EUR/USD Keeps Declining Ahead of the FED, as ECB Pledges to Keep PEPP Running
ECB remains hesitant to stop PEPP, which is keeping the Euro bearish
The USD is holding firmer to start European trading, as the market is honed in on the more defensive risk tone, amid contagion fears surrounding China/Evergrande. With the dollar pushing gains across the board, the EUR/USD is being pressured towards 1.1700 now, as sellers go in search of a third straight day of declines for the pair.
For now, one could argue that the 1.1700 is still a sort of key indicator of added downside momentum, with the August low at 1.1664 perhaps acting as an insurance, in case it starts to run. The Fed could be adding to the tailwind for the dollar this week, with the market anticipating some form of acknowledgement of tapering discussions at the FOMC meeting.
EUR/USD continues the slide down
Remarks by ECB executive board member, Isabel Schnabel
- As the inflation outlook brightens, when asset purchases will end is more important
- Less important is how much the central bank buys or when reduction of purchases begins
- ECB asset purchases will remain crucial in the time to come
- Paves the way out of the pandemic and towards reaching the inflation target
- The stock of asset purchases provides substantial, persistent policy stimulus
- But there may be a point where the positive effects of QE could even reverse
- Forward guidance cannot fully substitute asset purchases
The headline remark is less interesting than it suggests, as even with the end of PEPP purchases, the ECB is not going to put a stop to APP any time soon. As such, a lot of her remarks here are purely conjecture, in case anyone needs reminding.
Remarks by ECB policymaker, Martin Kazaks
- Support beyond PEPP will be necessary
- We will be very careful in phasing out stimulus
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