Will ECB raise rates in 2019?
Despite the fact that over the last month, the European regulator has softened its rhetoric, and the Eurozone economy continues to signal a slowdown, market participants continue to bet that the ECB will decide on the first rate hike before the end of this year.
This confidence of investors is fraught with longer-term prospects of the single currency. At some stage, given the prospect of continued weakening of the regional economy, the markets will have to dramatically adjust their expectations, leading to the aggressive liquidation of long positions on the Euro. Moreover, a further weakening (or at best stagnation) inflation pressure also would be contrary to the prospects of an early start of monetary policy in the Eurozone.
But the threat for the single currency not limited to a regional scale. Being a highly profitable asset, the Euro is vulnerable to fall amid the flight from risk. Given the General signs of fading economic growth in the world, investors with high probability will be used with caution. This pattern speaks in favor of the dollar.
On Monday the Euro/dollar has updated a minimum of 24 Jan, violating the integrity of the 1.13 level. Repair attempts do not evolve, and a bearish bias is retained, despite the fact that on a short term basis began to form signs of oversold. On the horizon – the breakdown of the 1.13 mark, which will worsen the prospects for the Euro and will mark the beginning of a new phase in the local bearish trend of the currency with immediate goal at 1.1270.
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