On the eve of the symposium in Jackson Hole, investors continue to wonder whether ECB President M. Draghi will give a signal at the September meeting of the bank whether they will end the stimulus of the European economy in 2018.
Earlier, M. Draghi hinted in his comments after ECB meetings on monetary policy that the bank could change its course of monetary policy on the basis of a strong growth of the European economy. This strongly inspired the markets and led to a significant increase in the euro. Although recently, the data of economic statistics from the eurozone and especially Germany began to point to the growth of existing problems in the economy. Thereby, Fed's GDP growth data unexpectedly fell to 0.6% in the second quarter from 0.7% in the first quarter. On Tuesday, the data of economic sentiment indexes in Germany (ZEW) and in the euro area confirmed a negative trend. German indicator in August fell to 10.0 points against the value of 17.5 points in July and the forecast of a slight decrease to 15.0 points. Indicator data for the euro area showed a drop to 29.
Such negative figures of economic statistics will reflect in the ECB President's speech at the forum.
In our opinion, the ECB and its leader is faced with a very difficult problem. If earlier the regulator, following the example of the Fed, could look through its fingers at low inflation rate of 1.3% while a strong slowdown in Germany's economic growth, as well as a decrease in economic activity in the eurozone as a whole, make the situation more complicated. The bank is unlikely to pay attention to this, and the president somehow will have to find a way out of a rather delicate situation. Against this backdrop, his words signaling a decision to postpone the end of the incentive measures will collapse the euro in the world of currency markets.
Taking all of this into consideration, it can be said that skepticism of the ECB to shift towards a change in the monetary policy will be raised during the September meeting of the bank.
Forecast of the day:
The EUR/USD pair is being traded within the range of 1.1685 and 1.1835. It seems that this will be maintained for today. The direction of the movement will be influenced by M. Draghi, which is expected to take place at 7.00 London time. If he signals the prospect of stopping further stimulus for the European economy, the pair may rise to 1.1835 and even higher. Alternately, a lack of a clear signal or a hint that the bank will take its time will crash the euro and could lead to the decline of euro pair towards 1.1685 with the possibility of further decline.
The USDCAD pair found support. However, if there is a slight move to the upside or downside, a breakout could occur at the level of 1.2600 on the data of oil and petroleum products from the US 1.2525 and this could further increase towards 1.2680.