EUR/USD Falters as Makuch Warns of ECB Action and Euro Weakness

Talking Points:

• ECB’s Makuch warns of possible measures to avoid deflation
• Makuch also sees potential for a weaker Euro
• EUR/USD falls 30 pips on comments

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The Euro fell about thirty pips against the US Dollar, as European Central Bank member Makuch said the bank is preparing measures to avoid a deflation environment. Following the near 5 cent gain in the value of the Euro in terms of US Dollars since the beginning of February, Makuch said that he sees potential for a weaker Euro. Additionally, Makuch said he would not oppose quantitative easing, which would be an unprecedented action for the ECB.

Makuch’s comments reinforced Draghi’s statement earlier this month that Euro gains are increasing relevant to price stability and the ECB will counter any material risk to inflation expectations. Any further accommodative action from the ECB to fight low inflation could drive the Euro lower.

 

That’s why the Euro declined following Makuch’s dovish comments, and EUR/USD may next find support by the 2-week low at 1.3749.