The president of the ECB is speaking for the second business day in a row. Mario Draghi is mostly repeating the same stance of his previous speech: great growth but with lagging inflation.
Yet he adds some other interesting comments: the central banker warns that geopolitical risks and outside forces could trigger a market correction that would trigger tightening in financial conditions. If this is the case, the ECB would have to act and loosen its monetary policy to help, and this means a lower euro.
EUR/USD is indeed sliding, erasing the previous gains. However, it is easier to attribute the moves to German politics rather than to Draghi.
Coalition talks have collapsed after an intense weekend. The news about the walkout by the FDP sent EUR/USD down to 1.1722. A report that the same party may support the government from the outside sent the pair all the way to 1.1808.
But as time passed by, that news piece the Bild tabloid did not seem real. Germany’s President Steinmeier did urge the parties to try and find a deal, but did not provide any hope.
So, the reaction has been a gradual grind to the downside. We are now at 1.1752, down some 35 pips day. While these are not the lows seen in the morning, the euro is certainly under pressure.
A Draghi drag and the FDP failure are to blame.
