Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Qualcom Stock Market Harbinger - 12th Aug 22
Apple Exec Gets World's 1st iPhone 14 for Daughters 14th Birthday Surprise Present Unboxing! - 12th Aug 22
Steps to remember while playing live roulette online - 12th Aug 22
China Bank Run Protests - Another Potential Tiananmen Square Massacre? - 11th Aug 22
Silver Coin Premiums – Another Collapse? - 11th Aug 22
Gold-to-Silver Ratio Heading Lower – Setup Like 1989-03 - 11th Aug 22
Severe Stocks Bear Market: Will You Be Among the Prepared 1.5%? - 11th Aug 22
There's a Hole in My Bucket Dear Liza, UK Summer Heatwave Plants Watering Problem Song - 11th Aug 22
Why PEAK INFLATION is a RED HERRING! Prepare for a Decade Long Cost of Living Crisis - 9th Aug 22
FREETRADE Want to LEND My Shares to Short Sellers! - 8th Aug 22
Stock Market Unclosed Gap - 8th Aug 22
The End Game for Silver Shenanigans... - 8th Aug 22er
WARNING Corsair MP600 NVME2 M2 SSD Are Prone to Failure Can Prevent Systems From Booting - 8th Aug 22
Elliott Waves: Your "Rhyme & Reason" to Mainstream Stock Market Opinions - 6th Aug 22
COST OF LIVING CRISIS NIGHTMARE - Expect High INFLATION for whole of this DECADE! - 6th Aug 22
WHY PEAK INFLATION RED HERRING - 5th Aug 22
Recession Is Good for Gold, but a Crisis Would Be Even Better - 5th Aug 22
Stock Market Rallying On Slowly Thinning Air - 5th Aug 22
SILVER’S BAD BREAK - 5th Aug 22
Stock Market Trend Pattren 2022 Forecast Current State - 4th Aug 22
Should We Be Prepared For An Aggressive U.S. Fed In The Future? - 4th Aug 22
Will the S&P 500 Stock Market Index Go the Way of Meme Stocks? - 4th Aug 22
Stock Market Another Upswing Attempt - 4th Aug 22
What is our Real Economic and Financial Prognosis? - 4th Aug 22
The REAL Stocks Bear Market of 2022 - 3rd Aug 22
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ - 3rd Aug 22
Don’t Be Misled by Gold’s Recent Upswing - 3rd Aug 22
Aluminum, Copper, Zinc: The 3 Horsemen of the Upcoming "Econocalypse" - 31st July 22
Gold Stocks’ Rally Autumn 2022 - 31st July 22
US Fed Is Battling Excess Global Capital – Which Is Creating Inflation - 31st July 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Mario Draghi Boosts Euro, Rebuffs Disinflation

Currencies / Euro Mar 07, 2014 - 04:08 AM GMT

By: Ashraf_Laidi

Currencies

Another euro-positive ECB presser highlights the reasons for lower inflation, with the implication that low prices are of temporary nature. The conference re-affirms the ECB is in no hurry to use up its eroding interest rate armory to tackle disinflation risks without first considering unsterilising its money market operations.


The chart below reminds that the last time extreme lows in Eurozone inflation were accompanied by multi-year highs in German business and macro data was in mid-2009, a period propped by optimism in global equities rather than a manifestation of broad Eurozone improvement. Less than 6 months later, the Eurozone was dragged into a 3-year slump of debt defaults, bailouts and austerity.

Draghi Boosts Euro, Rebuffs Disinflation - Ezone Cpi And German Data Mar 6 (Chart 1)

Today, 3-year lows in Eurozone inflation are not only occurring simultaneously with 3-year highs in Germany business confidence, but also backed by broadening stabilisation of growth dynamics in the periphery, four upgrades in the Eurozone since Nov alongside robust performance in equities and the single currency.

Draghi offered fresh data attributing low inflation to the euro's appreciation and the growth spillover from high austerity policies in "stress nations". Draghi quantified the effect of the euro rise on inflation at -0.4%, while stating that 2/3 of the 1.9% decline in inflation from 2012 Q1 to have been caused by lower energy prices, or -0.3% impact.

The ECB lowered its CPI forecasts for 2014 to 1.0% from 1.1% in December and held its 2015 forecasts at 1.3%. These forecasts may reflect the central bank's commitment to improved transparency but they prove of little value to the markets, especially as the accuracy of these forecasts is constantly challenged by revisions.

More importantly, the 1.0% rise in preliminary core Eurozone CPI for February showed a 25% rise, which was the biggest since September 2011. The main difference between now and 2011 is the dissipation of sovereign debt factor (four upgrades in periphery nations since November) and improved macro dynamics in those economies. Considering that the euro's sole handicap over the past 6 months anticipation of a forced rate cut, any indications that the ECB will abandon such this solution, will maintain the pair supported above 1.3600 and make $1.40 a reality.

Draghi Boosts Euro, Rebuffs Disinflation - Upgrades Feb 24 (Chart 2)

For tradable ideas on FX, gold, silver, oil & equity indices get your free 1-week trial to our Premium Intermarket Insights here

For more frequent FX & Commodity calls & analysis, follow me on Twitter Twitter.com/alaidi

By Ashraf Laidi
AshrafLaidi.com

Ashraf Laidi CEO of Intermarket Strategy and is the author of "Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets" Wiley Trading.

This publication is intended to be used for information purposes only and does not constitute investment advice.

Copyright © 2013 Ashraf Laidi

Ashraf Laidi Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in