued to signal limited concerns over underlying growth, despite the broader global risks (from US trade policy). Even so, the governing council saw fit to effectively leave the door open for further accommodation should the data warrant this, though this is more of a precautionary measure than a dovish read as was initially taken to be.  

EUR/USD has duly risen off the back of the modestly upbeat tone. Looking at gains seen in EUR/CHF and EUR/GBP, we can see that a large part of the gains in the spot rate is down to the weaker than expected inflation figures in the US, with the GBP cross rate struggling to move away from the low 0.8900's while EUR/CHF is still trying to establish a foothold above 1.1300 - unsuccessfully as yet.  

We have a mountain to climb if EUR/USD is to attempt a return to 1.2000, which is starting to crop up in projections later in the year. There are still those who believe a low for the year has still to be set in place, but for now, it looks as though 1.1300-1.1800 is the more likely scenario - at best.  


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