ECB Governor Mario Draghi remains convinced that the Eurozone needs an extra support stemming from current monetary policy. He mentioned that verbal intervention will stay in the toolbox used by policymakers to fight against European economy lower use of capital resources which represents the main obstacle in order to send inflation back to 2% ECB target. For the time being, the monthly bond purchases will stay at €60 billion.
Data wise, Eurozone inflation has declined to 1.5% from 1.9% in April. Despite the fact it has been a while that this conclusion has been drawn, we can certainly say that massive easing has not boosted inflation yet. Angela Merkel is concerned by the negative aspects of the monetary policy expansion and the German Chancellor starts to believe that the single currency is too weak.
Currency wise, we think that the EUR/USD pair is going towards 1.10 in the short-term. We therefore believe that there is no much time before markets start to price back economic uncertainties in the Eurozone.
By Yann Quelenn