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ECB’s Draghi Thinks Euro Area Economy Might Slow Further, EURUSD

ECB Preview Mario Draghi
ECB Preview Mario Draghi

ECB President Draghi is talking before the EU Committee on economic and monetary affairs of the European Parliament, and his comments are somewhat dovish in comparison to statements made at the latest ECB rate meeting on September 12.

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President Draghi says that Euro area growth momentum has slowed markedly, and more than the ECB previously anticipated.

This statement could set up the markets for easier monetary policy in the months ahead, but I think it is fair to assume that the ECB would like to wait a bit until the effects of their latest actions is felt in the real economy.

Another comment is, “We continue to stand ready to adjust all of our instruments if warranted by the inflation outlook.”

This is another comment telling the markets that the ECB is ready to act if the economy turns for the worse.

He also said, “this slowdown is mainly due to the weakness of international trade in an environment of persistent uncertainties related to protectionist policies and geopolitical factors.”

Here he indirectly blames the actions of President Trump and his ongoing trade wars, and Brexit for the European slowdown.

His outlook for the future is not good and says: “Recent data and forward-looking indicators – such as new export orders in manufacturing – do not show convincing signs of a rebound in growth in the near future.”

He also warns that weakness in the manufacturing sector might spread to other parts of the economy.

The EURUSD moved slightly lower on the comments and maintains a bearish bias below the September 17 high of 1.1075. The EURUSD took a step lower this morning as European Markit PMI was softer than expected, suggesting that Euro area economy is nearing recession levels.

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