The ECB Rhetoric Is Shifting From Inflation To Wages – Bearish Euro?

Posted Friday, May 12, 2017 by
Skerdian Meta • 1 min read

The ECB has been sticking to inflation (CPI – Consumer Price Index) for years when the need arises to tighten the monetary policy. That seems to be both the main strategy for them and for most central banks.

But they´re starting to change their rhetoric now. We have seen a few ECB (European Central bank) members talking about wages.

The Irish central banker Lane who is also a member of the ECB popped up a while ago and wages was all I heard amongst the blabbering. He said that they have to witness some real wage inflation in the Eurozone.

Inflation has been running close to the 2% target this year, helped by the higher global energy prices. But the ECB doesn´t want to tighten the monetary policy, so they´ve found wages now. That should give them some more time before considering hiking the interest rates.

This should be negative for the Euro. EUR/USD has made a comeback in the last several months, some of it came from Macron´s win in April, but most of this 7 cent uptrend was due to better economic conditions in the EU, which suggested a shift in the ECB monetary policy.

But now we´re hearing comments about wages, so one of the main reasons for this EUR/USD uptrend is eliminated. This comes at a time when the EUR/USD uptrend has met a brick wall at 1.10, so it´s a bit of coincidence. However, this coincidence happens pretty often in forex, so let´s hold onto our EUR/USD long term forex signal. Although, we must keep an eye on the USD as well.     

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